<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-75526
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 43 / X /
--
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 43
-----
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
(formerly Delaware Group Treasury Reserves, Inc.)
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
---------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 751-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
----------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Public Offering: February 29, 1996
-----------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
----------
X on February 29, 1996 pursuant to paragraph (b)
----------
60 days after filing pursuant to paragraph (a)(1)
----------
on (date) pursuant to paragraph (a)(1)
----------
75 days after filing pursuant to paragraph (a)(2)
----------
on (date) pursuant to paragraph (a)(2) of Rule 485
----------
Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. The Rule 24f-2 Notice for Registrant's
most recent fiscal year was filed on February 27, 1996.
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
--- C O N T E N T S ---
This Post-Effective Amendment No. 43 to Registration File No. 2-75526
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheet
4. Part A - Prospectuses
5. Part B - Statements of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Item No. Description Location in Prospectuses
- -------- ----------- ------------------------
<S> <C> <C> <C>
Limited-Term
Government Fund
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page...................................................... Cover Cover
2 Synopsis........................................................ Synopsis, Synopsis,
Summary of Summary of
Expenses Expenses
3 Condensed Financial Information................................. Financial Financial
Highlights Highlights
4 General Description of Registrant .............................. Investment Investment
Objective and Objective and
Strategies, Strategies,
Shares Shares
5 Management of the Fund ......................................... Management Management
of the Fund of the Fund
6 Capital Stock and Other Securities ............................. Delaware Dividends and
Difference, Distributions,
Dividends and Taxes, Shares
Distributions,
Taxes, Shares
7 Purchase of Securities Being Offered............................ Cover, How to Cover, How to
Buy Shares, Buy Shares,
Calculation of Calculation of
Offering Price Net Asset Value
and Net Asset Per Share,
Value Per Share, Management
Management of of the Fund
the Fund
8 Redemption or Repurchase........................................ How to Buy How to Buy
Shares, Shares,
Redemption Redemption and
and Exchange Exchange
9 Legal Proceedings............................................... None None
</TABLE>
* Delaware Group Limited-Term Government Funds, Inc. offers the Limited-Term
Government Fund and the U.S. Government Money Fund Series. The
Limited-Term Government Fund A Class, Limited-Term Government Fund B Class
and Limited-Term Government Fund C Class are combined in one Prospectus
and the Limited-Term Government Fund Institutional Class has its own
Prospectus. All classes of Limited-Term Government Fund are described in
one Statement of Additional Information covering only that Series. U.S.
Government Money Fund A Class and U.S. Government Money Fund Consultant
Class are combined in one Prospectus and are described in one Statement of
Additional Information covering only that Series.
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
CROSS-REFERENCE SHEET
PART A
(Continued)
<TABLE>
<CAPTION>
Item No. Description Location in Prospectus
- -------- ----------- ----------------------
<S> <C> <C>
U.S. Government
Money Fund
A Class/
Consultant Class
1 Cover Page...................................................... Cover
2 Synopsis........................................................ Synopsis,
Summary of
Expenses
3 Condensed Financial Information................................. Financial
Highlights
4 General Description of Registrant .............................. Investment
Objective and
Policies, Shares
5 Management of the Fund ......................................... Management of
the Fund
6 Capital Stock and Other Securities ............................. Delaware
Difference,
Dividends and
Distributions,
Taxes, Shares
7 Purchase of Securities Being Offered............................ Cover,
Buying Shares,
Net Asset Value
Per Share,
Management of
the Fund
8 Redemption or Repurchase........................................ Buying Shares,
Redemption
and Exchange
9 Legal Proceedings............................................... None
</TABLE>
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statements
Item No. Description of Additional Information
- -------- ----------- -------------------------
Limited-Term U.S. Government
Government Fund Money Series
<S> <C> <C> <C>
10 Cover Page........................................... Cover Cover
11 Table of Contents.................................... Table of Contents Table of Contents
12 General Information and History...................... General Information General Information
13 Investment Objectives and Policies................... Investment Objective Investment Objective
and Policies and Policy
14 Management of the Registrant......................... Officers and Directors Officers and Directors
15 Control Persons and Principal
Holders of Securities............................... Officers and Directors Officers and Directors
16 Investment Advisory and
Other Services...................................... Plans Under Rule 12b-1 Plan Under Rule 12b-1
for the Fund Classes for the U.S. Government
(under Purchasing Money Fund Consultant
Shares), Investment Class (under Purchasing
Management Agreement, Shares), Investment
Officers and Directors, Management Agreement,
General Information, Officers and Directors,
Financial Statements General Information,
Financial Statements
17 Brokerage Allocation................................. Trading Practices Trading Practices
and Brokerage
18 Capital Stock and Other Securities................... Capitalization and Capitalization and
Noncumulative Voting Noncumulative Voting
(under General (under General
Information) Information)
</TABLE>
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
CROSS-REFERENCE SHEET
PART B
(Continued)
<TABLE>
<CAPTION>
Location in Statements
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C> <C>
Limited-Term U.S. Government
Government Fund Money Series
19 Purchase, Redemption and Pricing of
Securities Being Offered............................ Purchasing Shares, Purchasing Shares,
Determining Offering Offering Price,
Price and Net Asset Redemption, Exchange
Value, Redemption Privilege
and Repurchase,
Exchange Privilege
20 Tax Status........................................... Accounting and Taxes
Tax Issues
21 Underwriters ........................................ Purchasing Shares Purchasing Shares
22 Calculation of Performance Data...................... Performance Performance
Information Information
23 Financial Statements................................. Financial Financial
Statements Statements
</TABLE>
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
CROSS REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Item No. Description Location in Part C
- -------- ----------- ------------------
<S> <C> <C>
24 Financial Statements and Exhibits................................ Item 24
25 Persons Controlled by or under
Common Control with Registrant.................................. Item 25
26 Number of Holders of Securities.................................. Item 26
27 Indemnification.................................................. Item 27
28 Business and Other Connections of
Investment Adviser............................................ Item 28
29 Principal Underwriters........................................... Item 29
30 Location of Accounts and Records................................. Item 30
31 Management Services.............................................. Item 31
32 Undertakings..................................................... Item 32
</TABLE>
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
- ---------------------------------------------------------
LIMITED-TERM GOVERNMENT FUND
- ---------------------------------------------------------
A CLASS
- ---------------------------------------------------------
B CLASS
- ---------------------------------------------------------
C CLASS
- ---------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
FEBRUARY 29, 1996
DELAWARE
GROUP
========
<PAGE>
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND) FEBRUARY 29, 1996
A CLASS SHARES
B CLASS SHARES
C CLASS SHARES
------------------------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918
Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") is a professionally-managed mutual fund of the series type. This
Prospectus describes the Limited-Term Government Fund series (the "Fund"). The
Fund's objective is to seek a high, stable level of current income while
attempting to minimize fluctuations in principal and provide maximum liquidity.
The Fund seeks to achieve its objective by investing its assets in a diversified
portfolio of short- and intermediate- term securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and instruments secured
by such securities. The Limited-Term Government Fund A Class ("Class A Shares"),
the Limited-Term Government Fund B Class ("Class B Shares") and the Limited-Term
Government Fund C Class ("Class C Shares") (such classes, will be referred to
individually as a "Class" and collectively as the "Classes") are described in
this Prospectus. These alternatives permit an investor to choose the method of
purchasing shares that is most suitable for his or her needs.
Class A Shares may be purchased at the public offering price, which is
equal to the next determined net asset value per share, plus a front-end sales
charge. Class B Shares and Class C Shares may be purchased at a price equal to
the next determined net asset value per share.
Class A Shares are subject to a maximum front-end sales charge of 3.00%
and annual 12b-1 Plan expenses of up to .30% (currently, no more than .15%
pursuant to Board action). Class B Shares are subject to a contingent deferred
sales charge ("CDSC") which may be imposed on redemptions made within three
years of purchase and annual 12b-1 Plan expenses of 1%, which are assessed
against Class B Shares for approximately five years after purchase. See
Automatic Conversion of Class B Shares under Classes of Shares. Class C Shares
are subject to a CDSC which may be imposed on redemptions made within 12 months
of purchase and annual 12b-1 Plan expenses of 1%, which are assessed against
Class C Shares for the life of the investment. See Summary of Expenses. In
choosing the most suitable Class, an investor should consider the differences
among the Classes, including the effect of sales charges and 12b-1 Plan
expenses, given the amount of the purchase and the length of time the investor
expects to hold the shares, among other circumstances. See Classes of Shares.
-1-
<PAGE>
This Prospectus relates only to the Classes listed above and sets forth
information that you should read and consider before you invest. Please retain
it for future reference. Part B of the registration statement, dated February
29, 1996, as it may be amended from time to time, contains additional
information about the Fund and has been filed with the Securities and Exchange
Commission. Part B is incorporated by reference into this Prospectus and is
available, without charge, by writing to Delaware Distributors, L.P. at the
above address or by calling the above numbers. The Fund's financial statements
appear in its Annual Report, which will accompany any response to requests for
Part B.
The Fund also offers the Limited-Term Government Fund Institutional
Class, which is available only to certain eligible investors. A prospectus for
the Limited-Term Government Fund Institutional Class can be obtained by writing
to Delaware Distributors, L.P. at the above address or by calling the above
number.
TABLE OF CONTENTS
Cover Page Retirement Planning
Synopsis Classes of Shares
Summary of Expenses How to Buy Shares
Financial Highlights Redemption and Exchange
Investment Objective and Strategies Dividends and Distributions
Suitability Taxes
Investment Strategy Calculation of Offering Price and
and Risk Factors Net Asset Value Per Share
The Delaware Difference Management of the Fund
Plans and Services Additional Information on Investment
Policies and Risk Considerations
Appendix A - Investment Illustrations
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for the Fund. The Manager or its affiliate, Delaware International
Advisers Ltd., also manages the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Management of the Fund.
Sales Charge
The price of Class A Shares includes a maximum front-end sales charge
of 3.00% of the offering price, which, based on the net asset value of Class A
Shares as of the end of Limited-Term Funds, Inc.'s most recent fiscal year, is
equivalent to 3.09% of the amount invested. The sales charge is reduced on
certain transactions of at least $100,000 but under $1,000,000. There is no
front-end sales charge on purchases of $1,000,000 or more. Class A Shares are
subject to annual 12b-1 Plan expenses.
The price of Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a CDSC of: (i) 2% if shares are redeemed within
two years of purchase; and (ii) 1% if shares are redeemed during the third year
following purchase. Class B Shares are subject to annual 12b-1 Plan expenses for
approximately five years after purchase. See Automatic Conversion of Class B
Shares under Classes of Shares.
The price of the Class C Shares is equal to the net asset value per
share. Class C Shares are subject to a CDSC of 1% if shares are redeemed within
12 months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses
for the life of the investment.
See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.
Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more of Class A
Shares, which are subject to lower annual 12b-1 Plan expenses than Class B
Shares and Class C Shares and generally are not subject to a CDSC. The minimum
and maximum purchase amounts for retirement plans may vary. See How to Buy
Shares.
Investment Objective
The objective of the Fund is to seek high, stable income by investing
in a portfolio of short- and intermediate-term securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and instruments
secured by such securities. For further details, see Investment Objective and
Strategies.
Open-End Investment Company
Limited-Term Funds, Inc., which was organized as a Pennsylvania
business trust in 1981 and reorganized as a Maryland corporation in 1990, is an
open-end management investment company. The Fund's portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
See Shares under Management of the Fund.
-3-
<PAGE>
Investment Management Fees
The Manager furnishes investment management services to the Fund,
subject to the supervision and direction of the Board of Directors. Under the
Investment Management Agreement, the annual compensation paid to the Manager is
equal to 1/2 of 1% of the average daily net assets, less a proportionate share
of all directors' fees paid to the unaffiliated directors by the Fund. See
Management of the Fund.
Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Fund nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.
Risk Factors
1. The value of Fund shares will fluctuate with the value of its
underlying investments. The Fund strives to minimize such fluctuations; however,
since the Fund invests in fixed income securities, the value of its shares will
tend to generally rise when interest rates fall and fall when interest rates
rise.
2. The Fund may invest a portion of its assets in over-the-counter
options and futures, some of which may be considered to be derivative
securities. See Investment Techniques under Investment Objective and Strategies.
-4-
<PAGE>
SUMMARY OF EXPENSES
A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:
<TABLE>
<CAPTION>
Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).............. 3.00% None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price).... None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds, whichever is lower)......... None* 2.00%* 1.00%*
Redemption Fees.................................. None** None** None**
Annual Operating Expenses
(as a percentage of average Class A Class B Class C
daily net assets) Shares Shares Shares
- -----------------------------------------------------------------------------------------------
Management Fees.................................. 0.50% 0.50% 0.50%
12b-1 Expenses (including service fees).......... 0.15%***/+ 1.00%+ 1.00%+
Other Operating Expenses......................... 0.31% 0.31% 0.31%++
---- ---- ----
Total Operating Expenses......................... 0.96%*** 1.81% 1.81%
==== ==== ====
</TABLE>
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in any of the
Classes will bear directly or indirectly.
*Class A purchases of $1 million or more may be made at net asset
value. However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a CDSC of
1% will be imposed on certain redemptions within 12 months of purchase ("Limited
CDSC"). Class B Shares are subject to a CDSC of: (i) 2% if shares are redeemed
within the first two years of purchase; (ii) 1% if shares are redeemed during
the third year following purchase; and (iii) 0% thereafter. Class C Shares are
subject to a CDSC of 1% if the shares are redeemed within 12 months of purchase.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange; Deferred Sales
Charge Alternative - Class B Shares and Level Sales Charge Alternative - Class C
Shares under Classes of Shares.
-5-
<PAGE>
**CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
***The actual 12b-1 Plan expenses to be paid and, consequently, the
"Total Operating Expenses" of Class A Shares, may be somewhat more (but the
12b-1 expenses may be no more than .15%) or somewhat less (but the 12b-1
expenses may be no less than .10%) because of the formula adopted by the Board
of Directors for use in calculating the 12b-1 Plan expenses beginning June 1,
1992. See Distribution (12b-1) and Service under Management of the Fund.
+Class A Shares, Class B Shares and Class C Shares are subject to
separate 12b-1 Plans. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the rules of the
National Association of Securities Dealers, Inc. ("NASD"). See Distribution
(12b-1) and Service.
++"Other Operating Expenses" for Class C Shares are estimates based
upon the actual expenses incurred by Class A Shares for its fiscal year ended
December 31, 1995.
For expense information about the Limited-Term Government Fund
Institutional Class, see the separate prospectus relating to that class.
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption at the end of each time period and (3) with
respect to Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.
<TABLE>
<CAPTION>
Assuming Redemption Assuming No Redemption
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares $40(1) $60 $81 $144 $40 $60 $81 $144
Class B Shares $38 $67 $98(2) $160(2) $18 $57 $98(2) $160(2)
Class C Shares $28 $57 $98 $213 $18 $57 $98 $213
</TABLE>
(1) Generally, no redemption charge is assessed upon a redemption of Class
A Shares. Under certain circumstances, however, a Limited CDSC, which
has not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.
(2) At the end of approximately five years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above
assumes conversion of Class B Shares at the end of the fifth year.
However, the conversion may occur as late as three months after the
fifth anniversary of purchase, during which time the higher 12b-1 Plan
fees payable by Class B Shares will continue to be assessed.
Information for the sixth through tenth years reflects expenses of
Class A Shares. See Automatic Conversion of Class B Shares under
Classes of Shares for a description of the automatic conversion
feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-6-
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Limited-Term Government Funds, Inc.--Limited-Term Government
Fund and have been audited by Ernst & Young LLP, independent auditors. The data
should be read in conjunction with the financial statements, related notes, and
the report of Ernst & Young LLP covering such financial information and
highlights, all of which are incorporated by reference into Part B. Further
information about the Fund's performance is contained in its Annual Report to
shareholders. A copy of the Fund's Annual Report (including the report of Ernst
& Young LLP) may be obtained from Limited-Term Funds, Inc. upon request at no
charge.
- -------------------------------------------------------------------------------
-7-
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------------
Year Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......................... $8.990 $9.840 $10.000 $10.190 $9.770 $9.720
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.699 0.667 0.681 0.740 0.799 0.814
Net Gains or Losses on Securities
(both realized and unrealized)........................ 0.060 (0.850) (0.160) (0.190) 0.420 0.050
------ ------ ------ ------ ------ ------
Total From Investment Operations........................... 0.759 (0.183) 0.521 0.550 1.219 0.864
------ ------ ------ ------ ------ ------
Less Distributions
- -------------------
Dividends (from net investment income)....................... (0.699) (0.667) (0.681) (0.740) (0.799) (0.814)
Distributions (from capital gains)........................... none none none none none none
Returns of Capital........................................... none none none none none none
------ ------ ------ ------ ------ ------
Total Distributions.................................... (0.699) (0.667) (0.681) (0.740) (0.799) (0.814)
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period............................... $9.050 $8.990 $9.840 $10.000 $10.190 $9.770
====== ====== ====== ======= ======= ======
- --------------------------------------------
Total Return(1) ............................................. 8.71% (1.88%) 5.31% 5.62%(1) 13.04%(1) 9.32%
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)....................$653,451 $789,525 $1,126,031 $861,829 $144,129 $107,739
Ratio of Expenses to Average Daily Net Assets................ 0.96% 0.91% 0.88% 0.87%(2) 0.90%(2) 0.99%
Ratio of Net Investment Income to Average Daily Net Assets... 7.71% 7.10% 6.77% 7.03%(3) 7.96%(3) 8.41%
Portfolio Turnover Rate...................................... 73% 148% 171% 77% 42% 175%
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------
12/28/89 12/29/88 12/31/87 12/25/86
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.........................$9.700 $9.800 $9.980 $10.040
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.843 0.730 0.695 0.836
Net Gains or Losses on Securities
(both realized and unrealized)........................ 0.020 (0.100) (0.180) (0.060)
------ ------- ------- -------
Total From Investment Operations........................... 0.863 0.630 0.515 0.776
------ ------- ------- -------
Less Distributions
- ------------------
Dividends (from net investment income)....................... (0.843) (0.730) (0.695) (0.836)
Distributions (from capital gains)........................... none none none none
Returns of Capital........................................... none none none none
------ ------ ------- -------
Total Distributions.................................... (0.843) (0.730) (0.695) (0.836)
------ ------ ------- -------
Net Asset Value, End of Period............................... $9.720 $9.700 $9.800 $9.980
====== ====== ====== ======
- --------------------------------------------
Total Return(1) ............................................. 9.28% 6.63% 5.46% 7.89%(1)
- ------------
- --------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)....................$107,637 $132,859 $138,818 $182,727
Ratio of Expenses to Average Daily Net Assets................ 0.97% 0.90% 1.06% 1.02%(2)
Ratio of Net Investment Income to Average Daily Net Assets... 8.72% 7.44% 6.86% 7.85%(3)
Portfolio Turnover Rate...................................... 311% 146% 304% 39%
</TABLE>
<PAGE>
- ----------
(1) Does not reflect maximum front-end sales charge, currently, 3.00% nor
the 1% Limited CDSC that would apply in the event of certain
redemptions within twelve months of purchase. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value. Total return for 1986, 1991 and 1992 reflects the expense
limitations referenced in Notes 2 and 3.
(2) Ratio of expenses to average daily net assets prior to expense
limitation was 0.90% for 1992, 0.99% for 1991 and 1.08% for 1986 for
the Limited-Term Government Fund A Class.
(3) Ratio of net investment income prior to expense limitation to average
daily net assets was 7.01% for 1992, 7.87% for 1991 and 7.79% for 1986
for the Limited-Term Government Fund A Class.
<PAGE>
<TABLE>
<CAPTION>
Class B Shares Class C Shares
------------------------ --------------
Period Period
Year 5/2/94(1) 11/29/95(3)
Ended through through
12/31/95 12/31/94 12/31/95
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $8.990 $9.430 $9.010
Income From Investment Operations
- ---------------------------------
Net Investment Income.......................................... 0.622 0.399 0.051
Net Gains or Losses on Securities
(both realized and unrealized)...................... 0.060 (0.440) 0.040
------ ------ ------
Total From Investment Operations......................... 0.682 (0.041) 0.091
------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)......................... (0.622) (0.399) (0.051)
Distributions (from capital gains)............................. none none none
Returns of Capital............................................. none none none
------ ------ ------
Total Distributions...................................... (0.622) (0.399) (0.051)
------ ------ ------
Net Asset Value, End of Period................................. $9.050 $8.990 $9.050
====== ====== ======
- ----------------------------------------------
Total Return .................................................. 7.80%(2) (0.44%)(2) (3)
- ------------
- ----------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $12,313 $6,282 $33
Ratio of Expenses to Average Daily Net Assets.................. 1.81% 1.76% (3)
Ratio of Net Investment Income to Average Daily Net Assets..... 6.86% 6.25% (3)
Portfolio Turnover Rate........................................ 73% 148% (3)
</TABLE>
- ----------
(1) Date of initial public offering. Ratios have been annualized, but total
return for the limited period between May 2, 1994 through December 31,
1994 has not been annualized.
(2) Total return does not reflect any applicable CDSC.
(3) Date of initial public offering; the ratios of expenses and net
investment income to average daily net assets, portfolio turnover and
total return have been omitted as management believes that such ratios
and return for this relatively short period are not meaningful.
<PAGE>
INVESTMENT OBJECTIVE AND
STRATEGIES
The Fund seeks to provide a high stable level of income, while
attempting to minimize fluctuations in principal and provide maximum liquidity.
It seeks to do this by investing primarily in a portfolio of short- and
intermediate-term securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and instruments secured by such securities. The
Fund may also invest up to 20% of its assets in corporate notes and bonds,
certificates of deposit and obligations of both U.S. and foreign banks,
commercial paper and certain asset-back securities.
The level of income will vary depending on interest rates and the
portfolio. However, since longer term rates are generally less volatile than
short-term rates, the level of income for the Fund may tend to be less volatile
than, for example, a money market fund.
SUITABILITY
The Fund may be suitable for individuals who want a stable and high
income flow, the security associated with investments focused principally on
U.S. Government-backed instruments and the convenience and liquidity of mutual
funds. However, investors should consider asset value fluctuation as well as
income potential in making an investment decision.
The Fund is not a money market fund. A money market fund is designed
for stability of principal; consequently, the level of income fluctuates. The
Fund is designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
Because the Fund invests in longer-term securities than a money market
fund, the value of shares will fluctuate. When interest rates rise, the share
value will tend to fall, and when interest rates fall, the share value will tend
to rise. Therefore, the Fund may not be suitable for investors whose overriding
objective is stability of principal. See Investment Strategy and Risk Factors.
The Fund's objective of a high stable income stream may also be
suitable for longer term investments, such as tax-deferred retirement plans
(e.g., IRA, 401(k), Profit Sharing, etc.), where the income stream can be left
to compound on a tax-deferred basis. Ownership of Fund shares reduces the
bookkeeping and administrative inconveniences connected with direct purchases of
these instruments.
INVESTMENT STRATEGY AND RISK
FACTORS
The Fund attempts to provide you with yields higher than those
available in money market funds or bank money market accounts by extending its
portfolio maturities.
The yield curves, as shown in the chart below, reflect the additional
return that may be obtained by a moderate extension of maturities.
YIELD CURVE
12/30/94 12/29/95
Average Portfolio Maturity
----- -----
3 Months 5.682 5.072
6 Months 6.495 5.147
1 Year 7.162 5.132
2 Years 7.690 5.150
3 Years 7.778 5.208
5 Years 7.827 5.374
10 Years 7.827 5.570
30 Years 7.876 5.949
<PAGE>
The Fund expects to have an average portfolio maturity in the shaded area
indicated above. By extending average maturity in this area, the Fund seeks
higher income than may be available from money market securities but may also
experience greater principal fluctuation. However, the Fund should tend to
experience less principal fluctuation than funds which have average maturities
beyond the gray shaded area. The yields to maturity in the curves are for
unmanaged Treasury securities with various remaining maturities. The black line
shows the yield curve at December 30, 1994. The purple line represents the yield
curve as of December 29, 1995. The data was obtained from Federal Reserve
Statistical Release H.15 (519). These are not necessarily indicative of future
performance or yield curves. The yield curve changes over time and short rates
may occasionally be higher than intermediate rates.
Maturity Restrictions
The Fund seeks to reduce the effects of interest rate volatility on
principal by keeping the average effective maturity (as that term is defined in
Part B) to no more than five years.
If in the judgment of the Manager rates are low, it will tend to
shorten the average effective maturity to three years or less. Conversely, if in
its judgment rates are high, it will tend to extend the average effective
maturity to as high as five years. The Manager will increase the proportion of
short-term instruments when short-term yields are higher. The Manager may
purchase individual securities with a remaining maturity of up to fifteen years.
Quality Guidelines
The Fund will invest primarily in securities issued or guaranteed by
the U.S. Government (e.g., Treasury Bills and Notes), its agencies (e.g.,
Federal Housing Administration) or instrumentalities (e.g., Federal Home Loan
Bank) or government-sponsored corporations (e.g., Federal National Mortgage
Association), as well as repurchase agreements and publicly- and
privately-issued mortgage-backed securities collateralized by such securities.
The Fund may invest up to 20% of its assets in: (1) corporate notes and bonds
rated A or above; (2) certificates of deposit and obligations of both U.S. and
foreign banks if they have assets of at least one billion dollars; (3)
commercial paper rated P-1 by Moody's Investors Service ("Moody's") and/or A-1
by Standard and Poor's Ratings Group ("S&P"); and (4) certain asset-backed
securities rated Aaa by Moody's or AAA by S&P.
Investment Techniques
To achieve its objective, the Fund may use certain hedging techniques
which might not be conveniently available to individuals. These techniques will
be used at the Manager's discretion to protect the Fund's principal value.
The Fund may purchase put options, write secured put options, write
covered call options, purchase call options and enter into closing transactions.
The Fund may invest in futures contracts and options on such futures
contracts subject to certain limitations.
The Fund may invest up to 35% of its assets in securities issued by
certain private, nongovernment corporations, such as financial institutions, if
the securities are fully collateralized at the time of issuance by securities or
certificates issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
The Fund may also invest in securities which are backed by assets such
as receivables on home equity and credit card loans, and receivables on
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
-9-
<PAGE>
plans and leases. All such securities must be rated in the highest rating
category by a reputable credit rating agency (e.g., AAA by S&P or Aaa by
Moody's).
The Fund may also use repurchase agreements which are at least 100%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a temporary basis.
* * *
Certain of the above-described securities may be considered to be
derivative securities.
* * *
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.
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
For a further discussion of the investment techniques described above,
see Additional Information on Investment Policies and Risk Considerations.
* * *
Investment Strategy and Risk Factors and Additional Information on
Investment Policies and Risk Factors in this Prospectus and Part B further
clarifies the Fund's investment policies, risk factors and the methods used to
determine maturity. A brief discussion of those factors that materially affected
the Fund's performance during its most recently completed fiscal year appears in
the Fund's Annual Report.
-10-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature; Price,
Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular
Investment Accounts and
Retirement Plan Accounts; Wire
Investments; Wire Liquidations;
Telephone Liquidations; Telephone
Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, various service features and other funds in the Delaware Group.
Performance Information
During business hours, you can call the Investor Information Center
anytime for current yield information. Current yield and total return
information may also be included in advertisements and information given to
shareholders. Yield information is computed on an annual basis over a 30-day
period.
Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Fund, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Limited-Term Funds, Inc. will mail you information on the
tax status of your dividends and distributions.
Dividend Orders
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
-11-
<PAGE>
For more information, see Dividend Reinvestment Plan under How to Buy
Shares Additional Methods of Adding to Your Investment or call the Shareholder
Service Center.
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.
Wealth Builder Option
You may elect to have amounts in your account automatically invested in
shares of other funds in the Delaware Group. Investments under this feature are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges of Class A, Class B and Class C Shares. See Redemption and
Exchange.
Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of the Fund with the dollar amount of new
purchases of Class A Shares to qualify for a reduced front-end sales charge on
such purchases of Class A Shares. Under the Combined Purchases Privilege, you
may also include certain shares that you own in other funds in the Delaware
Group. See Classes of Shares.
Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Group fund shares over a 13-month period. See Classes
of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.
-12-
<PAGE>
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
predesigned allocation strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor an
allocation strategy that meets their personal needs and goals. See Classes of
Shares.
MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. In addition, you may elect
to have your Systematic Withdrawal Plan payments transferred from your Fund
account to your predesignated bank account through this service. Your funds will
normally be credited to your bank account two business days after the payment
date. There are no fees for this service. You can initiate the MoneyLine Direct
Deposit Service by completing an Authorization Agreement. If your name and
address are not identical to the name and address on your Fund account, you must
have your signature guaranteed. This service is not available for retirement
plans.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Limited-Term Funds, Inc.'s fiscal
year ends on December 31.
The Delaware Digest
You will receive newsletters covering topics of interest about your
investment alternatives and services from Delaware Group.
-13-
<PAGE>
RETIREMENT PLANNING
An investment in the Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred Compensation
Plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
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. Certain shareholder investment services available to
non-retirement plan shareholders may not be available to retirement plan
shareholders. Certain retirement plans may qualify to purchase the Limited-Term
Government Fund Institutional Class. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center or
see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan. Class B Shares are not
available for purchase by such plans.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A Shares or Class C Shares. Class
B Shares are not available for purchase by such plans.
-14-
<PAGE>
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 Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by 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 Group fund shares. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described below under Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares, apply to redemptions by
participants in Allied Plans, except in the case of exchanges between eligible
Delaware Group and non-Delaware Group fund shares. When eligible Delaware Group
fund shares are exchanged into eligible non-Delaware Group fund shares, the
Limited CDSC will be imposed at the time of the exchange unless the joint
venture agreement specifies that the amount of the CDSC will be paid by the
financial adviser or selling dealer. See Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative - Class A Shares under Classes of Shares.
-15-
<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares. Class A Shares incur a sales charge when
they are purchased but generally are not subject to any sales charge when they
are redeemed. Class A Shares are subject to annual 12b-1 Plan expenses of up to
a maximum of .30% (currently, no more than .15% pursuant to Board action) of
average daily net assets of such shares. See Front-End Sales Charge Alternative
- - Class A Shares, below. See also Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value and Distribution
(12b-1) and Service. Certain purchases of Class A Shares qualify for reduced
front-end sales charges.
Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but they are subject to a sales charge if they are
redeemed within three years of purchase. Class B Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service fees to
be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for approximately five years after purchase. Class B Shares permit all of
the investor's dollars to work from the time the investment is made. The higher
12b-1 Plan expenses paid by Class B Shares will cause such shares to have a
higher expense ratio and to pay lower dividends than Class A Shares. At the end
of approximately five years after purchase, Class B Shares will (LTGF-ABC)
automatically be converted into Class A Shares. See Automatic Conversion of
Class B Shares, below.
Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but they are subject to a sales charge if they are
redeemed within 12 months of purchase. Class C Shares are subject to annual
12b-1 Plan expenses of up to a maximum of 1% (.25% of which are service fees to
be paid to the Distributor, dealers or others for providing personal service
and/or maintaining shareholder accounts) of average daily net assets of such
shares for the life of the investment. The higher 12b-1 Plan expenses paid by
Class C Shares will cause such shares to have a higher expense ratio and to pay
lower dividends than Class A Shares. Unlike Class B Shares, Class C Shares do
not convert to another class.
The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within three years of purchase, or purchase
Class C Shares and have the entire initial purchase amount invested in the Fund
with their investment being subject to a CDSC if they redeem shares within 12
months of purchase. In addition, investors should consider the level of annual
12b-1 Plan expenses applicable to each Class and, in comparing Class B Shares to
Class C Shares, the desirability of an automatic conversion feature, which is
available only for Class B Shares.
-16-
<PAGE>
As an illustration, investors who qualify for significantly reduced
front-end sales charges on purchases of Class A Shares, as described below,
might choose the front-end sales charge alternative because similar sales charge
reductions are not available for purchases under either the deferred sales
charge alternative or the level sales charge alternative. Moreover, shares
acquired under the front-end sales charge alternative are subject to annual
12b-1 Plan expenses of up to .30% (currently, no more than .15% pursuant to
Board action), whereas Class B Shares acquired under the deferred sales charge
alternative are subject to higher annual 12b-1 Plan expenses of up to 1% for
approximately five years after purchase (see Automatic Conversion of Class B
Shares) and Class C Shares acquired under the level sales charge alternative are
subject to annual 12b-1 Plan expenses of up to 1% for the life of the
investment. However, because front-end sales charges are deducted from the
purchase amount, investors who buy Class A Shares would not have their full
purchase amount invested in the Fund.
Other investors might determine it to be more advantageous to purchase
Class B Shares and have all their funds invested initially, even though they
would be subject to a CDSC for up to three years after purchase, as well as
annual 12b-1 Plan expenses of up to 1% until the shares are automatically
converted into Class A Shares. Still other investors might determine it to be
more advantageous to purchase Class C Shares and have all of their funds
invested initially, recognizing that they would be subject to a CDSC for just 12
months after purchase, but that Class C Shares do not offer a conversion
feature, so their shares would be subject to annual 12b-1 Plan expenses of up to
1% for the life of the investment. The higher 12b-1 Plan expenses on Class B
Shares and Class C Shares will be offset to the extent a return is realized on
the additional money initially invested 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.
Prospective investors should refer to Appendix A to this Prospectus for
an illustration of the potential effect that each of the purchase options may
have on a long-term shareholder's investment.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Sales personnel may receive different compensation for selling Class
A, Class B and Class C Shares. Investors should understand that the purpose and
function of the respective 12b-1 Plans and 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 12b-1 Distribution
Plans - Class A, Class B and Class C Shares.
Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that the additional
amount of 12b-1 Plan expenses relating to Class B Shares and Class C Shares will
be borne exclusively by such shares. See Calculation of Offering Price and Net
Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Limited-Term Funds, Inc. and the Distributor intend to operate in
compliance with these rules.
-17-
<PAGE>
Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price which reflects a
maximum front-end sales charge of 3.00%. See Calculation of Offering Price and
Net Asset Value Per Share.
Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.
<TABLE>
<CAPTION>
Limited-Term Government Fund A Class
- --------------------------------------------------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 3.00% 3.09% 2.50%
$100,000 but under $250,000 2.50 2.54 2.00
$250,000 but under $500,000 2.00 2.04 1.60
$500,000 but under $1,000,000* 1.50 1.55 1.20
</TABLE>
* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.
** Based on the net asset value of Class A Shares as of the end of Limited-Term
Funds, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- ------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by the Fund. Such reduced
front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which
the Distributor may reallow to dealers up to the full amount of the
front-end sales charge shown above. In addition, certain dealers who enter
into an agreement to provide extra training and information on Delaware
Group products and services and who increase sales of Delaware Group funds
may receive an additional commission of up to .15% of the offering price.
Dealers who receive 90% or more of the sales charge may be deemed to be
underwriters under the Securities Act of 1933.
- -------------------------------------------------------------------------------
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For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's
Commission
----------
(as a percent-
age of amount
Amount of Purchase purchased)
- ------------------
Up to $3 million .60%
Next $2 million up to $5 million .40
Amount over $5 million .20
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of the Fund. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.
An exchange from other Delaware Group 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.
Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.
Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of the other funds
in the Delaware Group, except those noted below, you can reduce the front-end
sales charges on any additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products may be combined with other Delaware Group fund
holdings. Shares of other funds that do not carry a front-end sales charge or
CDSC may not be included unless they were acquired through an exchange from a
Delaware Group fund that does carry a front-end sales charge or CDSC.
This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.
It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.
Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.
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<PAGE>
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.
Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Group, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.
Purchases of Class A Shares may be made by clients of registered
representatives of an authorized investment dealer at net asset value within six
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge has been
assessed and the redemption of the investment did not result in the imposition
of a contingent deferred sales charge or other redemption charge. Purchases of
Class A Shares 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 Delaware Group funds. Officers,
directors and key employees of institutional clients of the Manager or any of
its affiliates may purchase Class A Shares at net asset value. Moreover,
purchases may be effected at net asset value for the benefit of the clients of
brokers, dealers and registered investment advisers affiliated with a broker or
dealer, if such broker, dealer or investment adviser has entered into an
agreement with the Distributor providing specifically for the purchase of Class
A Shares in connection with special investment products, such as wrap accounts
or similar fee based programs.
Investments of Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts, will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.
Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit
Sharing, Pension and 401(k) Defined Contribution Plans) may benefit from the
reduced front-end sales charges available on Class A Shares set forth in the
table on page , based on total plan assets. In addition, 403(b)(7) and 457
Retirement Plan Accounts may benefit from a reduced front-end sales charge on
Class A Shares based on the total amount invested by all participants in the
plan by satisfying the following criteria: (i) the employer for which the plan
was established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund that it qualifies for the reduction.
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Employees participating in such Group Investment Plans may also combine the
investments held in their plan account to determine the front-end sales charge
applicable to purchases in non-retirement Delaware Group investment accounts if,
at the time of each such purchase, they notify the Fund that they are eligible
to combine purchase amounts held in their plan account.
For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.
For other retirement plans and special services, see Retirement
Planning.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without 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. 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 the Fund's Class B
Shares as described in this Prospectus, 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 last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the fifth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the fifth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's fifth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the fifth anniversary of
purchase before the shares will automatically convert into Class A Shares.
Class B Shares of a fund acquired through reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
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<PAGE>
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 Fund will invest the full amount of the
investor's purchase payment. The Distributor currently anticipates compensating
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, however, Class C Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within 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 the Fund's Class C
Shares as described in this Prospectus, even after exchange. See Redemption and
Exchange.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within three years of purchase may be subject
to a CDSC at the rates set forth below 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
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 reinvestments 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 Group
fund. In the event of an exchange of the shares, the "net asset value of such
shares at the time of redemption" will be the net asset value of the shares that
were acquired in the exchange.
The following table sets forth the rates of the CDSC for Class B Shares
of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- ------------------------ ------------------
0-2 2%
3 1%
4 and thereafter None
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that 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 .30% (currently, no
more than .15% pursuant to Board action) 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
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<PAGE>
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.
All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.
The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange.
12b-1 Distribution Plans - Class A, Class B and Class C Shares
Under the distribution plans adopted by Limited-Term Funds, Inc. in
accordance with Rule 12b-1 under the 1940 Act, the Fund is permitted to pay the
Distributor annual distribution fees of up to .30% (currently, no more than .15%
pursuant to Board action) of the average daily net assets of Class A Shares and
1% of the average daily net assets of each of Class B Shares and Class C Shares.
These fees, which are payable monthly, compensate the Distributor for providing
distribution and related services and bearing certain expenses of each of the
Classes. The 12b-1 Plans applicable to the Class B Shares and the Class C Shares
are designed to permit an investor to purchase these shares through dealers or
brokers without paying a front-end sales charge while enabling the Distributor
to compensate dealers and brokers for the sale of such shares. For a more
detailed discussion of the 12b-1 Plans relating to Class A, Class B and Class C
Shares, see Distribution (12b-1) and Service under Management of the Fund.
Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash commissions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.
Classes Offered
The following funds currently offer Class A Shares, Class B Shares and
Class C Shares: Delaware Group Delchester High-Yield Bond Fund, Inc., Delaware
Group Government Fund, Inc., Delaware Group Value Fund, Inc., Delaware Group
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<PAGE>
Cash Reserve, Inc., Tax-Free USA Fund, Tax-Free Insured Fund and Tax-Free USA
Intermediate Fund of Delaware Group Tax-Free Fund, Inc., Delaware Group DelCap
Fund, Inc., Delaware Fund and Devon Fund of Delaware Group Delaware Fund, Inc.,
Decatur Income Fund and Decatur Total Return Fund of Delaware Group Decatur
Fund, Inc., Delaware Group Trend Fund, Inc., International Equity Series, Global
Bond Series and Global Assets Series of Delaware Group Global & International
Funds, Inc., DMC Tax-Free Income Trust-Pennsylvania and the Fund. In addition,
Delaware Group Cash Reserve, Inc. offers Consultant Class shares. U.S.
Government Money Series of Limited-Term Funds, Inc. and Delaware Group Tax-Free
Money Fund, Inc. offer only Class A and Consultant Class Shares.
Limited-Term Government Fund Institutional Class
In addition to offering Class A, Class B and Class C Shares, the Fund
also offers the Limited-Term Government Fund Institutional Class, which is
described in a separate prospectus and is available for purchase only by certain
investors. Limited-Term Government Fund Institutional Class shares generally are
distributed directly by the Distributor and do not have a front-end sales
charge, a CDSC or a Limited CDSC, and are not subject to 12b-1 Plan distribution
expenses. To obtain the prospectus that describes the Limited-Term Government
Fund Institutional Class, contact the Distributor by writing to the address or
by calling the telephone number listed on the cover of this Prospectus.
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<PAGE>
HOW TO BUY SHARES
Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be $100
or more. Shares purchased under the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act are subject to a minimum initial purchase of $250 and a
minimum subsequent purchase of $25. Minimum purchase requirements do not apply
to retirement plans other than IRAs for which there is a minimum initial
purchase of $250, and a minimum subsequent purchase of $25, regardless of which
Class is selected.
There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares and Class C Shares by the plan.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class or Limited-Term Government Fund C Class at
1818 Market Street, Philadelphia, PA 19103.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Limited-Term Government Fund A Class, Limited-Term Government
Fund B Class or Limited-Term Government Fund C Class. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Limited-Term Funds, Inc. Use of
this investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to Limited-Term Government Fund A Class, Limited-Term
Government Fund B Class or Limited-Term Government Fund C Class at 1818 Market
Street, Philadelphia, PA 19103.
-25-
<PAGE>
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described, the Delaware Group Asset
Planner service offers a choice of four predesigned asset allocation strategies
(each with a difference risk/reward profile) in predetermined percentages in
Delaware Group funds or, with the help of a financial adviser, you may 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. The minimum initial investment
per Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service; however, only shares within the same class may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30th of each subsequent year. The
fee, payable to Delaware Service Company, Inc. to defray extra costs associated
with administering the Asset Planner service, will be deducted automatically
from one of the funds within your Asset Planner account if not paid by September
30th. See Part B.
Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of the 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 each fund's
prospectus.
Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in the Delaware Group. 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 Group 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 Group
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
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<PAGE>
holding period of Class B Shares of the Fund acquired by exchange will be added
to that of the shares that were exchanged for purposes of determining the time
of the automatic conversion into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
See Retirement Planning for information on exchanges by participants in
an Allied Plan.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Limited-Term
Funds, Inc. to transfer a designated amount monthly from your checking account
to your Fund account. Many shareholders use this as an automatic savings plan.
Shareholders should allow a reasonable amount of time for initial purchases and
changes to these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
2. Direct Deposit
You may have your employer or bank make regular investments directly to
your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments by direct deposit or through an Automatic Investing
Plan be reclaimed or returned for some reason, Limited-Term Funds, Inc. has the
right to liquidate your Fund shares to reimburse the government or transmitting
bank. If there are insufficient funds in your account, you are obligated to
reimburse the Fund.
3. Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
through regular liquidations of shares in their accounts in other funds in the
Delaware Group, subject to the same conditions and limitations as other
exchanges noted above.
Shareholders may elect to invest in other mutual funds in the Delaware
Group through our Wealth Builder Option. Under this automatic exchange program,
shareholders can authorize regular monthly amounts (minimum of $100 per fund) to
be liquidated from their Fund account and invested automatically into an account
in one or more funds in the Delaware Group. If, in connection with the Wealth
Builder Option, a shareholder wishes to open a new account in such other fund or
funds to receive the automatic investment, such new account must meet such other
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<PAGE>
fund's minimum initial purchase requirements. Investments under this option are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges noted above.
Shareholders can terminate their participation at any time by written
notice to the Fund. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account. Or, you may invest
your distributions in certain other funds in the Delaware Group, subject to the
exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.
Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Group funds or into Class C Shares of the Fund or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Classes
of Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Fund. Holders of Class B Shares of the Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares (the "Class B Funds"). Similarly, holders of
Class C Shares of the Fund may reinvest their distributions only into Class C
Shares of the funds in the Delaware Group which offer that class of shares
(the"Class C Funds"). See Classes Offered under Classes of Shares for a list of
the funds offering those classes of shares. For more information about
reinvestments, call the Shareholder Service Center.
Purchase Price and Effective Date
The offering price and net asset value of Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received, unless
it is received after the time the offering price of shares is determined, as
noted above. Purchase orders received after such time will be effective the next
business day.
The Conditions of Your Purchase
The Fund reserves the right to reject any
purchase order. If a purchase is canceled because your check is returned unpaid,
you are responsible for any loss incurred. The Fund can redeem shares from your
account(s) to reimburse itself for any loss, and you may be restricted from
making future purchases in any of the funds in the Delaware Group. The Fund
reserves the right to reject purchase orders paid by third-party checks or
checks that are not drawn on a domestic branch of a United States financial
institution. If a check drawn on a foreign financial institution is accepted,
you may be subject to additional bank charges for clearance and currency
conversion.
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The Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that have remained below the
minimum stated account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their 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.
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REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other bond funds, equity funds, tax-advantaged
funds or money market funds. Exchanges are subject to the requirements of each
fund and all exchanges of shares constitute taxable events. See Taxes. Further,
in order for an exchange to be processed, shares of the fund being acquired must
be registered in the state where the acquiring shareholder resides. You may want
to consult your financial adviser or investment dealer to discuss which funds in
the Delaware Group will best meet your changing objectives, and the consequences
of any exchange transaction. You may also call the Delaware Group directly for
fund information.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
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.
Redemption or exchange requests received in good order after the time the
offering price and net asset value of shares are determined, as noted above,
will be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. A shareholder submitting a redemption may indicate
that he or she wishes to receive redemption proceeds of a specific dollar
amount. In the case of such a request, and in the case of certain redemptions
from retirement plan accounts, the Fund will redeem the number of shares
necessary to deduct the applicable CDSC in the case of Class B Shares or Class C
Shares or, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC.
Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the 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.
The Fund will honor written redemption requests of shareholders who
recently purchased shares by check, but will not mail the proceeds until it is
reasonably satisfied that the purchase check has cleared, which may take up to
15 days from the purchase date. Telephone redemptions for shares recently
purchased by check will not be honored unless the Fund is reasonably satisfied
that the purchase check has cleared. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. The Fund reserves the right to reject a
written or telephone redemption request or delay payment of redemption proceeds
if there has been a recent change to the shareholder's address of record.
There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
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front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for transfers involving assets that were
previously invested in a fund with a front-end sales charge and/or transfers
involving the reinvestment of dividends.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for Class B Shares of other Class B Funds or Class C Shares
of other Class C Funds, as applicable (in each case, "New Shares"), will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the Fund. 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.
Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Checkwriting Feature
Purchasers of Class A Shares can request special checks by marking the
box on the Investment Application.
The checks must be drawn for $500 or more and, unless otherwise
indicated on the Investment Application or your checkwriting authorization form,
must be signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to close
your account. The Checkwriting Feature is not available with respect to the
Class B Shares or the Class C Shares and, for retirement plans, with respect to
the Class A Shares. See Part B for additional information.
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day, but no later than
seven days, after receipt of your redemption request. If your Class A Shares are
in certificate form, the certificate must accompany your request and also be in
good order. Certificates are issued for Class A Shares only if a shareholder
submits a specific request. Certificates are not issued for Class B Shares or
Class C Shares.
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Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
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. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.
Telephone Redemption - Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day, but no more than seven days, after receipt of the request. This service is
only available to individual, joint and individual fiduciary-type accounts.
Telephone Redemption - Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, 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.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. Except for any CDSC which may be applicable to Class
B and Class C Shares and the Limited CDSC which may be applicable to certain
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Class A Shares, there are no fees for this redemption method, but the mail time
may delay getting funds into your bank account. Simply call the Shareholder
Service Center prior to the time the offering price and net asset value are
determined, as noted above.
If expedited payment by check or wire could adversely affect the Fund,
the Fund may take up to seven days to pay.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into any fund in the Delaware Group under the same registration, subject
to the same conditions and limitations as other exchanges noted above. As with
the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Except for the Limited CDSC which may be applicable to Class A Shares
and the CDSC which may be applicable to Class B Shares and Class C Shares as
noted below, there are no fees for this redemption method. See MoneyLine Direct
Deposit Service under The Delaware Difference for more information about this
service.
2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals, depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required.
* * *
Shareholders should not purchase additional shares while participating
in a Systematic Withdrawal Plan.
Redemptions of Class A Shares pursuant to a Systematic Withdrawal Plan
may be subject to a Limited CDSC if the original purchase was made at net asset
value within the 12 months prior to the withdrawal and a dealer's commission has
been paid on that purchase. See Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value, below.
With respect to Class B Shares and Class C Shares redeemed via a
Systematic Withdrawal Plan, any applicable CDSC will be waived if, on the date
that the Plan is established, the annual amount selected to be withdrawn is less
than 12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
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applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares, below.
For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal to
the lesser of 1% of (1) the net asset value at the time of purchase of the Class
A Shares being redeemed or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware Group
fund and, in the event of an exchange of Class A Shares, the "net asset value of
such shares at the time of redemption" will be the net asset value of the shares
acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed, followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.
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)
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redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability or attainment of age 59 1/2; (v) returns
of excess contributions to an IRA; (vi) distributions by other employee benefit
plans to pay benefits; (vii) distributions described in (ii), (iv) and (vi)
above pursuant to a systematic withdrawal plan; and (viii) redemptions by the
classes of shareholders who are permitted to purchase shares at net asset value,
regardless of the size of the purchase (see Buying Class A Shares at Net Asset
Value under Classes of Shares).
Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC on certain redemptions of Class B 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 or 403(b)(7)
Deferred Compensation Plan; (iii) required minimum distributions from an IRA,
403(b)(7) Deferred Compensation Plan or 457 Deferred Compensation Plan; and (iv)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.
The CDSC on certain redemptions of Class C Shares is waived in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, 403(b)(7) Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or 401(k)
Defined Contribution Plan; (iii) required minimum distributions from an IRA,
403(b)(7) Deferred Compensation Plan, 457 Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iv) distributions from a 403(b)(7) Deferred Compensation Plan, 457 Deferred
Compensation Plan, Profit Sharing Plan or 401(k) Defined Contribution Plan,
under hardship provisions of the plan; (v) distributions from a 403(b)(7)
Deferred Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan,
Money Purchase Pension Plan or a 401(k) Defined Contribution Plan upon
attainment of normal retirement age under the plan or upon separation from
service; (vi) distributions from an IRA on or after attainment of age 59 1/2;
and (vii) distributions from an account if the redemption results from the death
of all registered owners of the account (in the case of accounts established
under the Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust
accounts, the waiver applies upon the death of all beneficial owners) or a total
and permanent disability (as defined in Section 72 of the Code) of all
registered owners occurring after the purchase of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the amount selected
to be withdrawn under the Plan does not exceed 12% of the value of the account
on the date that the Systematic Withdrawal Plan was established or modified.
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DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly on the last business day
of each month. Payment by check of cash dividends will ordinarily be mailed
within three business days after the payable date.
Purchases of 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 business day, Limited-Term Funds, Inc. declares a dividend to all
shareholders of record in each Class at the time the offering price of shares is
determined. See Purchase Price and Effective Date under How to Buy Shares. Thus,
when redeeming shares, dividends continue to accrue up to and including the date
of redemption.
Each of the Classes will share proportionately in the investment income
and expenses of the Fund, except that the per share dividends from net
investment income will vary due to the expenses under the 12b-1 Plan applicable
to each Class. Generally, the dividends per share on Class B Shares and Class C
Shares can be expected to be lower than the dividends per share on Class A
Shares because the expenses under the 12b-1 Plans of Class B and Class C Shares
will be higher than the expenses under the 12b-1 Plan of Class A Shares. See
Distribution (12b-1) and Service under Management of the Fund.
The Fund can have two types of distributions: income dividends and
capital gains. Short-term capital gains distributions, if any, may be paid
quarterly, but in the discretion of Limited-Term Funds, Inc.'s Board of
Directors might be distributed less frequently. Long-term capital gains, if any,
will be distributed annually.
Both dividends and capital gains are automatically reinvested in your
account unless you elect otherwise. See The Delaware Difference for more
information on reinvestment options.
If you elect to have your dividends and distributions paid in cash and
such payments are in an amount of $25 or more, you may elect the MoneyLine
Direct Deposit Service to have your payments transferred from your Fund account
to your predesignated bank account. See MoneyLine Direct Deposit Service under
The Delaware Difference for more information about this service.
Any check for 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.
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TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Code. As such, the Fund
will not be subject to federal income tax, or to any excise tax, to the extent
its earnings are distributed as provided in the Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, whether
received in cash or in additional shares. No portion of the Fund's distributions
will be eligible for the dividends-received deduction for corporations.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a byproduct of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
Dividends or capital gains which are declared in October, November or
December to shareholders of record in such a month but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two series or portfolios of a mutual fund). Any loss
incurred on sale or exchange of the Fund's shares held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares. All or a portion of the sales
charge incurred in acquiring Fund shares will be excluded from the federal tax
basis of any of such shares sold or exchanged within 90 days of their purchase
(for purposes of determining gain or loss upon sale of such shares) if the sale
proceeds are reinvested in the Fund or in another fund in the Delaware Group of
funds and a sales charge that would otherwise apply to the reinvestment is
reduced or eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.
The automatic conversion of Class B Shares into Class A Shares at the
end of approximately five years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
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Each year, Limited-Term Funds, Inc. will mail to you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. Government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by the Fund.
The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Accounting and Tax Issues in Part B for additional information on
tax matters relating to the Fund and its shareholders.
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CALCULATION OF OFFERING PRICE
AND NET ASSET VALUE PER SHARE
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by
Limited-Term Funds, Inc.'s Board of Directors.
Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the net asset value ("NAV")
per share. The offering price per share of Class A Shares consists of the NAV
per share next computed after the order is received, plus any applicable
front-end sales charges.
The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.
The 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 the Limited-Term Government Fund Institutional Class will not incur any
of the expenses under the Fund's 12b-1 Plans and the Class A, Class B and Class
C Shares alone will bear the 12b-1 Plan expenses payable under their respective
12b-1 Plans. Due to the specific distribution expenses and other costs that will
be allocable to each class, the dividends paid to each class of the Fund may
vary. However, the NAV per share of each class is expected to be equivalent.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Limited-Term Funds, Inc. are managed under
the direction of its Board of Directors. Part B contains additional information
regarding Limited-Term Funds, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On December 31, 1995, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $28 billion in assets in the various institutional (approximately
$17,606,321,000) and investment company (approximately $10,522,726,000)
accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, a new Investment Management Agreement
between Limited-Term Funds, Inc. on behalf of the Fund and the Manager was
executed following shareholder approval.
The Manager manages the Fund's portfolio, makes investment decisions
and implements them. The Manager also administers Limited-Term Funds, Inc.'s
affairs and pays the salaries of all the directors, officers and employees of
Limited-Term Funds, Inc. who are affiliated with the Manager. For these
services, the Manager is paid an annual fee of 1/2 of 1% of the average daily
net assets of the Fund, less a proportionate share of all directors' fees paid
to the unaffiliated directors by the Fund. Investment management fees paid by
the Fund were 0.50% of average daily net assets for the fiscal year ended
December 31, 1995.
Roger A. Early has had primary responsibility for making day-to-day
investment decisions for the Fund since July 18, 1994. Mr. Early has an
undergraduate degree in economics from the University of Pennsylvania's Wharton
School and an MBA in finance and accounting from the University of Pittsburgh.
He is also a CPA and a CFA. Prior to joining the Delaware Group, Mr. Early was a
portfolio manager for Federated Investment Counseling's fixed income group, with
over $1 billion in assets.
In making investment decisions for the Fund, Mr. Early consults
regularly with Paul E. Suckow and Gary A. Reed. Mr. Suckow is the Chief
Investment Officer for fixed income. A Chartered Financial Analyst, he is a
graduate of Bradley University with an MBA from Western Illinois University. Mr.
Suckow was a fixed income portfolio manager at the Delaware Group from 1981 to
1985. He returned to the Delaware Group in 1993 after eight years with
Oppenheimer Management Corporation. Mr. Reed, also a Chartered Financial
Analyst, is a graduate of the University of Chicago with an MA from Columbia
University. He joined the Delaware Group in 1989 as a vice president for fixed
income.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Fund's portfolio
transactions.
-40-
<PAGE>
Although the Fund trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The degree of portfolio activity
may affect brokerage costs of the Fund, if any, and taxes payable by
shareholders. During the fiscal years ended December 31, 1994 and 1995, the
Fund's portfolio turnover rates were 148% and 73%, respectively. See Portfolio
Turnover under Trading Practices and Brokerage in Part B.
The Manager uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be placed
with brokers or dealers who provide brokerage and research services to the
Manager or its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Manager
may consider a broker/dealer's sales of Fund shares in placing portfolio orders
and may place orders with broker/dealers that have agreed to defray certain Fund
expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return performance
of the Classes in advertising and other types of literature.
The current yield for a Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the maximum offering price per share on the last day of the period.
The yield formula provides for semi-annual compounding which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at NAV and: (i) in the case of
Class A Shares, the impact of the maximum front-end sales charge at the
beginning of each specified period; and (ii) in the case of Class B Shares and
Class C Shares, the deduction of any applicable CDSC at the end of the relevant
period. Each presentation will include the average annual total return for one-,
five- and ten-year periods, as relevant. The Fund may also advertise aggregate
and average total return information concerning a Class over additional periods
of time. 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. In this case, such total return information would be more
favorable than total return information which includes deductions of the maximum
front-end sales charge or any applicable CDSC.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not a guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Fund under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995.
Limited-Term Funds, Inc. has adopted a separate distribution plan under
Rule 12b-1 for each of Class A Shares, Class B Shares and Class C Shares (the
"Plans"). The Plans permit the Fund to pay the Distributor from the assets of
the respective Classes a monthly fee for its services and expenses in
distributing and promoting sales of shares. These expenses include, among other
things, preparing and distributing advertisements, sales literature, and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, holding special promotions for specified periods of time,
and paying distribution and maintenance fees to brokers, dealers and others. In
-41-
<PAGE>
connection with the promotion of Class A, Class B and Class C Shares, the
Distributor may, from time to time, pay to participate in dealer- sponsored
seminars and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences and advertising. The
Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning each Class and increase sales of each Class. In
addition, the Fund may make payments from the assets of the respective Class
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to agreements with
Limited-Term Funds, Inc.
The 12b-1 Plan expenses relating to each of the Class B Shares and the
Class C Shares are also used to pay the Distributor for advancing the commission
costs to dealers with respect to the initial sale of such shares.
The aggregate fees paid by the Fund from the assets of the respective
Classes to the Distributor and others under the Plans may not exceed .30% of the
Class A Shares' average daily net assets in any year, and 1% (.25% of which are
service fees to be paid by the Fund to the Distributor, dealers and others, for
providing personal service and/or maintaining shareholder accounts) of each of
the Class B Shares' and Class C Shares' average daily net assets in any year.
Class A, Class B and Class C Shares will not incur any distribution expenses
beyond these limits, which may not be increased without shareholder approval.
The Distributor may, however, incur additional expenses and make additional
payments to dealers from its own resources to promote the distribution of shares
of the Classes.
On May 21, 1987, the Board of Directors set the fee for Class A Shares,
pursuant to its Plan, at .15% of average daily net assets. This fee was
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors has
determined that the annual fee payable on a monthly basis, under the Plan will
be equal to the sum of: (i) the amount obtained by multiplying .10% by the
average daily net assets represented by Class A Shares which were originally
purchased prior to June 1, 1992 in 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 the shareholders of Investors Series I
class), and (ii) the amount obtained by multiplying .15% by the average daily
net assets represented by all other Class A Shares. While this is the method to
be used to calculate the 12b-1 expenses to be paid by Class A Shares under its
Plan, the fee is a Class A Shares' expense so that all shareholders of Class A
Shares, regardless of whether they originally purchased or received shares in
Investors Series I class, or in one of the other classes that is now known as
Class A Shares, will bear 12b-1 expenses at the same rate. While this describes
the current formula for calculating the fees which will be payable under the
Class A Shares' Plan beginning June 1, 1992, such Plan permits a full .30% on
all Class A Shares' assets to be paid at any time following appropriate Board
approval. See Shares, below.
Limited-Term Funds, Inc.'s Plans do not apply to the Limited-Term
Government Fund Institutional Class of shares. Those shares are not included in
calculating the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of Limited-Term Government Fund Institutional Class
shares.
While payments pursuant to the Plans may not exceed .30% annually with
respect to Class A Shares and 1% annually with respect to Class B Shares and
Class C Shares, the Plans do not limit fees to amounts actually expended by the
Distributor. It is therefore possible that the Distributor may realize a profit
-42-
<PAGE>
in any particular year. However, the Distributor currently expects that its
distribution expenses will likely equal or exceed payments to it under the
Plans. The monthly fees paid to the Distributor are subject to the review and
approval of Limited-Term Funds, Inc.'s unaffiliated directors who may reduce the
fees or terminate the Plans at any time.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an Agreement dated December 20, 1990. The directors annually review service fees
paid to the Transfer Agent.
The Distributor and the Transfer Agent are indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratios of expenses to
average daily net assets for the Class A Shares and the Class B Shares for the
fiscal year ended December 31, 1995 were 0.96% and 1.81%, respectively. The Fund
anticipates that the expense ratio for Class C Shares will approximately equal
the expense ratio for Class B Shares. The ratio of each Class reflects the
impact of its 12b-1 Plan.
Shares
The Limited-Term Government Fund series is the second series of
Delaware Group Limited-Term Government Funds, Inc., which is an open-end
management investment company, commonly known as a mutual fund. The Fund's
portfolio of assets is diversified as defined by the 1940 Act. Limited-Term
Funds, Inc. was organized as a Pennsylvania business trust in 1981 and was
reorganized as a Maryland corporation in 1990. The authorized capital of
Limited-Term Funds, Inc. consists of three billion shares of common stock, of
which two billion shares have been allocated to the Limited-Term Government
Fund series. Nine hundred fifty million shares have been allocated to Class A
Shares, two hundred million shares have been allocated to each of Class B Shares
and Limited-Term Government Fund Institutional Class Shares and fifty million
shares have been allocated to Class C Shares.
All of the shares have noncumulative voting rights which means that the
holders of more than 50% of Limited-Term Funds, Inc.'s shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
Under Maryland law, Limited-Term Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of Limited-Term Funds, Inc.'s shares may request that a special meeting
be called to consider the removal of a director.
Fund shares have a $.001 par value per share, equal voting rights,
except as noted below, and are equal in all other respects. Shares of the Fund
will have a priority over shares of any other series of Limited-Term Funds, Inc.
in the assets and income of the Fund and will vote separately on any matter that
affects only the Limited-Term Government Fund series.
In addition to Class A Shares, Class B Shares and Class C Shares, the
Fund also offers the Limited-Term Government Fund Institutional Class shares.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as the other classes
of shares of the Fund, except that shares of the Limited-Term Government Fund
Institutional Class may not vote on matters affecting the 12b-1 Plans.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
-43-
<PAGE>
and Class C Shares may vote only on matters affecting the 12b-1 Plan that
relates to the Class of shares that they hold. However, Class B Shares may vote
on any proposal to increase materially the fees to be paid by the Fund under the
12b-1 Plan relating to Class A Shares.
Until May 31, 1992, the Fund offered two retail classes of shares,
Investors Series I and Investors Series II (now Class A Shares). Investors
Series I class offered shares with a front-end sales charge, but without the
imposition of a Rule 12b-1 fee. Effective June 1, 1992, following shareholder
approval of a plan of recapitalization on May 15, 1992, shareholders of the
Investors Series I class had their shares converted into shares of the Investors
Series II class and became subject to the latter class' Rule 12b-1 charges.
Effective at the same time, following approval by shareholders, the name
Investors Series was changed to Treasury Reserves Intermediate Series and the
name Investors Series II class was changed to Treasury Reserves Intermediate
Fund class. On May 2, 1994, Treasury Reserves Intermediate Fund class became
known as Treasury Reserves Intermediate Fund A Class. Effective as of the close
of business on August 28, 1995, the name Delaware Group Treasury Reserves, Inc.
was changed to Delaware Group Limited-Term Government Funds, Inc. and the name
Treasury Reserves Intermediate Series was changed to Limited-Term Government
Fund. At the same time, the names of Treasury Reserves Intermediate Fund A
Class, Treasury Reserves Intermediate Fund B Class and Treasury Reserves
Intermediate Fund Institutional Class were changed to, respectively,
Limited-Term Government Fund A Class, Limited-Term Government Fund B Class and
Limited-Term Government Fund Institutional Class.
-44-
<PAGE>
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISK CONSIDERATIONS
Following are more detailed descriptions of investment strategies
employed by the Fund and any risks they may entail.
Put Options
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. The advantage is that
the Fund can be protected should the market value of the security decline due to
a rise in interest rates. However, the Fund must pay a premium for this right,
whether it exercises it or not. 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 written by the Fund obligates it to buy the security
underlying the option at the exercise price during the option period, and the
purchaser of the option has the right to sell the security to the Fund. During
the option period, the Fund, as writer of the put option, may be assigned an
exercise notice by the broker/dealer through whom the option was sold requiring
the Fund to make payment of the exercise price against delivery of the
underlying security. This obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. The Fund will only write put options on a secured basis. The
advantage to the Fund of writing put options is that it receives premium income.
The disadvantage is that the Fund may be required, when the put is exercised, to
purchase securities at higher prices than the current market price.
A covered call option written by the Fund obligates it to sell one of
its securities for an agreed price up to an agreed date. The advantage is that
the Fund receives premium income, which may offset the cost of purchasing put
options. However, the Fund may lose the potential market appreciation of the
security if the Manager's judgment is wrong and interest rates fall.
When the Fund purchases a call option, in return for a premium paid by
the Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium
upon writing the option, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. The
advantage is that the Fund may hedge against an increase in the price of
securities which it ultimately wishes to buy. However, the premium paid for the
call option plus any transaction costs will reduce the benefit, if any, realized
by the Fund upon exercise of the option. The Fund will only purchase call
options to the extent that premiums paid on all outstanding call options do not
exceed 2% of the Fund's total assets.
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will not invest more
than 10% of its assets in illiquid securities.
Futures Contracts
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A purchase
-45-
<PAGE>
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.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The principal purpose of the purchase or sale of futures contracts for
the Fund is to protect the Fund against the adverse effects of fluctuations in
interest rates without actually buying or selling such securities. To the extent
that interest rates move in an unexpected direction, however, the Fund may not
achieve the anticipated benefits of futures contracts or options on such futures
contracts or may realize a loss. To the extent that the Fund purchases an option
on a futures contract and fails to exercise the option prior to the exercise
date, it will suffer a loss of the premium paid. Further, the possible lack of a
secondary market would prevent the Fund from closing out its option positions
relating to futures.
Mortgaged-Backed Securities
Two principal types of mortgage-backed securities are collateralized
mortgage obligations (CMOs) and real estate mortgage investment conduits
(REMICs).
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government securities and are
not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. The Fund will invest in such
private-backed securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. The Fund currently invests in privately-issued CMOs and
REMICs only if they are rated at the time of purchase in the two highest grades
by a nationally-recognized rating agency. Certain of the CMOs in which the Fund
may invest may have variable or floating interest rates and others may be
stripped (securities which provide only the principal or interest feature of the
underlying security).
Asset-Backed Securities
The Fund may also invest in securities which are backed by assets such
as receivables on home equity and credit card loans, and receivables on
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
plans and leases.
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass- through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued. The Fund may invest in these and other types of asset-backed securities
that may be developed in the future. It is the Fund's current policy to limit
asset-backed investments to those represented by interests in credit card
receivables, wholesale dealer floor plans, home equity loans and automobile
loans.
-46-
<PAGE>
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established. In addition,
with respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities. For further
discussion concerning the risks of investing in such asset- backed securities,
see Part B.
Repurchase Agreements
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.
Portfolio Loan Transactions
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, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Restricted Securities
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the 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.
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<PAGE>
<TABLE>
<CAPTION>
APPENDIX A - INVESTMENT ILLUSTRATIONS
Illustrations of Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 9,700 10,000 10,000 9,700 10,000 10,000
1 10,185 10,415 10,415 10,185 10,215 10,315+
2 10,694 10,847 10,847
3 11,229 11,297 11,297
4 11,790+ 11,766 11,766
5 12,380 12,255 12,255
6 12,999 12,867* 12,763
7 13,649 13,511* 13,293
8 14,331 14,186* 13,844
9 15,048 14,895* 14,419
10 15,800 15,640* 15,017
</TABLE>
<TABLE>
<CAPTION>
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ------------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 9,700 10,000 10,000 9,700 10,000 10,000
1 10,185 10,415 10,415 10,185 10,415 10,415
2 10,694 10,847 10,847 10,694 11,847 10,847
3 11,229 11,197 11,297+ 11,229 11,297 11,297
4 11,790+ 11,766 11,766
5 12,380 12,255 12,255
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to Class A
Shares at the end of the fifth year.
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 245,000 250,000 250,000 245,000 250,000 250,000
1 257,250 260,375 260,375 257,250 255,375 257,875+
2 270,113 271,181 271,181
3 283,618+ 282,435 282,435
4 297,799 294,156 294,156
5 312,689 306,363 306,363
6 328,323 321,681* 319,077
7 344,740 337,765* 332,319
8 361,977 354,654* 346,110
9 380,075 372,386* 360,474
10 399,079 391,006* 375,433
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$250,000 Purchase
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
0 245,000 250,000 250,000 245,000 250,000 250,000
1 257,250 260,375 260,375 257,250 260,375 260,375
2 270,113 271,181 271,181 270,113 271,181 271,181
3 283,618+ 279,935 282,435 283,618+ 282,435 282,435
4 297,799 294,156 294,156
5 312,689 306,363 306,363
6
7
8
9
10
</TABLE>
*This assumes that Class B Shares were converted to Class A Shares
at the end of the fifth year.
Assumes a hypothetical return for Class A of 5% per year, a hypothetical return
for Class B of 4.15% for years 1-5 and 5% for years 6-10, and a hypothetical
return for Class C of 4.15% per year. Hypothetical returns vary due to different
expense structures for each Class and do not represent actual performance.
Class A purchase subject to appropriate sales charge breakpoint (3.00% @
$10,000; 2.50% @ $100,000; 2.00% @ $250,000)
Class B purchase assessed appropriate CDSC upon redemption (schedule 2%-2%-1% in
years 1-2-3).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on the investment amount, the holding period and the expense structure of
each Class.
<PAGE>
For more information call Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
- ---------------------------------------------------------
LIMITED-TERM GOVERNMENT
FUND INSTITUTIONAL
- ---------------------------------------------------------
P R O S P E C T U S
- ---------------------------------------------------------
FEBRUARY 29, 1996
DELAWARE
GROUP
-----
<PAGE>
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND) FEBRUARY 29, 1996
INSTITUTIONAL
--------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Limited-Term Government Fund
Institutional Class call Delaware Group at 800-828-5052.
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") is a professionally-managed mutual fund of the series type. This
Prospectus describes the Limited-Term Government Fund series (the "Fund"). The
Fund's objective is to seek a high, stable level of current income while
attempting to minimize fluctuations in principal and provide maximum liquidity.
The Fund intends to achieve its objective by investing its assets in a
diversified portfolio of short- and intermediate- term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
instruments secured by such securities. The Limited-Term Government Fund
Institutional Class of shares (the "Class") is described in this Prospectus. The
Fund offers shares of the Class for purchase only by certain eligible investors
at net asset value, without the imposition of a front-end or contingent deferred
sales charge and without a 12b-1 charge. See Classes of Shares.
This Prospectus relates only to the Class and sets forth information
that you should read and consider before you invest. Please retain it for future
reference. Part B of the registration statement, dated February 29, 1996, as it
may be amended from time to time, contains additional information about the Fund
and has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above number. The Fund's financial statements appear in its Annual Report, which
will accompany any response to requests for Part B.
The Fund also offers the Limited-Term Government Fund A Class, the
Limited-Term Government Fund B Class and the Limited-Term Government Fund C
Class. Shares of those classes are subject to sales charges and other expenses,
which may affect their performance. A prospectus for those classes can be
obtained by writing to Delaware Distributors, L.P. at the above address or by
calling 800-523-4640.
-1-
<PAGE>
TABLE OF CONTENTS
Cover Page How to Buy Shares
Synopsis Redemption and Exchange
Summary of Expenses Dividends and Distributions
Financial Highlights Taxes
Investment Objective and Strategies Calculation of Net Asset Value
Suitability Per Share
Investment Strategy Additional Information on Investment
and Risk Factors Policies and Risk Considerations
Classes of Shares Management of the Fund
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for the Fund. The Manager or its affiliate, Delaware International
Advisers Ltd., also manages the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Management of the Fund.
Purchase Price
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan. See Classes
of Shares.
Investment Objective
The objective of the Fund is to seek high, stable income by investing
in a portfolio of short- and intermediate-term securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and instruments
secured by such securities. For further details, see Investment Objective and
Strategies.
Open-End Investment Company
Limited-Term Funds, Inc., which was organized as a Pennsylvania
business trust in 1981 and reorganized as a Maryland corporation in 1990, is an
open-end management investment company. The Fund's portfolio of assets is
diversified as defined by the Investment Company Act of 1940 (the "1940 Act").
See Shares under Management of the Fund.
Investment Management Fees
The Manager furnishes investment management services to the Fund,
subject to the supervision and direction of the Board of Directors. Under the
Investment Management Agreement, the annual compensation paid to the Manager is
equal to 1/2 of 1% of the average daily net assets, less a proportionate share
of all directors' fees paid to the unaffiliated directors by the Fund. See
Management of the Fund.
Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
Risk Factors
1. The value of Fund shares will fluctuate with the value of its
underlying investments. The Fund strives to minimize such fluctuations; however,
since the Fund invests in fixed income securities, the value of its shares will
tend to generally rise when interest rates fall and fall when interest rates
rise.
2. The Fund may invest a portion of its assets in over-the-counter
options and futures, some of which may be considered to be derivative
securities. See Investment Techniques under Investment Objective and Strategies.
-3-
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
--------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................... None
Redemption Fees............................................................... None*
Exchange Fees................................................................. None**
Annual Operating Expenses
(as a percentage of average daily net assets)
---------------------------------------------
Management Fees .............................................................. 0.50%
12b-1 Fees.................................................................... None
Other Operating Expenses...................................................... 0.31%
----
Total Operating Expenses................................................. 0.81%
=====
</TABLE>
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in the Class will
bear directly or indirectly.
*CoreStates Bank, N.A. currently charges $7.50 per redemption for
redemptions payable by wire.
**Exchanges are subject to the requirements of each fund and a
front-end sales charge may apply.
For expense information about the Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class and Limited-Term Government Fund C Class,
see the separate prospectus relating to those classes.
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return and (2) redemption at the end of each time period. As noted in
the table above, the Fund charges no redemption fees.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$8 $26 $45 $100
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
-4-
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund and have been audited by Ernst & Young LLP, independent auditors. The data
should be read in conjunction with the financial statements, related notes, and
the report of Ernst & Young LLP covering such financial information and
highlights, all of which are incorporated by reference into Part B. Further
information about the Fund's performance is contained in its Annual Report to
shareholders. A copy of the Fund's Annual Report (including the report of Ernst
& Young LLP) may be obtained from the Fund upon request at no charge.
- -------------------------------------------------------------------------------
-5-
<PAGE>
<TABLE>
<CAPTION>
Year Ended
12/31/95 12/31/94 12/31/93 12/31/92(1)(3) 12/31/91(1)
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $8.990 $9.840 $10.000 $10.190 $9.770
Income From Investment Operations
- ---------------------------------
Net Investment Income.......................................... 0.712 0.681 0.696 0.754 0.816
Net Gains or Losses on Securities
(both realized and unrealized)...................... 0.060 (0.850) (0.160) (0.190) 0.420
------ ------- ------- ------- -----
Total From Investment Operations......................... 0.772 (0.169) 0.536 0.564 1.236
------ ------- ------- ------- -----
Less Distributions
- ------------------
Dividends (from net investment income)......................... (0.712) (0.681) (0.696) (0.754) (0.816)
Distributions (from capital gains)............................. none none none none none
Returns of Capital......................................... none none none none none
------ ------- ------- ------- -------
Total Distributions..................................... (0.712) (0.681) (0.696) (0.754) (0.816)
------ ------- ------- ------- -------
Net Asset Value, End of Period................................. $9.050 $8.990 $9.840 $10.000 $10.190
====== ======= ======= ======== =======
z---------------------------------------------------------------
Total Return ............................................... 8.87% (1.74%) 5.44% 5.77%(4) 13.21%(4)
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $37,460 $37,238 $47,700 $52,403 $146,598
Ratio of Expenses to Average Daily Net Assets.................. 0.81% 0.76% 0.74% 0.75%(5) 0.75%(5)
Ratio of Net Investment Income to Average Daily Net Assets..... 7.86% 7.25% 6.91% 7.58%(6) 8.11%(6)
Portfolio Turnover Rate........................................ 73% 148% 171% 77% 42%
</TABLE>
<TABLE>
<CAPTION>
Period
9/2/87(1)(2)
Year Ended through
12/31/90(1) 12/28/89(1) 12/29/88(1) 12/31/87
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................... $9.720 $9.700 $9.800 $9.770
Income From Investment Operations
- ---------------------------------
Net Investment Income.......................................... 0.828 0.857 0.744 0.192
Net Gains or Losses on Securities
(both realized and unrealized)...................... 0.050 0.020 (0.100) 0.030
----- ----- ------ -----
Total From Investment Operations......................... 0.878 0.877 0.644 0.222
----- ----- ----- -----
Less Distributions
- ------------------
Dividends (from net investment income)......................... (0.828) (0.857) (0.744) (0.192)
Distributions (from capital gains)............................. none none none none
Returns of Capital......................................... none none none none
------ ------ ------ ------
Total Distributions..................................... (0.828) (0.857) (0.744) (0.192)
------ ------ ------ ------
Net Asset Value, End of Period................................. $9.770 $9.720 $9.700 $9.800
====== ====== ====== ======
- ---------------------------------------------------------------
Total Return ............................................... 9.48% 9.44% 6.78% 5.61%
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted)...................... $12,811 $3,933 $5,740 $10,599
Ratio of Expenses to Average Daily Net Assets.................. 0.84% 0.82% 0.75% (2)
Ratio of Net Investment Income to Average Daily Net Assets..... 8.56% 8.87% 7.59% (2)
Portfolio Turnover Rate........................................ 175% 311% 146% (2)
</TABLE>
<PAGE>
(1) The financial highlights for the period prior to June 1, 1992 (the date
Limited-Term Government Fund Institutional Class was first offered for
public sale) are derived from data of the Investors Series I class, which
like the Limited-Term Government Fund Institutional Class, was not subject
to Rule 12b-1 distribution expenses. Shares of Investors Series I class
were converted into shares of Investors Series II class on June 1, 1992
pursuant to a Plan of Recapitalization approved by shareholders of the
Investors Series I class. See Shares for additional information.
(2) September 2, 1987 was the date of the initial public offering of Investors
Series I class (see Note 1); the ratios of expenses and net investment
income to average daily net assets and portfolio turnover have been omitted
as management believes that such ratios for this relatively short of a time
period are not meaningful.
(3) The per share data and ratios for the Investors Series I class and the
Limited-Term Government Fund Institutional Class (formerly known as
Treasury Reserves Intermediate Fund Institutional Class) have been combined
for 1992. For the five months ended May 31, 1992, the Investors Series I
class' operating expenses and net investment income per share were $.031
and $.325, respectively. For the seven months ended December 31, 1992, the
Limited-Term Government Fund Institutional Class' operating expenses and
net investment income per share were $.045 and $.429, respectively. All net
investment income was distributed to shareholders.
(4) Total return for 1991 and 1992 reflect the expense limitations referenced
in Notes 5 and 6.
(5) Ratio of expenses to average daily net assets prior to expense limitation
was 0.78% for 1992 and 0.84% for 1991. See Note 1.
(6) Ratio of net investment income to average daily net assets prior to expense
limitation was 7.54% for 1992 and 8.02% for 1991. See Note 1.
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
The Fund seeks to provide a high stable level of income, while
attempting to minimize fluctuations in principal and provide maximum liquidity.
It seeks to do this by investing primarily in a portfolio of short- and
intermediate-term securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and instruments secured by such securities. The
Fund may also invest up to 20% of its assets in corporate notes and bonds,
certificates of deposit and obligations of both U.S. and foreign banks,
commercial paper and certain asset-back securities.
The level of income will vary depending on interest rates and the
portfolio. However, since longer term rates are generally less volatile than
short-term rates, the level of income for the Fund may tend to be less volatile
than, for example, a money market fund.
SUITABILITY
The Fund may be suitable for individuals who want a stable and high
income flow, the security associated with investments focused principally on
U.S. Government-backed instruments and the convenience and liquidity of mutual
funds. However, investors should consider asset value fluctuation as well as
income potential in making an investment decision.
The Fund is not a money market fund. A money market fund is designed
for stability of principal; consequently, the level of income fluctuates. The
Fund is designed for greater stability of income at a relatively higher level;
consequently, the principal value will fluctuate over time.
Because the Fund invests in longer-term securities than a money market
fund, the value of shares will fluctuate. When interest rates rise, the share
value will tend to fall, and when interest rates fall, the share value will tend
to rise. Therefore, the Fund may not be suitable for investors whose overriding
objective is stability of principal. See Investment Strategy and Risk Factors.
The Fund's objective of a high stable income stream may also be
suitable for longer term investments, such as tax-deferred retirement plans
(e.g., IRA, 401(k), Profit Sharing, etc.), where the income stream can be left
to compound on a tax-deferred basis. Ownership of Fund shares reduces the
bookkeeping and administrative inconveniences connected with direct purchases of
these instruments.
INVESTMENT STRATEGY AND RISK FACTORS
The Fund attempts to provide you with yields higher than those
available in money market funds or bank money market accounts by extending its
portfolio maturities.
The yield curves, as shown in the chart below, reflect the additional
return that may be obtained by a moderate extension of maturities.
YIELD CURVE
12/30/94 12/29/95
Average Portfolio Maturity
----- -----
3 Months 5.682 5.072
6 Months 6.495 5.147
1 Year 7.162 5.132
2 Years 7.690 5.150
3 Years 7.778 5.208
5 Years 7.827 5.374
10 Years 7.827 5.570
30 Years 7.876 5.949
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<PAGE>
The Fund expects to have an average portfolio maturity in the shaded area
indicated above. By extending average maturity in this area, the Fund seeks
higher income than may be available from money market securities but may also
experience greater principal fluctuation. However, the Fund should tend to
experience less principal fluctuation than funds which have average maturities
beyond the gray shaded area. The yields to maturity in the curves are for
unmanaged Treasury securities with various remaining maturities. The black line
shows the yield curve at December 30, 1994. The purple line represents the yield
curve as of December 29, 1995. The data was obtained from Federal Reserve
Statistical Release H.15 (519). These are not necessarily indicative of future
performance or yield curves. The yield curve changes over time and short rates
may occasionally be higher than intermediate rates.
Maturity Restrictions
The Fund seeks to reduce the effects of interest rate volatility on
principal by limiting the average effective maturity (as that term is defined in
Part B) to no more than five years.
If in the judgment of the Manager rates are low, it will tend to
shorten the average effective maturity to three years or less. Conversely, if in
its judgment rates are high, it will tend to extend the average effective
maturity to as high as five years. The Manager will increase the proportion of
short-term instruments when short-term yields are higher. The Manager may
purchase individual securities with a remaining maturity of up to fifteen years.
Quality Guidelines
The Fund will invest primarily in securities issued or guaranteed by
the U.S. Government (e.g., Treasury Bills and Notes), its agencies (e.g.,
Federal Housing Administration) or instrumentalities (e.g., Federal Home Loan
Bank) or government-sponsored corporations (e.g., Federal National Mortgage
Association), as well as repurchase agreements and publicly-and
privately-issued mortgage-backed securities collateralized by such securities.
The Fund may invest up to 20% of its assets in: (1) corporate notes and bonds
rated A or above; (2) certificates of deposit and obligations of both U.S. and
foreign banks if they have assets of at least one billion dollars; (3)
commercial paper rated P-1 by Moody's Investors Service ("Moody's") and/or A-1
by Standard and Poor's Ratings Group ("S&P"); and (4) certain asset-backed
securities rated Aaa by Moody's or AAA by S&P.
Investment Techniques
To achieve its objective, the Fund may use certain hedging techniques
which might not be conveniently available to individuals. These techniques will
be used at the Manager's discretion to protect the Fund's principal value.
The Fund may purchase put options, write secured put options, write
covered call options, purchase call options and enter into closing transactions.
The Fund may invest in futures contracts and options on such futures
contracts subject to certain limitations.
The Fund may invest up to 35% of its assets in securities issued by
certain private, nongovernment corporations, such as financial institutions, if
the securities are fully collateralized at the time of issuance by securities or
certificates issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Two principal types of mortgage-backed securities are
collateralized mortgage obligations (CMOs) and real estate mortgage investment
conduits (REMICs).
The Fund may also invest in securities which are backed by assets such
as receivables on home equity and credit card loans, and receivables on
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
-7-
<PAGE>
plans and leases. All such securities must be rated in the highest rating
category by a reputable credit rating agency (e.g., AAA by S&P or Aaa by
Moody's).
The Fund may also use repurchase agreements which are at least 100%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a temporary basis.
* * *
Certain of the above-described securities may be considered to be
derivative securities.
* * *
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.
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
For a further discussion of the investment techniques described above,
see Additional Information on Investment Policies and Risk Considerations.
* * *
Investment Strategy and Risk Factors and Additional Information on
Investment Policies and Risk Factors in this Prospectus and Part B further
clarifies the Fund's investment policies, risk factors and the methods used to
determine maturity. A brief discussion of those factors that materially affected
the Fund's performance during its most recently completed fiscal year appears in
the Fund's Annual Report.
-8-
<PAGE>
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares
of the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class are
at net asset value. There is no front-end or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement accounts from such plans; (b) tax-exempt employee benefit plans of
the Manager or its affiliates and securities dealer firms with a selling
agreement with the Distributor; (c) institutional advisory accounts of the
Manager or its affiliates and those having client relationships with Delaware
Investment Advisers, a division of the Manager, or its affiliates and their
corporate sponsors, as well as subsidiaries and related employee benefit plans
and rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class and
Limited-Term Government Fund C Class
In addition to offering the Limited-Term Government Fund Institutional
Class, the Fund also offers the Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class and Limited-Term Government Fund C Class,
which are described in a separate prospectus relating only to those classes.
Shares of Limited-Term Government Fund A Class, Limited-Term Government Fund B
Class and Limited-Term Government Fund C Class may be purchased through
authorized investment dealers or directly by contacting the Fund or its agent.
The Limited-Term Government Fund A Class carries a front-end sales charge and
has annual 12b-1 expenses equal to a maximum of .30%. The maximum front-end
sales charge as a percentage of the offering price is 3.00% and is reduced on
certain transactions of $100,000 or more. The Limited-Term Government Fund B
Class and Limited-Term Government Fund C Class have no front-end sales charge,
but are subject to annual 12b-1 expenses equal to a maximum of 1%. Shares of
Limited-Term Government Fund B Class and Limited-Term Government Fund C Class
and certain shares of the Limited-Term Government Fund A Class may be subject to
a contingent deferred sales charge upon redemption. To obtain a prospectus
relating to such classes, contact the Distributor by writing to the address or
by calling the phone number listed on the cover of this Prospectus.
-9-
<PAGE>
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.
Investing Directly by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application, must be completed,
signed and sent with a check payable to Limited-Term Government Fund
Institutional Class, to P.O. Box 7977, Philadelphia, PA 19101.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to Limited-Term Government Fund Institutional Class. Your check
should be identified with your name(s) and account number.
Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your account number for the class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application or, in the case of a retirement plan account, an
appropriate retirement plan application, to Limited-Term Government Fund
Institutional Class, to P.O. Box 7977, Philadelphia, PA 19101.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, shares of
Limited-Term Government Fund B Class and Limited-Term Government Fund C Class
and the Class B Shares and Class C Shares of the other funds in the Delaware
Group offering such a class of shares may not be exchanged into the Class. If
you wish to open an account by exchange, call your Client Services
Representative at 800-828-5052 for more information.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must promptly transmit orders
to the Fund. They may charge for this service.
Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received unless
it is received after the time the share price is determined, as noted above.
Purchase orders received after such time will be effective the next business
day.
-10-
<PAGE>
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $1,000 as a result of
redemptions.
-11-
<PAGE>
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order.
Redemption and exchange requests received in good order after the time the net
asset value of shares is determined, as noted above, will be processed on the
next business day. See Purchase Price and Effective Date under How to Buy
Shares. Except as otherwise noted below, for a redemption request to be in "good
order," you must provide your Class account number, account registration, and
the total number of shares or dollar amount of the transaction. For exchange
requests, you must also provide the name of the fund you want to receive the
proceeds. Exchange instructions and redemption requests must be signed by the
record owner(s) exactly as the shares are registered. You may also request a
redemption or an exchange by calling the Fund at 800-828- 5052.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
The Fund will not honor check or wire redemptions for Class shares
recently purchased by check unless it is reasonably satisfied that the purchase
check has cleared, which may take up to 15 days from the purchase date. The Fund
may honor written redemption requests, but will not mail the proceeds until it
is reasonably satisfied the purchase check has cleared. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. The Fund
reserves the right to reject a written or telephone redemption request or delay
payment of redemption proceeds if there has been a recent change to the
shareholder's address of record.
Shares of the Class may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into the Class B
Shares or Class C Shares of the funds in the Delaware Group. The Fund may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.
Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
Checkwriting Feature
You can request special checks by marking the box on the Investment
Application.
The checks must be drawn for $500 or more and, unless otherwise
-12-
<PAGE>
indicated on the Investment Application or your checkwriting authorization form,
must be signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to close
your account. The Checkwriting Feature is not available for retirement plans.
See Part B for additional information.
Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your Class shares or to request an exchange of any or
all of your shares into another mutual fund in the Delaware Group, subject to
the same conditions and limitations as other exchanges noted above. The request
must be signed by all owners of the account or your investment dealer of record.
For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.
The redemption request is effective at the net asset value next
determined after it is received in good order. Payment is normally mailed the
next business day, but no later than seven days, after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.
You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may 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 service available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor 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. 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.
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Telephone Redemption--Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day, but no later than seven days, after receipt of the request.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, the Fund requires a written authorization and may require that you have
your signature guaranteed. For your protection, your authorization must be on
file. If you request a wire, your funds will normally be sent the next business
day. CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. There are no fees for this redemption method, but
the mail time may delay getting funds into your bank account. Simply call your
Client Services Representative prior to the time the net asset value is
determined, as noted above.
Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
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DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly on the last business day
of each month. Payment by check of cash dividends will ordinarily be mailed
within three business days after the payable date.
Purchases of 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 business day, Limited-Term Funds, Inc. declares a dividend to all
shareholders of record in the Class at the time the net asset value per share is
determined. See Purchase Price and Effective Date under How to Buy Shares. Thus,
when redeeming shares, dividends continue to accrue up to and including the date
of redemption.
Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur any
distribution fee under the Fund's 12b-1 Plans which apply to the Limited-Term
Government Fund A Class, B Class and C Class.
The Fund can have two types of distributions: income dividends and
capital gains. Short-term capital gains distributions, if any, may be paid
quarterly, but in the discretion of the Fund's Board of Directors might be
distributed less frequently. Long-term capital gains, if any, will be
distributed annually.
Both dividends and capital gains are automatically reinvested in your
account at net asset value.
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<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
The Fund has qualified, and intends to continue to qualify, as a
regulated investment company under Subchapter M of the Internal Revenue Code
(the "Code"). As such, the Fund will not be subject to federal income tax, or to
any excise tax, to the extent its earnings are distributed as provided in the
Code.
The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to you as ordinary income, even
though received in additional shares. No portion of the Fund's distributions
will be eligible for the dividends-received deduction for corporations.
Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a byproduct of
Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.
Dividends or capital gains which are declared in October, November or
December to shareholders of record in such a month, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.
The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
two mutual funds (or two portfolios or series of a mutual fund). Any loss
incurred on sale or exchange of Fund shares held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.
Each year, Limited-Term Funds, Inc. will mail you information on the
tax status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any, that
is derived from U.S. Government securities that are exempt from state income
tax. Of course, shareholders who are not subject to tax on their income would
not be required to pay tax on amounts distributed to them by the Fund.
The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Accounting and Tax Issues in Part B for additional information on
tax matters relating to the Fund and its shareholders.
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CALCULATION OF NET ASSET VALUE PER SHARE
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding. Portfolio
securities for which market quotations are available are priced at market value.
Short-term investments having a maturity of less than 60 days are valued at
amortized cost, which approximates market value. All other securities are valued
at their fair value as determined in good faith and in a method approved by
Limited- Term Funds, Inc.'s Board of Directors.
The purchase and redemption price of the Class is the net asset value
("NAV") per share of the Class next computed after the order is received.
The NAV is computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.
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 Class will not incur any of the expenses under the Fund's 12b-1
Plans and Limited-Term Government Fund A, B and C Classes alone will bear the
12b-1 Plan fees payable under their respective Plans. Due to the specific
distribution expenses and other costs that will be allocable to each class, the
dividends paid to each class of the Fund may vary. However, the NAV per share of
each class is expected to be equivalent.
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<PAGE>
MANAGEMENT OF THE FUND
Directors
The business and affairs of Limited-Term Funds, Inc. are managed under
the direction of its Board of Directors. Part B contains additional information
regarding Limited-Term Funds, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On December 31, 1995, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $28 billion in assets in the various institutional (approximately
$17,606,321,000) and investment company (approximately $10,522,726,000)
accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, a new Investment Management Agreement
between Limited-Term Funds, Inc. on behalf of the Fund and the Manager was
executed following shareholder approval.
The Manager manages the Fund's portfolio, makes investment decisions
and implements them. The Manager also administers Limited-Term Funds, Inc.'s
affairs and pays the salaries of all the directors, officers and employees of
Limited-Term Funds, Inc. who are affiliated with the Manager. For these
services, the Manager is paid an annual fee of 1/2 of 1% of the average daily
net assets of the Fund, less a proportionate share of all directors' fees paid
to the unaffiliated directors by the Fund. Investment management fees paid by
the Fund were 0.50% of average daily net assets for the fiscal year ended
December 31, 1995.
Roger A. Early has had primary responsibility for making day-to-day
investment decisions for the Fund since July 18, 1994. Mr. Early has an
undergraduate degree in economics from the University of Pennsylvania's Wharton
School and an MBA in finance and accounting from the University of Pittsburgh.
He is also a CPA and a CFA. Prior to joining the Delaware Group, Mr. Early was a
portfolio manager for Federated Investment Counseling's fixed income group, with
over $1 billion in assets.
In making investment decisions for the Fund, Mr. Early consults
regularly with Paul E. Suckow and Gary A. Reed. Mr. Suckow is the Chief
Investment Officer for fixed income. A Chartered Financial Analyst, he is a
graduate of Bradley University with an MBA from Western Illinois University. Mr.
Suckow was a fixed income portfolio manager at the Delaware Group from 1981 to
1985. He returned to the Delaware Group in 1993 after eight years with
Oppenheimer Management Corporation. Mr. Reed, also a Chartered Financial
Analyst, is a graduate of the University of Chicago with an MA from Columbia
University. He joined the Delaware Group in 1989 as a vice president for fixed
income.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Fund's portfolio
transactions.
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<PAGE>
Although the Fund trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The degree of portfolio activity
may affect brokerage costs of the Fund and taxes payable by shareholders. During
the fiscal years ended December 31, 1994 and 1995, the Fund's portfolio turnover
rates were 148% and 73%, respectively. See Portfolio Turnover under Trading
Practices and Brokerage in Part B.
The Manager uses its best efforts to obtain the best available price
and most favorable execution for portfolio transactions. Orders may be placed
with brokers or dealers who provide brokerage and research services to the
Manager or its advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Manager
may consider a broker/dealer's sales of Fund shares in placing portfolio orders
and may place orders with broker/dealers that have agreed to defray certain Fund
expenses such as custodian fees.
Performance Information
From time to time, the Fund may quote yield or total return performance
of the Class in advertising and other types of literature.
The current yield for the Class will be calculated by dividing the
annualized net investment income earned by the Class during a recent 30-day
period by the net asset value per share on the last day of the period. The yield
formula provides for semi-annual compounding which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period.
Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value. Each
presentation will include the average annual total return for one-, five- and
ten-year (or life of fund, if applicable) periods. The Fund may also advertise
aggregate and average total return information concerning the Class over
additional periods of time.
Yield and net asset value fluctuate and are not guaranteed. Past
performance is not a guarantee of future results.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of distributions. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling your Client Services Representative.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Limited-Term Funds, Inc.'s fiscal year
ends on December 31.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Fund under a Distribution Agreement dated April 3, 1995, as amended on
November 29, 1995. The Distributor bears all of the costs of promotion and
distribution.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an Agreement dated December 20, 1990. The directors annually review service fees
paid to the Transfer Agent. Certain recordkeeping and other shareholder services
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that otherwise would be performed by the Transfer Agent may be performed by
certain other entities and the Transfer Agent may elect to enter into an
agreement to pay such other entities for those services. In addition,
participant account maintenance fees may be assessed for certain recordkeeping
services provided as part of retirement plan and administration service
packages. These fees are based on the number of participants in the plan and the
various services selected. Fees will be quoted upon request and are subject to
change.
The Distributor and the Transfer Agent are indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratio of expenses to
average daily net assets for the Class was 0.81% for the fiscal year ended
December 31, 1995.
Shares
The Limited-Term Government Fund series is the second series of
Delaware Group Limited-Term Government Funds, Inc., which is an open-end
management investment company, commonly known as a mutual fund. The Fund's
portfolio of assets is diversified as defined by the 1940 Act. Limited-Term
Funds, Inc. was organized as a Pennsylvania business trust in 1981 and was
reorganized as a Maryland corporation in 1990. The authorized capital of
Limited-Term Funds, Inc. consists of three billion shares of common stock, of
which two billion shares have been allocated to the Limited- Term Government
Fund series.
Fund shares have a $.001 par value per share, equal voting rights,
except as noted below, and are equal in all other respects. Shares of the Fund
will have a priority over shares of any other funds of Limited-Term Funds, Inc.
in the assets and income of the Fund and will vote separately on any matter that
affects only the Limited-Term Government Fund series.
All of the shares have noncumulative voting rights which means that the
holders of more than 50% of Limited-Term Funds, Inc.'s shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
Under Maryland law, Limited-Term Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the 1940 Act. Shareholders of 10%
or more of Limited-Term Funds, Inc.'s shares may request that a special meeting
be called to consider the removal of a director.
The Fund also offers Limited-Term Government Fund A Class, Limited-Term
Government Fund B Class and Limited-Term Government Fund C Class which represent
a proportionate interest in the assets of the Fund and have the same voting and
other rights and preferences as the Class, except that shares of the Class may
not vote on matters affecting the Fund's Distribution Plans under Rule 12b-1
relating to the Limited-Term Government Fund A Class, Limited-Term Government
Fund B Class and Limited-Term Government Fund C Class. Two hundred million
shares each have been allocated to the Limited-Term Government Institutional
Class and the Limited-Term Government Fund B Class, nine hundred fifty million
shares have been allocated to the Limited-Term Government Fund A Class and fifty
million shares have been allocated to the Limited-Term Government Fund C Class.
Until May 31, 1992, the Fund offered two retail classes of shares,
Investors Series II class (now the Limited-Term Government Fund A Class) and the
Investors Series I class. Shares of Investors Series I class were offered with a
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<PAGE>
sales charge, but without the imposition of a Rule 12b- 1 fee. Effective June 1,
1992, following shareholder approval of a plan of recapitalization on May 15,
1992, shareholders of the Investors Series I class had their shares converted
into shares of the Investors Series II class and became subject to the latter
class' Rule 12b-1 charges. Effective at the same time, following approval by
shareholders, the name Investors Series was changed to Treasury Reserves
Intermediate Series and the name Investors Series II class was changed to
Treasury Reserves Intermediate Fund class. On May 2, 1994, Treasury Reserves
Intermediate Fund (Institutional) class became known as Treasury Reserves
Intermediate Fund Institutional Class and Treasury Reserves Intermediate Fund
class became known as Treasury Reserves Intermediate Fund A Class. Effective as
of the close of business on August 28, 1995, the name Delaware Group Treasury
Reserves, Inc. was changed to Delaware Group Limited-Term Government Funds, Inc.
and the name Treasury Reserves Intermediate Series was changed to Limited-Term
Government Fund. At the same time, the names of Treasury Reserves Intermediate
Fund Institutional Class, Treasury Reserves Intermediate Fund A Class and
Treasury Reserves Intermediate Fund B Class were changed to, respectively,
Limited-Term Government Fund Institutional Class, Limited-Term Government Fund
A Class and Limited-Term Government Fund B Class.
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ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISK CONSIDERATIONS
Following are more detailed descriptions of investment strategies
employed by the Fund and any risks they may entail.
Put Options
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. The advantage is that
the Fund can be protected should the market value of the security decline due to
a rise in interest rates. However, the Fund must pay a premium for this right,
whether it exercises it or not. 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 written by the Fund obligates it to buy the security
underlying the option at the exercise price during the option period, and the
purchaser of the option has the right to sell the security to the Fund. During
the option period, the Fund, as writer of the put option, may be assigned an
exercise notice by the broker/dealer through whom the option was sold requiring
the Fund to make payment of the exercise price against delivery of the
underlying security. This obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. The Fund will only write put options on a secured basis. The
advantage to the Fund of writing put options is that it receives premium income.
The disadvantage is that the Fund may be required, when the put is exercised, to
purchase securities at higher prices than the current market price.
A covered call option written by the Fund obligates it to sell one of
its securities for an agreed price up to an agreed date. The advantage is that
the Fund receives premium income, which may offset the cost of purchasing put
options. However, the Fund may lose the potential market appreciation of the
security if the Manager's judgment is wrong and interest rates fall.
When the Fund purchases a call option, in return for a premium paid by
the Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium
upon writing the option, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. The
advantage is that the Fund may hedge against an increase in the price of
securities which it ultimately wishes to buy. However, the premium paid for the
call option plus any transaction costs will reduce the benefit, if any, realized
by the Fund upon exercise of the option. The Fund will only purchase call
options to the extent that premiums paid on all outstanding call options do not
exceed 2% of the Fund's total assets.
Closing transactions essentially let the Fund offset put options or
call options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will not invest more
than 10% of its assets in illiquid securities.
Futures Contracts
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month. A purchase
of a futures contract means the acquisition of a contractual right to obtain
delivery to the 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
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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.
The Fund may also purchase and write options to buy or sell futures
contracts. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
The principal purpose of the purchase or sale of futures contracts for
the Fund is to protect the Fund against the adverse effects of fluctuations in
interest rates without actually buying or selling such securities. To the extent
that interest rates move in an unexpected direction, however, the Fund may not
achieve the anticipated benefits of futures contracts or options on such futures
contracts or may realize a loss. To the extent that the Fund purchases an option
on a futures contract and fails to exercise the option prior to the exercise
date, it will suffer a loss of the premium paid. Further, the possible lack of a
secondary market would prevent the Fund from closing out its option positions
relating to futures.
Mortgaged-Backed Securities
Two principal types of mortgage-backed securities are collateralized
mortgage obligations (CMOs) and real estate mortgage investment conduits
(REMICs).
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government securities and are
not directly guaranteed by any government agency. They are secured by the
underlying collateral of the private issuer. The Fund will invest in such
private-backed securities only if they are 100% collateralized at the time of
issuance by securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities. The Fund currently invests in privately-issued CMOs and
REMICs only if they are rated at the time of purchase in the two highest grades
by a nationally-recognized rating agency. Certain of the CMOs in which the Fund
may invest may have variable or floating interest rates and others may be
stripped (securities which provide only the principal or interest feature of the
underlying security).
Asset-Backed Securities
The Fund may also invest in securities which are backed by assets such
as receivables on home equity and credit card loans, and receivables on
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
plans and leases.
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass- through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued. The Fund may invest in these and other types of asset-backed securities
that may be developed in the future. It is the Fund's current policy to limit
asset-backed investments to those represented by interests in credit card
receivables, wholesale dealer floor plans, home equity loans and automobile
loans.
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<PAGE>
Due to the shorter maturity of the collateral backing such securities,
there is less of a risk of substantial prepayment than with mortgage-backed
securities. Such asset-backed securities do, however, involve certain risks not
associated with mortgage-backed securities, including the risk that security
interests cannot be adequately or in many cases, ever, established. In addition,
with respect to credit card receivables, a number of state and federal consumer
credit laws give debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the outstanding balance. In the case of automobile
receivables, there is a risk that the holders may not have either a proper or
first security interest in all of the obligations backing such receivables due
to the large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore, recoveries on repossessed collateral
may not always be available to support payments on the securities. For further
discussion concerning the risks of investing in such asset-backed securities,
see Part B.
Repurchase Agreements
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.
Portfolio Loan Transactions
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, subject to overall
supervision by the Board of Directors, including the creditworthiness of the
borrowing broker, dealer or institution and then only if the consideration to be
received from such loans would justify the risk. Creditworthiness will be
monitored on an ongoing basis by the Manager.
Restricted Securities
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the 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.
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The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
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U.S. GOVERNMENT MONEY FUND
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A CLASS
CONSULTANT CLASS
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No Sales Charge
P R O S P E C T U S
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FEBRUARY 29, 1996
While the Fund will make every effort to maintain a stable net asset
value of $1 per share, there is no assurance that the Fund will be able to do
so. The Fund invests primarily in securities that are issued or guaranteed as to
the prompt payment of principal and interest by the U.S. Government, its
agencies and instrumentalities. The shares of the Fund, however, are neither
insured nor guaranteed by the U.S. Government.
DELAWARE
GROUP
-----
<PAGE>
U.S. GOVERNMENT MONEY FUND
A CLASS PROSPECTUS
CONSULTANT CLASS FEBRUARY 29, 1996
------------------------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts: Nationwide 800-523-1918
This Prospectus describes the U.S. Government Money Fund A Class and
the U.S. Government Money Fund Consultant Class (individually, a "Class" and
collectively, the "Classes") of shares of the U.S. Government Money Series (the
"Fund") of Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc."). The Fund is a professionally-managed mutual fund seeking maximum
current income while preserving principal and maintaining liquidity. The Fund
intends to achieve its objective by investing its assets only in short-term
securities issued or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities, and repurchase agreements secured
by the same.
The Fund is a money market fund. There are no front-end or contingent
deferred sales charges for either Class. Shares of the U.S. Government Money
Fund A Class are not subject to 12b-1 distribution expenses. Shares of the U.S.
Government Money Fund Consultant Class are offered for sale through
broker/dealers, financial institutions and other entities which have a dealer
agreement with the Fund's Distributor or a service agreement with the Fund's
Distributor or a service agreement with the Fund. Though shares of this Class
are subject to ongoing 12b-1 Plan distribution expenses, at the present time, no
distribution fees are being charged under the 12b-1 Plan for the U.S. Government
Money Fund Consultant Class.
This Prospectus sets forth information that you should read and
consider before you invest. Please retain it for future reference. Part B of the
registration statement, dated February 29, 1996, as it may be amended from time
to time, contains additional information about the Fund and has been filed with
the Securities and Exchange Commission. Part B is incorporated by reference into
this Prospectus and is available, without charge, by writing to Delaware
Distributors, L.P. at the above address or by calling the above numbers. The
Fund's financial statements appear in its Annual Report, which will accompany
any response to requests for Part B.
Delaware Group Limited-Term Government Funds, Inc. also offers the
Limited-Term Government Fund series, a prospectus for which may be obtained by
calling the number listed above.
-1-
<PAGE>
TABLE OF CONTENTS
Cover Page Retirement Planning
Synopsis Buying Shares
Summary of Expenses Redemption and Exchange
Financial Highlights Dividends and Distributions
Investment Objective and Policies Taxes
Suitability Net Asset Value Per Share
Investment Strategy Management of the Fund
The Delaware Difference
Plans and Services
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
SYNOPSIS
Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") is the investment
manager for the Fund. The Manager or its affiliate, Delaware International
Advisers Ltd., manages the other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing and transfer agent for the Fund and for all of the other mutual funds
in the Delaware Group. See Management of the Fund.
Purchase Price
Shares of the U.S. Government Money Fund A Class offered by this
Prospectus are available at net asset value, without a sales charge and are not
subject to distribution fees under a Rule 12b-1 distribution plan.
Shares of the U.S. Government Money Fund Consultant Class offered by
this Prospectus are available at net asset value, without a sales charge, but
are subject to distribution fees under a Rule 12b-1 distribution plan, though no
fees are being charged under the Plan at this time.
See Buying Shares; and Distribution (12b-1) and Service under
Management of the Fund.
Minimum Investment
The minimum initial investment for each Class is $1,000 and all
subsequent investments must be at least $100. The minimum and maximum purchase
amounts for retirement plans may vary.
See Buying Shares.
Investment Objective
The objective of the Fund is to seek maximum current income while
preserving principal and maintaining liquidity. The Fund intends to achieve its
objective by investing its assets only in short-term securities issued or
guaranteed as to principal and interest by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements secured by the same. For further
details, see Investment Objective and Policies.
Open-End Investment Company
Limited-Term Funds, Inc., which was organized as a Pennsylvania
business trust in 1981 and reorganized as a Maryland corporation in 1990, is a
diversified, open-end management investment company, commonly known as a mutual
fund. The Fund's portfolio of assets is diversified as defined by the Investment
Company Act of 1940. See Shares under Management of the Fund.
Investment Management Fees
The Manager furnishes investment management services to the Fund,
subject to the supervision and direction of Limited-Term Funds, Inc.'s Board of
Directors. Under the Investment Management Agreement, the annual compensation
paid to the Manager is equal to 1/2 of 1% of average daily net assets of the
Fund, less all directors' fees paid to the unaffiliated directors by the Fund.
See Management of the Fund.
Redemption and Exchange
Shares of the Fund are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.
-3-
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
U.S. Government
Money Fund
Shareholder Transaction Expenses A Class
-------------------------------- -------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).......................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).......................................... None
Redemption Fees.............................................................. None*
Exchange Fees................................................................ None**
U.S. Government
Annual Operating Expenses Money Fund
(as a percentage of average daily net assets) A Class
--------------------------------------------- -------
Management Fees (after voluntary waiver)..................................... 0.00%***
12b-1 Fees................................................................... None
Other Operating Expenses (after reimbursements).............................. 0.70%
----
Total Operating Expenses (after voluntary waiver
and reimbursements)............................................... 0.70%***
====
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
U.S. Government
Money Fund
Shareholder Transaction Expenses Consultant Class
-------------------------------- ----------------
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).......................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).......................................... None
Redemption Fees.............................................................. None*
Exchange Fees................................................................ None**
U.S. Government
Annual Operating Expenses Money Fund
(as a percentage of average daily net assets) Consultant Class
--------------------------------------------- ----------------
Management Fees (after voluntary waiver)..................................... 0.00%***
12b-1 Fees................................................................... None****
Other Operating Expenses (after reimbursements).............................. 0.70%***
----
Total Operating Expenses (after voluntary waiver
and reimbursements)............................................... 0.70%
====
</TABLE>
The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.
*CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
**Exchanges are subject to the requirements of each fund and a sales charge may
apply.
***Beginning January 26, 1996, the Manager elected voluntarily to waive that
portion, if any, of the annual management fees payable by the Fund and to
reimburse the Fund's expenses to the extent necessary to ensure that the Total
Operating Expenses (after voluntary waiver and reimbursements) of the Fund do
not exceed 0.70% (exclusive of taxes, interest, brokerage commissions,
extraordinary expenses and, in the case of U.S. Government Money Fund Consultant
Class, 12b-1 fees) through July 31, 1996. Information in the above tables has
been adjusted to reflect the waivers. Total Operating Expenses for each Class
for the fiscal year ended December 31, 1995 were 1.39%, reflecting Management
Fees of 0.44%. The Total Operating Expenses for each Class will be lower to the
amounts noted in the charts as a result of the voluntary waiver.
****Shares of the U.S. Government Money Fund Consultant Class are subject to a
12b-1 Plan; however, the Board of Directors of Limited-Term Funds, Inc.
suspended 12b-1 Plan payments from the Class to the Distributor effective June
1, 1990. See Distribution (12b-1) and Service under Management of the Fund.
-5-
<PAGE>
The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods assuming (1) a 5% annual
rate of return and (2) redemption at the end of each time period. As noted in
the table above, the Fund charges no redemption fees.
U.S. Government
Money Fund A Class 1 year 3 years 5 years 10 years
- ------------------ ------ ------- ------- --------
$7 $22 $39 $87
U.S. Government
Money Fund
Consultant Class 1 year 3 years 5 years 10 years
- ---------------- ------ ------- ------- --------
$7 $22 $39 $87
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the financial statements of
Delaware Group Limited- Term Government Funds, Inc. - U.S. Government Money
Series and have been audited by Ernst & Young LLP, independent auditors. The
data should be read in conjunction with the financial statements, related notes,
and the report of Ernst & Young LLP covering such financial information and
highlights, all of which are incorporated by reference into Part B. Further
information about the Fund's performance is contained in its Annual Report to
shareholders. A copy of the Fund's Annual Report (including the report of Ernst
& Young LLP) may be obtained from Limited-Term Funds, Inc. upon request at no
charge.
- -------------------------------------------------------------------------------
-6-
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Money Fund A Class
Year Ended
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period(1)...................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.0448 0.0289 0.0200 0.0308 0.0519
Net Gains or Losses on Securities
(both realized and unrealized)...................... none none none none none
------ ------ ------ ------ ------
Total From Investment Operations......................... 0.0448 0.0289 0.0200 0.0308 0.0519
------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)....................... (0.0448) (0.0289) (0.0200) (0.0308) (0.0519)
Distributions (from capital gains)........................... none none none none none
Returns of Capital........................................... none none none none none
------ ------ ------ ------ ------
Total Distributions...................................... (0.0448) (0.0289) (0.0200) (0.0308) (0.0519)
------ ------ ------ ------ ------
Net Asset Value, End of Period............................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
====== ====== ====== ====== ======
Total Return .............................................. 4.57% 2.93% 2.01% 3.13% 5.32%
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).................... $13,787 $17,119 $20,919 $41,049 $45,933
Ratio of Expenses to Average Daily Net Assets................ 1.39% 1.26% 1.04% 0.91% 0.85%
Ratio of Net Investment Income to Average Daily Net Assets... 4.45% 2.91% 2.06% 3.11% 5.23%
12/31/90 12/28/89 12/29/88 12/31/87 12/25/86
Net Asset Value, Beginning of Period(1)...................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.0711 0.0768 0.0608 0.0525 0.0575
Net Gains or Losses on Securities
(both realized and unrealized)...................... none none none none none
------ ------ ------ ------ ------
Total From Investment Operations......................... 0.0711 0.0768 0.0608 0.0525 0.0575
------ ------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)....................... (0.0711) (0.0768) (0.0608) (0.0525) (0.0575)
Distributions (from capital gains)........................... none none none none none
Returns of Capital........................................... none none none none none
------ ------ ------ ------ ------
Total Distributions...................................... (0.0711) (0.0768) (0.0608) (0.0525) (0.0575)
------ ------ ------ ------ ------
Net Asset Value, End of Period............................... $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
Total Return .............................................. 7.35% 7.96% 6.26% 5.38% 5.90%
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).................... $49,907 $34,572 $35,013 $34,292 $56,464
Ratio of Expenses to Average Daily Net Assets................ 0.82% 1.21% 1.20% 1.21% 0.93%
Ratio of Net Investment Income to Average Daily Net Assets... 7.11% 7.69% 6.11% 5.25% 5.73%
</TABLE>
- ----------
(1) Effective January 1, 1991, Limited-Term Funds, Inc. will attempt to
maintain a constant net asset value of $1.00 per share. Limited-Term Funds,
Inc. accomplished this change by effecting a ten-to-one stock split for
shareholders of record on that date. All figures prior to January 1, 1991
have been restated to reflect this stock split.
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Money Fund Consultant Class
-------------------------------------------
Year Ended
12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period(2)...................... $1.0000 $1.0000 $1.0000 $1.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.0448 0.0289 0.0200 0.0308
Net Gains or Losses on Securities
(both realized and unrealized)...................... none none none none
------ ------ ------ ------
Total From Investment Operations......................... 0.0448 0.0289 0.0200 0.0308
------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)....................... (0.0448) (0.0289) (0.0200) (0.0308)
Distributions (from capital gains)........................... none none none none
Returns of Capital........................................... none none none none
------ ------ ------ ------
Total Distributions...................................... (0.0448) (0.0289) (0.0200) (0.0308)
------ ------ ------ ------
Net Asset Value, End of Period............................... $1.0000 $1.0000 $1.0000 $1.0000
====== ====== ====== ======
- ------------------------------------------------------------
Total Return .............................................. 4.57% 2.93% 2.01% 3.13%
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).................... $329 $1,077 $555 $747
Ratio of Expenses to Average Daily Net Assets................ 1.39% 1.26% 1.04% 0.91%
Ratio of Net Investment Income to Average Daily Net Assets... 4.45% 2.91% 2.06% 3.11%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. Government Money Fund Consultant Class
-------------------------------------------
Period
3/29/88(1)
through
12/31/91 12/31/90 12/28/89 12/29/88
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period(2)...................... $1.0000 $1.0000 $1.0000 $1.0000
Income From Investment Operations
- ---------------------------------
Net Investment Income........................................ 0.0519 0.0700 0.0744 0.0458
Net Gains or Losses on Securities
(both realized and unrealized)...................... none none none none
------ ------ ------ ------
Total From Investment Operations......................... 0.0519 0.0700 0.0744 0.0458
------ ------ ------ ------
Less Distributions
- ------------------
Dividends (from net investment income)....................... (0.0519) (0.0700) (0.0744) (0.0458)
Distributions (from capital gains)........................... none none none none
Returns of Capital........................................... none none none none
------ ------ ------ ------
Total Distributions...................................... (0.0519) (0.0700) (0.0744) (0.0458)
------ ------ ------ ------
Net Asset Value, End of Period............................... $1.0000 $1.0000 $1.0000 $1.0000
====== ====== ====== ======
- ------------------------------------------------------------
Total Return .............................................. 5.32% 7.23% 7.69% 6.20%
- ------------
- ---------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (000's omitted).................... $1,399 $1,604 $1,638 $483
Ratio of Expenses to Average Daily Net Assets................ 0.85% 0.94% 1.46% 1.45%
Ratio of Net Investment Income to Average Daily Net Assets... 5.23% 6.99% 7.44% 6.44%
</TABLE>
(1) March 29, 1988 was the date of the Class' initial public sale; ratios and
total return for this period have been annualized.
(2) Effective January 1, 1991, Limited-Term Funds, Inc. will attempt to
maintain a constant net asset value of $1.00 per share. Limited-Term Funds,
Inc. accomplished this change by effecting a ten-to-one stock split for
shareholders of record on that date. All figures prior to January 1, 1991
have been restated to reflect this stock split.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
As a money market fund, the Fund's objective is to provide maximum
current income, while preserving principal and maintaining liquidity. The Fund
seeks to do this by investing only in short-term securities issued or guaranteed
as to principal and interest by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements secured by such permitted
investments. All securities purchased by the Fund mature within 13 months from
the date of purchase, although repurchase agreements may be collateralized by
securities maturing in more than 13 months.
The Fund attempts to manage the portfolio to maintain a constant net
asset value of $1.00 per share. While the Fund will make every effort to
maintain a fixed net asset value of $1.00 per share, there can be no assurance
that this objective will be achieved.
SUITABILITY
The Fund is suitable for investors who seek high yields along with easy
access to their money and stable principal value. Ownership of Fund shares also
reduces the bookkeeping and administrative inconveniences of directly purchasing
money market securities.
Shares of the Fund may be suitable for investors who desire the
investment and administrative services provided by brokers, financial
institutions and other entities.
INVESTMENT STRATEGY
The Fund invests principally in short-term U.S. Government securities in
order to achieve its objective. While there is no assurance this objective can
be achieved, the Fund must follow certain policies that can only be changed by
shareholder approval.
Quality Restrictions
The Fund limits its investments to those which the Board of Directors
has determined present minimal credit risks and are of high quality and which
are otherwise in accordance with the maturity, quality and diversification
conditions with which taxable money market funds must comply.
The Fund's investments include direct obligations issued by the U.S.
Treasury which include bills, notes and bonds which differ from each other
principally in interest rates, maturities and dates of issuance. These issues,
plus some federal agency obligations, are guaranteed by the full faith and
credit of the U.S. Government. Examples include Federal Housing Administration,
Farmers Home Administration, Government National Mortgage Association and
Export-Import Bank of the United States. Other federal agency obligations only
have the guarantee of the agency. Examples include Federal Home Loan Banks,
Federal Land Banks, Federal Home Loan Mortgage Corporation, The Tennessee Valley
Authority and the International Bank for Reconstruction and Development.
Although obligations of agencies and instrumentalities are not direct
obligations of the U.S. Treasury, payment of the interest and principal on such
obligations is generally backed directly or indirectly by the U.S. Government.
This support can range from the backing of the full faith and credit of the
United States, to U.S. Treasury guarantees, or to the backing solely of the
issuing agency or instrumentality itself.
Maturity Restrictions
The Fund maintains an average maturity of not more than 90 days. Also,
it does not purchase any instruments with an effective remaining maturity of
more than 13 months.
-7-
<PAGE>
Investment Strategy
The Fund intends to hold its investments until maturity, but may sell
them prior to maturity for a number of reasons. These reasons include: to
shorten or lengthen the average maturity, to increase the yield, to maintain the
quality of the portfolio or to maintain a stable share value.
The Fund may invest up to 10% of its assets, together with any other
illiquid investments, in fully-insured deposits maturing in 60 days or less from
members of the FDIC.
The Fund may also use repurchase agreements which are at least 100%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a short-term basis. 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.
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions, but it does not presently intend to do
so.
Rule 144A Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
While maintaining oversight, the Board of Directors has delegated to the
Manager the day-to-day function of determining whether or not individual Rule
144A Securities are liquid for purposes of the 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 investments in
such securities, the Manager will determine what action to take to ensure that
the Fund continues to adhere to such limitation.
Part B provides more information on the Fund's investment policies and
restrictions.
-8-
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.
SHAREHOLDER PHONE DIRECTORY
Investor Information Center
800-523-4640
Fund Information; Literature;
Price, Yield and Performance Figures
Shareholder Service Center
800-523-1918
Information on Existing Regular
Investment Accounts and Retirement
Plan Accounts; Wire Investments;
Wire Liquidations; Telephone
Liquidations; Telephone Exchanges
Delaphone
800-362-FUND
(800-362-3863)
Performance Information
You can call the Investor Information Center anytime for current yield
information. Yield information is updated each weekday and is based on the
annualized yield over the past seven-day or longer period.
Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. The representatives can answer any of your questions about your
account, the Fund, the various service features and other funds in the Delaware
Group.
Delaphone Service
Delaphone is an account inquiry service for investors with Touch-Tone(R)
phone service. It enables you to get information on your account faster than the
mailed statements and confirmations. Delaphone also provides current performance
information on the Fund, as well as other funds in the Delaware Group. Delaphone
is available seven days a week, 24 hours a day.
Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. Accounts in which there has been activity will
receive a monthly statement confirming each transaction. You should examine
statements and confirmations immediately and promptly report any discrepancy by
calling the Shareholder Service Center.
Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.
Tax Information
Each year, Limited-Term Funds, Inc. will mail you information on the
tax status of your dividends and distributions.
Dividend Orders
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.
For more information, see Dividend Reinvestment Plan under Buying Shares
Additional Methods of Adding to Your Investment or call the Shareholder Service
Center.
-9-
<PAGE>
Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their Class shares into shares of the other funds in the Delaware Group, subject
to the eligibility and minimum purchase requirements set forth in each fund's
prospectus, including any applicable front-end sales charge. For additional
information on exchanges, see Investing by Exchange under Buying Shares and
Redemption and Exchange.
Wealth Builder Option
You may elect to have amounts in your account automatically invested in
other funds in the Delaware Group. Investments under this feature are exchanges
and are therefore subject to the same conditions and limitations as other
exchanges of Class shares. See Redemption and Exchange.
Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
predesigned allocation strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor an
allocation strategy that meets their personal needs and goals. See Buying
Shares.
MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. In addition, you may elect
to have your Systematic Withdrawal Plan payments transferred from your Fund
account to your predesignated bank account through this service. Your funds will
normally be credited to your bank account two business days after the payment
date. There are no fees for this service. You can initiate the MoneyLine Direct
Deposit Service by completing an Authorization Agreement. If your name and
address are not identical to the name and address on your Fund account, you must
have your signature guaranteed. This service is not available for retirement
plans.
Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Limited-Term Funds, Inc.'s fiscal year
ends on December 31.
The Delaware Digest
You will receive Delaware Group's newsletters covering topics of
interest about your investment alternatives and services.
-10-
<PAGE>
RETIREMENT PLANNING
An investment in either Class may be suitable for tax-deferred
retirement plans.
Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based on
the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request. Certain shareholder investment services available to
non-retirement plan shareholders may not be available to retirement plan
shareholders. For additional information on any of the plans and Delaware's
retirement services, call the Shareholder Service Center or see Part B.
Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program. Contributions to an
IRA may be tax-deductible and earnings are tax-deferred. Under the Tax Reform
Act of 1986, the tax deductibility of IRA contributions is restricted, and in
some cases eliminated, for individuals who participate in certain
employer-sponsored retirement plans and whose annual income exceeds certain
limits. Existing IRAs and future contributions up to the IRA maximums, whether
deductible or not, still earn on a tax-deferred basis.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan.
403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of Class shares.
457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
Class shares.
Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class
shares.
Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax- qualified plan based on salary
deferral contributions. An employer may elect to make profit sharing
contributions and/or matching contributions into the plan.
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BUYING SHARES
Delaware Distributors, L.P. serves as the national distributor for the
Fund.
Shares of the U.S. Government Money Fund Consultant Class may be
purchased through brokers, financial institutions and other entities that have a
dealer agreement with the Fund's Distributor or a service agreement with the
Fund.
The minimum for initial investments for each Class is $1,000 and all
subsequent investments must be at least $100. Shares purchased under the Uniform
Gifts to Minors Act or Uniform Transfers to Minors Act are subject to a minimum
initial purchase of $250 and a minimum subsequent purchase of $25. All purchases
for each Class are at net asset value. There is no sales charge.
Minimum purchase requirements do not apply to retirement plans other
than IRAs for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.
Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
plan account, an appropriate retirement plan application must be completed,
signed and sent with a check payable to U.S. Government Money Fund A Class or
U.S. Government Money Fund Consultant Class at P.O. Box 7977, Philadelphia, PA
19101.
2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Class selected. Your check should be identified
with your name(s) and account number. An investment slip (similar to a deposit
slip) is provided at the bottom of dividend statements that you will receive
from Limited-Term Funds, Inc. and should be used when you are making additional
purchases. You can expedite processing by including an investment slip with your
check when making additional purchases. Your investment may be delayed if you
send additional purchases by certified mail.
Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 0114-2596 (include
your name(s) and your account number for the Class in which you are investing).
1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, it may delay
processing your investment. In addition, you must promptly send your Investment
Application or, in the case of a retirement plan account, an appropriate
retirement plan application to the specific Class selected, at P.O. Box 7977,
Philadelphia, PA 19101.
2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
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Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described, the Delaware Group Asset
Planner service offers a choice of four predesigned asset allocation strategies
(each with a difference risk/reward profile) in predetermined percentages in
Delaware Group funds or, with the help of a financial adviser, you may 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. The minimum initial investment
per Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service; however, only shares within the same class may be used within the same
Strategy.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30th of each subsequent year. The
fee, payable to Delaware Service Company, Inc. to defray extra costs associated
with administering the Asset Planner service, will be deducted automatically
from one of the funds within your Asset Planner account if not paid by September
30th. See Part B.
Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
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Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
the Fund. Shares of the Class B Funds or Class C Funds may not be exchanged into
either Class of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information.
Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:
1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Limited-Term
Funds, Inc. to transfer a designated amount monthly from your checking account
to your Fund account. Many shareholders use this as an automatic savings plan
for IRAs and other purposes. Shareholders should allow a reasonable amount of
time for initial purchases and changes to these plans to become effective.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
2. Direct Deposit
You may wish your employer or bank to make regular investments directly
to your account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.
* * *
Should investments by direct deposit or through an Automatic Investing
Plan be reclaimed or returned for some reason, Limited- Term Funds, Inc. has the
right to liquidate your Fund shares to reimburse the government or transmitting
bank. If there are insufficient funds in your account, you are obligated to
reimburse the Fund.
3. Wealth Builder Option
You can use the Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group, subject to the same conditions and limitations as other exchanges noted
above.
You may elect to invest in other mutual funds in the Delaware Group
through our Wealth Builder Option. Under this automatic exchange program, you
can authorize regular monthly amounts (minimum of $100 per fund) to be
liquidated from your Fund account and invested automatically into an account in
one or more funds in the Delaware Group. If, in connection with the election of
Wealth Builder Option, you wish to open a new account in such other fund or
funds to receive the automatic investment, such new account must meet such other
fund's minimum initial purchase requirements. Investments under this option are
exchanges and are therefore subject to the same conditions and limitations as
other exchanges noted above.
You can terminate your participation at any time by written notice to
the Fund. See Redemption and Exchange.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
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<PAGE>
4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your account without a sales
charge or you may be permitted to reinvest your distributions in certain other
funds in the Delaware Group without a sales charge, subject to eligibility and
minimum purchase requirements set forth in each fund's prospectus. Dividends on
shares of either Class may not be invested in the Class B Shares ("Class B
Shares") or Class C Shares ("Class C Shares") that are offered by certain other
funds in the Delaware Group. For more information about reinvestment in shares
of other funds in the Delaware Group, call the Shareholder Service Center.
Purchase Price and Effective Date
The offering price (net asset value) of each Class is determined as of
the close of regular trading on the New York Stock Exchange (ordinarily, 4 p.m.,
Eastern time) on days when the Exchange is open.
Investments by Federal Funds wire will be effective upon receipt. If the
wire is received after the time the offering price of shares is determined, as
noted above, it will be effective the next business day. If the investment is
made by check, the check must be converted to Federal Funds before your purchase
can be effective (normally one business day after receipt).
Your purchase begins earning dividends the next business day after
becoming effective. See Dividends and Distributions for additional information.
The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that have remained below the
minimum stated account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their 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 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.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $1,000 as a result of
redemptions. An investor making the minimum initial investment may be subject to
involuntary redemption if he or she redeems any portion of his or her account.
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<PAGE>
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in tax-advantaged funds, equity funds or more
aggressive bond funds. Exchanges are subject to the requirements of each fund
and all exchanges constitute taxable events. All exchanges are subject to the
eligibility and minimum purchase requirements set forth in each fund's
prospectus. Any applicable front-end sales charge will apply to exchanges from
this Fund and any other money market fund to other funds, except for exchanges
involving assets that were previously invested in a fund with a front-end sales
charge and or resulted from the reinvestment of dividends. Shares of the Fund
may not be exchanged for the Class B Shares or the Class C Shares. Shares
acquired in an exchange must be registered in the state where they are so
purchased. You may want to call us for more information or consult your
financial adviser or investment dealer to discuss which funds in the Delaware
Group will best meet your changing objectives and the consequences of any
exchange transaction.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses.
Your shares will be redeemed or exchanged out of the Fund based on the
net asset value next determined after the Fund receives your request in good
order. Redemption or exchange requests received in good order after the time the
offering price of shares is determined, as noted above, will be processed on the
next business day. See Purchase Price and Effective Date under Buying Shares.
Except as otherwise noted below, for a redemption request to be in "good order,"
you must provide your Class account number, account registration, and the total
number of shares or dollar amount of the transaction. Exchange instructions and
redemption requests must be signed by the record owner(s) exactly as the shares
are registered. With regard to exchanges, you must also provide the name of the
fund you want to receive the proceeds. You may request a redemption or an
exchange by calling the Fund at 800-523-1918. The Fund may suspend, terminate or
amend the terms of, the exchange privilege upon 60 days' written notice to
shareholders.
The Fund will not honor check, telephone or wire redemptions for Class
shares recently purchased by check unless it is reasonably satisfied that the
purchase check has cleared, which may take up to 15 days from the purchase date.
The Fund may honor written redemption requests, but will not mail the proceeds
until it is reasonably satisfied the purchase check has cleared. You can avoid
this potential delay if you purchase shares by wiring Federal Funds. You may
call the Shareholder Service Center to determine if your funds are available for
redemption. The Fund reserves the right to reject a written or telephone
redemption request or delay payment of redemption proceeds if there has been a
recent change to the shareholder's address of record.
Various redemption and exchange methods are outlined below. There is no
fee charged by the Fund or the Distributor for redeeming or exchanging your
shares, but such fees could be charged in the future. You may also have your
investment dealer arrange to have your shares redeemed or exchanged. Your
investment dealer may charge for this service.
All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.
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<PAGE>
The Class A Shares of the Delaware Group funds that carry a front-end
sales charge will be subject to a contingent deferred sales charge ("Limited
CDSC") upon redemption if the shares were purchased at net asset value without
payment of a front-end sales charge and if a dealer's commission was paid to a
financial adviser, except in certain limited instances. Such shares may be
exchanged for shares of either Class of the Fund without the imposition of the
Limited CDSC at the time of the exchange. However, upon subsequent redemption
from the Class or after a subsequent exchange into a fund that is subject to the
Limited CDSC, such shares will be subject to the Limited CDSC imposed by the
original fund whose shares were initially exchanged into the Class. Shareholders
will be given credit for the period during which the Class shares were held.
Checkwriting Feature
Checkwriting is a convenient access feature that allows you to earn
dividends until your check is presented to the Fund.
You can request special checks by marking the box on the Investment
Application. There is a one-time $5 charge for this service.
Checks must be drawn for $500 or more and, unless otherwise indicated on
the Investment Application or your checkwriting authorization form, must be
signed by all owners of the account.
You will be subject to CoreStates Bank, N.A.'s rules and regulations
governing similar accounts. If the amount of the check is greater than the value
of the shares in your account, the check will be returned and you may be subject
to a charge.
You may request a stop payment on checks by providing the Fund with a
written authorization (oral requests will be accepted only if followed promptly
with a written authorization). Such requests will remain in effect for six
months unless renewed or cancelled. There will be a $5 charge per check for each
six-month period.
Checks paid will be returned to you semi-annually (January and July). If
you need a copy of a check prior to the regular mailing you may call the
Shareholder Service Center.
Since dividends are declared daily, you may not use the Checkwriting
Feature to close your account. (See below and Part B for additional
information.)
Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your Class shares. The request must be signed by all
owners of the account or your investment dealer of record. For redemptions of
more than $50,000, or when the proceeds are not sent to the shareholder(s) at
the address of record, the Fund requires a signature by all owners of the
account and a signature guarantee for each owner. Each signature guarantee must
be supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
The redemption request is effective when it is received in good order.
Payment is normally mailed the next business day, but no later than seven days,
after receipt of the request. Certificates are issued for shares only if you
submit a specific request. If your shares are in certificate form, the
certificate must accompany your request and also be in good order.
Written Exchange
You can also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your Class shares into another
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<PAGE>
mutual fund in the Delaware Group. Written exchanges are 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 shares in certificate form, you can 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 the Fund receives written notice from the
shareholder to the contrary. 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 Class shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, the shareholder is acknowledging prior receipt
of a prospectus for the fund into which shares are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record, and will normally be sent the next business day,
but no later than seven days, after receipt of the request. This service is only
available to individual, joint and individual fiduciary-type accounts.
Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, 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.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day, but no later than seven days, after receipt of your request to your
predesignated bank account. There are no fees for this redemption 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.
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<PAGE>
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. Any such exchange is
subject to the same conditions and limitations as other exchanges noted above.
Telephone exchanges may be subject to limitations as to amounts or frequency.
Systematic Withdrawal Plan
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it provides them with a stable supplemental amount. With accounts of at
least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or more.
The Fund does not recommend any particular monthly amount, as each shareholder's
situation and needs vary. Payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service. Please call the Shareholder Service Center
for additional information.
2. Retirement Plans
For shareholders eligible under the applicable Retirement Plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals, depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required.
For more information on both of these plans, please call the Shareholder
Service Center.
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DIVIDENDS AND DISTRIBUTIONS
The Fund's dividends are declared daily and paid monthly on the last day
of each month. Payment by check of cash dividends will ordinarily be mailed
within three business days after the payable date.
Purchases of Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if the Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning dividends
on the date the wire is received. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.
Limited-Term Funds, Inc. declares a dividend to all Class shareholders
of record at the time the offering price of shares is determined. See Purchase
Price and Effective Date under Buying Shares. Thus, when redeeming shares,
dividends continue to accrue up to and including the date of redemption.
Each class of shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that the U.S. Government
Money Fund A Class will not incur any distribution fee under the 12b-1 Plan for
the U.S. Government Money Fund Consultant Class. No distribution fee under the
12b-1 Plan for the U.S. Government Money Fund Consultant Class is currently
being paid. For the seven-day period ended December 31, 1995, the annualized
current yield of each Class was 4.79% and the compounded effective yield was
4.90%.
Short-term capital gains distributions, if any, may be paid with the
daily dividend; otherwise, they will be distributed annually during the first
quarter following the close of the fiscal year.
Both dividends and distributions will be automatically reinvested in
your account unless you elect otherwise. Any check in payment of dividends or
other distributions which cannot be delivered by the United States Post Office
or which remains uncashed for a period of more than one year may be reinvested
in the shareholder's account at the then-current net asset value and the
dividend option may be changed from cash to reinvest.
If you elect to take your dividends and distributions in cash and such
dividends and distributions are in an amount of $25 or more, you may elect the
MoneyLine Direct Deposit Service to enable such payments to be transferred from
your Fund account to your predesignated bank account. See MoneyLine Direct
Deposit Service under The Delaware Difference for more information about this
service.
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TAXES
The Fund has qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code"). As such, the Fund will
not be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code. Each fund of Limited-Term
Funds, Inc. is treated as a separate tax entity for federal income tax purposes.
The Fund intends to distribute substantially all of its net investment
income and net capital gains. Dividends from net investment income or net
short-term capital gains, if any, will be taxable to you as ordinary income,
whether received in cash or in additional shares. No portion of the Fund's
distributions will be eligible for the dividends-received deduction for
corporations.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. Government securities may be exempt from
state and local personal income tax. You should consult your tax adviser with
respect to the tax status of distributions from the Fund in your state and
locality. Shares of the Fund are exempt from Pennsylvania county personal
property taxes.
Each year, Limited-Term Funds, Inc. will mail you information on the tax
status of dividends and distributions. Shareholders will receive each year
information as to the portion of distributions that came from U.S. Government
securities. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
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<PAGE>
NET ASSET VALUE PER SHARE
The purchase and redemption price of the Fund's shares is equal to the
Fund's net asset value ("NAV") per share that is next computed after the order
is received. The NAV is computed as of the close of regular trading on the New
York Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange
is open.
The NAV per share is computed by adding the value of all securities and
other assets in the portfolio, deducting any liabilities (expenses and fees are
accrued daily) and dividing by the number of shares outstanding.
The Fund's total net assets are determined by valuing the portfolio
securities at amortized cost. Under the direction of the Board of Directors,
certain procedures have been adopted to monitor the value of the Fund's
securities and stabilize the price per share at $1.00. Prior to January 1, 1991,
the portfolio of the Fund was managed to maintain a fixed net asset value of $10
per share. Limited-Term Funds, Inc. accomplished this change by effecting a
ten-to- one stock split for shareholders of record on that date.
See Part B for additional information.
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MANAGEMENT OF THE FUND
Directors
The business and affairs of Limited-Term Funds, Inc. are managed under
the direction of its Board of Directors. Part B contains additional information
regarding Limited-Term Funds, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On December 31, 1995, the Manager and its affiliate,
Delaware International Advisers Ltd., were supervising in the aggregate more
than $28 billion in assets in the various institutional (approximately
$17,606,321,000) and investment company (approximately $10,522,726,000)
accounts.
The Manager is an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly-owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now wholly-owned subsidiaries, and subject to
the ultimate control, of Lincoln National. Lincoln National, with headquarters
in Fort Wayne, Indiana, is a diversified organization with operations in many
aspects of the financial services industry, including insurance and investment
management. In connection with the merger, a new Investment Management Agreement
between Limited-Term Funds, Inc. on behalf of the Fund and the Manager was
executed following shareholder approval.
The Manager manages the Fund's portfolio, makes investment decisions and
implements them. The Manager also administers Limited-Term Funds, Inc.'s affairs
and also pays the salaries of all the directors, officers and employees of
Limited-Term Funds, Inc. who are affiliated with the Manager. The annual
compensation paid by the Fund for investment management services is equal to 1/2
of 1% of average daily net assets of the Fund, less a proportionate share of all
directors' fees paid to the unaffiliated directors by the Fund. Investment
management fees paid by the Fund were 0.44% of average daily net assets for the
fiscal year ended December 31, 1995.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down.
Banks, brokers or dealers are selected to execute the Fund's portfolio
transactions.
The Manager uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
its advisory clients. These services may be used by the Manager in servicing any
of its accounts. Subject to best price and execution, the Manager may consider a
broker/dealer's sales of Fund shares in placing portfolio orders, and may place
orders with broker/dealers that have agreed to defray certain Fund expenses such
as custodian fees.
Performance Information
From time to time, the Fund may publish the "yield" and "effective
yield" for the Classes. Both yield figures are based on historical earnings and
are not intended to indicate future performance. The "yield" of a Class refers
to the income generated by an investment in the Class over a specified seven-day
period. This income is then "annualized," which means the amount of income
generated by the investment during that week is assumed to be generated each
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week over a 52-week period and is shown as a percentage of the investment. The
"effective yield" is calculated in a similar manner but, when annualized, the
income earned by an investment in the Class is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The Fund may also publish aggregate and average annual total return
information concerning a Class which will reflect the compounded rate of return
of an investment in the Class over a specified period of time and will assume
the investment of all distributions at net asset value.
Yield fluctuates and is not guaranteed. Past performance is not a
guarantee of future results.
Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), serves as the national distributor for
the Fund under a Distribution Agreement dated April 3, 1995.
The Fund has adopted a distribution plan under Rule 12b-1 (the "Plan")
for the U.S. Government Money Fund Consultant Class which permits the Fund to
pay the Distributor from U.S. Government Money Fund Consultant Class assets a
monthly fee for its services and expenses in distributing and promoting sales of
shares of this Class. These expenses include preparing and distributing
advertisements, sales literature, and prospectuses and reports used for sales
purposes, compensating sales and marketing personnel, holding special promotions
for specified periods of time, and paying distribution and maintenance fees to
brokers, dealers and other entities which sell U.S. Government Money Fund
Consultant Class shares. In connection with the promotion of U.S. Government
Money Fund Consultant Class shares, the Distributor may, from time to time, pay
to participate in dealer-sponsored seminars and conferences, and reimburse
dealers for expenses incurred in connection with preapproved seminars,
conferences and advertising. The Distributor may pay or allow additional
promotional incentives to dealers as part of preapproved sales contests and/or
to dealers who provide extra training and information concerning the U.S.
Government Money Fund Consultant Class and increase sales of shares of this
Class. In addition, the Fund may make payments from U.S. Government Money Fund
Consultant Class assets directly to others, such as banks, who aid in the
distribution of Class shares or provide services to this Class, pursuant to
service agreements with the Fund. Registered representatives of brokers, dealers
or other entities, who have sold a specified level of Delaware Group funds
having a 12b-1 Plan were, prior to June 1, 1990, paid a .25% continuing trail
fee by the Distributor from 12b-1 Plan payments of the U.S. Government Money
Fund Consultant Class for assets maintained in this Class. Payment of such fees
has been suspended but may be reinstituted in the future with prior approval of
the Board of Directors.
The aggregate fees paid by the Fund from U.S. Government Money Fund
Consultant Class assets to the Distributor and others under the Plan may not
exceed .30% of this Class' average daily net assets in any year. The U.S.
Government Money Fund Consultant Class will not incur any distribution expenses
beyond this limit, which may not be increased without shareholder approval. The
Board of Directors previously had set the fee for the U.S. Government Money Fund
Consultant Class at .25% of average daily net assets. The Distributor may,
however, incur additional expenses and make additional payments to dealers from
its own resources to promote the distribution of U.S. Government Money Fund
Consultant Class shares.
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<PAGE>
The Plan does not apply to the U.S. Government Money Fund A Class of
shares. Those shares are not included in calculating the Plan's fees, and the
Plan is not used to assist in the distribution and marketing of U.S. Government
Money Fund A Class shares.
While Plan payments may not exceed .30% annually, the Plan does not
limit fees to amounts actually expended by the Distributor. It is therefore
possible that if a distribution fee were to be paid, the Distributor could
realize a profit in any particular year. However, the Distributor currently
expects that its distribution expenses will likely equal or exceed payments to
it under the Plan. The monthly fee paid to the Distributor is subject to the
review and approval of the Fund's unaffiliated directors who may reduce the fee
or terminate the Plan at any time. The Board of Directors has suspended 12b-1
Plan payments from the U.S. Government Money Fund Consultant Class to the
Distributor effective June 1, 1990. Such payments may be reinstituted in the
future with prior approval of the Board of Directors.
The staff of the Securities and Exchange Commission ("SEC") has proposed
amendments to Rule 12b-1 and other related regulations that could impact Rule
12b-1 Distribution Plans. Limited-Term Funds, Inc. intends to amend the Plan, if
necessary, to comply with any new rules or regulations the SEC may adopt with
respect to Rule 12b-1.
The NASD has adopted amendments to its Rules of Fair Practice relating
to investment company sales charges. Limited-Term Funds, Inc. and the
Distributor intend to operate in compliance with these rules.
The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund under
an Agreement dated December 20, 1990. The directors annually review service fees
paid to the Transfer Agent.
The Distributor and the Transfer Agent are also indirect, wholly-owned
subsidiaries of DMH.
Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The ratio of expenses to
average daily net assets for each Class for the fiscal year ended December 31,
1995 was 1.39%.
Shares
The U.S. Government Money Series is the original fund of Limited-Term
Funds, Inc., which is an open-end management investment company. The Fund's
portfolio of assets is diversified as defined by the Investment Company Act of
1940. Commonly known as a mutual fund, Limited- Term Funds, Inc. was organized
as a Pennsylvania business trust in 1981 and was reorganized as a Maryland
corporation in 1990. Limited-Term Funds, Inc. currently has authorized capital
of three billion shares of common stock. The Fund consists of one billion shares
of common stock, with a $.001 par value per share. The Fund's shares have equal
voting rights, except as noted below, and are equal in all other respects.
Shares of each fund of Limited-Term Funds, Inc. will vote separately on
any matter which affects only that fund. Shares of the U.S. Government Money
Series will have a priority over shares of Limited-Term Funds, Inc.'s other
series in the assets and income of the U.S. Government Money Series and will
vote separately on any matter that affects only this Fund.
Each Class represents a proportionate interest in the assets of the
Fund and has the same voting and other rights and preferences, except that
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<PAGE>
shares of the U.S. Government Money Fund A Class are not subject to, and may not
vote on matters affecting, the Distribution Plan under Rule 12b-1 relating to
the U.S. Government Money Fund Consultant Class.
All of the shares have noncumulative voting rights which means that the
holders of more than 50% of Limited-Term Funds, Inc.'s shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
Under Maryland law, Limited-Term Funds, Inc. is not required, and does not
intend, to hold annual meetings of shareholders unless, under certain
circumstances, it is required to do so under the Investment Company Act of 1940.
Shareholders of 10% or more of Limited-Term Funds, Inc.'s shares may request
that a special meeting be called to consider the removal of a director.
Prior to August 29, 1995, Delaware Group Limited-Term Government Funds,
Inc. was named Delaware Group Treasury Reserves, Inc. Prior to March 1994, the
U.S. Government Money Fund A Class was known as the U.S. Government Money Fund
class.
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<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact their financial
adviser or call Delaware Group at 800-523-4640 and shareholders of the
Institutional Class should contact Delaware Group at 800-828-5052.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260
- ------------------------------------------------------------
LIMITED-TERM GOVERNMENT FUND
(FORMERLY TREASURY RESERVES
INTERMEDIATE FUND)
- ------------------------------------------------------------
A CLASS
- ------------------------------------------------------------
B CLASS
- ------------------------------------------------------------
C CLASS
- ------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------
CLASSES OF LIMITED-TERM
GOVERNMENT FUND
(FORMERLY TREASURY RESERVES
INTERMEDIATE SERIES)
- ------------------------------------------------------------
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
(FORMERLY DELAWARE GROUP
TREASURY RESERVES, INC.)
- ------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------------
FEBRUARY 29, 1996
DELAWARE
GROUP
--------
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about the Limited-Term Government Fund Institutional Class:
800-828-5052
For Prospectus and Performance of the Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class and the Limited-Term Government Fund C
Class: Nationwide 800-523-4640
Information on Existing Accounts of the Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class and the Limited-Term Government Fund C
Class:
(SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
- --------------------------------------------------------------------------------
Investment Objective and Policies
- --------------------------------------------------------------------------------
Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- --------------------------------------------------------------------------------
Redemption and Repurchase
- --------------------------------------------------------------------------------
Income Dividends and Realized Securities
Profits Distributions
- --------------------------------------------------------------------------------
Investment Management Agreement
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A - IRA Information
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
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<PAGE>
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") is a professionally- managed mutual fund currently offering two
funds: the Limited-Term Government Fund and the U.S. Government Money Series.
This Statement of Additional Information ("Part B" of Limited-Term Funds, Inc.'s
registration statement) describes the Limited-Term Government Fund series (the
"Fund") only, except where noted. The Limited-Term Government Fund offers four
classes (individually a "Class" and collectively, the "Classes") of shares -
Limited-Term Government Fund A Class ("Class A Shares"), Limited-Term Government
Fund B Class ("Class B Shares"), Limited-Term Government Fund C Class ("Class C
Shares") (together the "Fund Classes") and the Limited-Term Government Fund
Institutional Class (the "Institutional Class"). Until August 28, 1995, Delaware
Group Limited-Term Government Funds, Inc. was called Delaware Group Treasury
Reserves, Inc. and Limited-Term Government Fund was called Treasury Reserves
Intermediate Series. In addition, prior to that date, Limited-Term Government
Fund A Class, Limited-Term Government Fund B Class and Limited-Term Government
Fund Institutional Class were called, respectively, Treasury Reserves
Intermediate Fund A Class, Treasury Reserves Intermediate Fund B Class and
Treasury Reserves Intermediate Fund Institutional Class.
Class B Shares, Class C Shares and Institutional Class shares may be
purchased at a price equal to the next determined net asset value per share.
Class A Shares may be purchased at the public offering price, which is equal to
the next determined net asset value per share, plus a front-end sales charge.
Class A Shares are subject to a maximum front-end sales charge of 3.00% and
annual 12b-1 Plan expenses of up to .30% (currently, .15% pursuant to Board
action). Class B Shares are subject to a contingent deferred sales charge
("CDSC") which may be imposed on redemptions made within three years of purchase
and annual 12b-1 Plan expenses of up to 1%, which are assessed against Class B
Shares for approximately five years after purchase. See Automatic Conversion of
Class B Shares under Classes of Shares in the Fund Classes' Prospectus. Class C
Shares are subject to a CDSC which may be imposed on redemptions made within 12
months of purchase and annual 12b-1 Plan expenses of up to 1%, which are
assessed against Class C Shares for the life of the investment. All references
to "shares" in this Part B refer to all Classes of shares of the Fund, except
where noted.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes dated February 29, 1996, and the current
Prospectus for the Institutional Class dated February 29, 1996, as they may be
amended from time to time. It should be read in conjunction with the respective
Class' Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. A Prospectus relating to
the Fund Classes and a Prospectus relating to the Institutional Class may be
obtained by writing or calling your investment dealer or by contacting the
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"),
1818 Market Street, Philadelphia, PA 19103.
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<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
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.
Investment Restrictions
Limited-Term Funds, Inc. has adopted the following restrictions for the
Fund which, along with its investment objective, 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 of the Fund 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 Fund's outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
The Limited-Term Government Fund series shall not:
1. Invest more than 5% of the market or other fair value of its assets
in the securities of any one issuer (other than obligations of, or guaranteed
by, the U.S. Government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of
a merger, consolidation or other acquisition, and except to the extent that an
issuer of mortgage-backed securities may be deemed to be an investment company,
provided that any such investment in securities of an issuer of a
mortgage-backed security which is deemed to be an investment company will be
subject to the limits set forth in Section 12(d)(1)(A) of the Investment Company
Act of 1940 (the "1940 Act"), as amended.
The Fund has been advised by the staff of the Securities and Exchange
Commission (the "Commission") that it is the staff's position that, under the
1940 Act, the Fund may invest (a) no more than 10% of its assets in the
aggregate in certain CMOs and REMICs which are deemed to be investment companies
under the 1940 Act and issue their securities pursuant to an exemptive order
from the Commission, and (b) no more than 5% of its assets in any single issue
of such CMOs or REMICs.
3. Make loans, except to the extent 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.
4. Purchase or sell real estate but this shall not prevent the Fund
from investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting or nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.
6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Fund may be deemed to
be an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
8. Write, purchase or sell options, puts, calls or combinations
thereof, except that the Fund may: (a) write covered call options with respect
to any part or all of its portfolio securities; (b) purchase call options to the
extent that the premiums paid on all outstanding call options do not exceed 2%
of the Fund's total assets; (c) write secured put options; (d) purchase put
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<PAGE>
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.
9. Enter into futures contracts or options thereon, except that the
Fund may enter into futures contracts to the extent that not more than 5% of the
Fund's assets are required as futures contract margin deposits and only to the
extent that obligations under such contracts or transactions represent not more
than 20% of the Fund's assets.
10. Purchase securities on margin or make short sales of securities.
11. Invest in warrants or rights except where acquired in units or
attached to other securities.
12. Purchase or retain the securities of any issuer any of whose
officers, directors or security holders is a director or officer of Limited-Term
Funds, Inc. or of its investment manager if or so long as the directors and
officers of Limited-Term Funds, Inc. and of its investment manager together own
beneficially more than 5% of any class of securities of such issuer.
13. Invest in interests in oil, gas or other mineral exploration or
development programs.
14. Invest more than 10% of the Fund's total assets in repurchase
agreements maturing in more than seven days and other illiquid assets.
15. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Fund's net assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Fund shall, within three days thereafter (not including
Sunday or holidays) or such longer period as the Commission may prescribe by
rules and regulations, reduce the amount of its borrowings to such an extent
that the asset coverage of such borrowings shall be at least 300%. The Fund will
not pledge more than 10% of its net assets. The Fund will not issue senior
securities as defined in the 1940 Act, except for notes to banks. 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.
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
-4-
<PAGE>
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
Two principal types of mortgage-backed securities are collateralized mortgage
obligations (CMOs) and real estate mortgage investment conduits (REMICs).
CMOs are debt securities issued by U.S. Government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the "interest-only" class), while the other class will receive
all of the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
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.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. The Fund will invest
in such private-backed securities only if they are 100% collateralized at the
time of issuance by securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. The Fund currently invests in privately-issued
CMOs and REMICs only if they are rated at the time of purchase in the two
highest grades by a nationally-recognized rating agency.
Asset-Backed Securities--The Fund may invest a portion of its assets in
asset-backed securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets. Such rate of payments may be affected by economic and various
other factors such as changes in interest rates. Therefore, the yield may be
difficult to predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. The credit quality of most asset-backed
securities depends primarily on the credit quality of the assets underlying such
securities, how well the entities issuing the securities are insulated from the
credit risk of the originator or affiliated entities, and the amount of credit
support provided to the securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
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<PAGE>
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, Inc. (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
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<PAGE>
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 may invest up to 2% of its total
assets in the purchase of put options. 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
-7-
<PAGE>
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. 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 Securities and Exchange Commission, 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
-8-
<PAGE>
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 Ratings Group ("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
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<PAGE>
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 Commission
permits portfolio lending by registered investment companies if certain
conditions are met. These conditions are as follows: 1) each transaction must
have 100% collateral in the form of cash, short-term U.S. Government securities,
or irrevocable letters of credit payable by banks acceptable to the Fund from
the borrower; 2) this collateral must be valued daily and should the market
value of the loaned securities increase, the borrower must furnish additional
collateral to the Fund; 3) Limited-Term Funds, Inc. 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
directors of Limited-Term Funds, Inc. know that a material event will occur
affecting an investment loan, they must either terminate the loan in order to
vote the proxy or enter into an alternative arrangement with the borrower to
enable the directors to vote the proxy.
The major risk to which the 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 Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.
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<PAGE>
ACCOUNTING AND TAX ISSUES
The following supplements the information in the Classes' Prospectuses
under the heading 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 gain (or loss if the cost of the
closing transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. Any such gain or loss is a
short-term capital gain or loss for federal income tax purposes. If a call
option which the Fund has written is exercised, the Fund realizes a capital gain
or loss (long-term or short-term, depending on the holding period of the
underlying security) from the sale of the underlying security, and the proceeds
from such sale are increased by the premium originally received.
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.
The Fund has qualified and intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code.
The Fund must meet several requirements to maintain its status as a regulated
investment company. Among these requirements is that not more than 30% of the
Fund's gross income be derived from gains from the sale or other disposition of
securities held for less than three months. This requirement may restrict the
Fund in its ability to write covered call options on securities which it has
held less than three months, to write options which expire in less than three
months, to sell securities which have been held less than three months, and to
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<PAGE>
effect closing purchase transactions with respect to options which have been
written less than three months prior to such transactions. Consequently, in
order to avoid realizing a gain within the three-month period, the Fund may be
required to defer the closing out of a contract beyond the time when it might
otherwise be advantageous to do so. The Fund may also be restricted in the sale
of purchased put options and the purchase of put options for the purpose of
hedging underlying securities because of the application of the short sale
holding period rules with respect to such underlying securities.
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PERFORMANCE INFORMATION*
From time to time, the Fund may state total return for each Class in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life of fund, if applicable) periods. The
Fund may also advertise aggregate and average compounded return information of
each Class over additional periods of time.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
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.
*In the case of 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 will apply to Class B Shares or 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 performance of Class A Shares, Class B Shares and the Institutional
Class, as shown below, is the average annual total return quotations through
December 31, 1995, computed as described above.
The average annual total return for Class A Shares at offer reflects
the maximum front-end sales charges paid on the purchase of shares. The average
annual total return for Class A Shares at net asset value (NAV) does not reflect
the payment of the maximum front-end sales charge of 3.00%.
The average annual total return for Class B Shares including deferred
sales charge reflects the deduction of the applicable CDSC that would be paid if
the shares were redeemed on December 31, 1995. The average annual total return
for Class B Shares excluding deferred sales charge assumes the shares were not
redeemed on December 31, 1995 and therefore does not reflect the deduction of a
CDSC.
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 front-end sales charges. However,
for those periods, no adjustment has been made to eliminate the impact of 12b-1
payments, and performance may have been affected had such an adjustment been
made.
The performance shown below for Class C Shares is aggregate total
return through December 31, 1995. The aggregate total return for 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, 1995. The
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<PAGE>
aggregate total return for Class B Shares excluding deferred sales charge
assumes the shares were not redeemed on December 31, 1995 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.
Average Annual Total Return
Class A Class A
Shares Shares Institutional
(at Offer)(1) (at NAV)(1) Class(1)(2)
1 year
ended
12/31/95 5.43% 8.71% 8.87%
3 years
ended
12/31/95 2.90% 3.95% 4.10%
5 years
ended
12/31/95 5.41% 6.05% 6.20%
10 years
ended
12/31/95 6.55% 6.87% 6.99%
Period
11/24/85(3)
to 12/31/95 6.58% 6.90% 7.02%
(1) The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with Limited-Term
Funds, Inc. on behalf of the Fund to limit operating expenses to 1.00% from
the date of the initial public offering through July 31, 1986 and of each
class to .75% (exclusive of 12b-1 payments with respect to Class A Shares)
from February 25, 1991 until December 30, 1992. In the absence of such
voluntary waivers, performance would have been affected negatively.
(2) Date of initial public offering was June 1, 1992.
(3) Date of initial public offering of Class A Shares.
Average Annual Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
1 year
ended
12/31/95 5.80% 7.80%
Period
5/2/94(1)
through
12/31/95 3.20% 4.32%
(1) Date of initial public offering of Class B Shares.
Aggregate Total Return
Class C Shares Class C Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
Period
11/29/95(1)
through
12/31/95 (0.01%) 1.01%
(1) Date of initial public offering of Class C Shares; total return for this
short of a time period may not be representative of longer-term results.
As stated in the Prospectuses, 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:
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<PAGE>
a -- b
------- 6
YIELD = 2[( cd + 1) -- 1]
Where: a = dividends and interest earned during
the period;
b = expenses accrued for the period (net
of reimbursements);
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends;
d = the maximum offering price per share
on the last day of the period.
The above formula will be used in calculating quotations of yield of
each Class, based on specified 30-day periods identified in advertising by the
Fund. The yields as of December 31, 1995 using this formula were 6.01%, 5.31%,
5.31% and 6.35% for Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, respectively. 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.
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.
On December 31, 1995, the average effective weighted average portfolio
maturity was 16 years for the Fund.
From time to time, the Fund may also quote actual total return and/or
yield performance for each Class in advertising and other types of literature
compared to indices or averages of alternative financial products available to
prospective investors. For example, the performance comparisons may include the
average return of various bank instruments, some of which may carry certain
return guarantees offered by leading banks and thrifts as monitored by Bank Rate
Monitor, and those of corporate bond and government security price indices of
various durations prepared by Lehman Brothers and Salomon Brothers, Inc. These
indices are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be
included. The Consumer Price Index, as prepared by the U.S. Bureau of Labor
Statistics, is the most commonly used measure of inflation. It indicates the
cost fluctuations of a representative group of consumer goods. It does not
represent a return from investment.
Total return performance of each Class will reflect the appreciation or
depreciation of principal, reinvestment of income and any capital gains
distributions paid during any indicated period, and the impact of the maximum
front-end sales charge or 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.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance and in illustrating
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<PAGE>
general financial planning principles. From time to time, certain mutual fund
performance ranking information, calculated and provided by these organizations
may also be used in the promotion of sales in the Fund. Any indices used are not
managed for any investment goal.
CDA Investment Technologies, Lipper Analytical Services, Inc. and
Morningstar, Inc. are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.
Ibbotson Associates, Inc. is a consulting firm that provides a variety
of historical data including total return, capital appreciation and
income on the stock market as well as other investment asset classes,
and inflation. With their permission, this information will be used
primarily for comparative purposes and to illustrate general financial
planning principles.
Interactive Data Corporation is a statistical access service that
maintains a database of various international industry indicators, such
as historical and current price/earning information, individual equity
and fixed income price and return information.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This
information, as well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative illustrations.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. As well, current rate information on
municipal debt obligations of various durations, as reported daily by The Bond
Buyer, may also be used. The Bond Buyer is published daily and is an
industry-accepted source for current municipal bond market information.
The following table is an example, for purposes of illustration only,
of cumulative total return performance for Class A Shares, Class B Shares, Class
C Shares and the Institutional Class through December 31, 1995. 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 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.
-16-
<PAGE>
Cumulative Total Return
Class A Institu-
Shares(1) tional
(at Offer) Class(1)(2)
3 months
ended
12/31/95 (1.02%) 2.09%
6 months
ended
12/31/95 (0.24%) 2.90%
9 months
ended
12/31/95 2.53% 5.82%
1 year
ended
12/31/95 5.43% 8.87%
3 years
ended
12/31/95 8.96% 12.82%
5 years
ended
12/31/95 30.13% 35.12%
10 years
ended
12/31/95 88.57% 96.62%
11/24/85(3)
through
12/31/95 90.38% 98.52%
(1) The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with Limited-Term
Funds, Inc. on behalf of the Fund to limit operating expenses to 1.00% from
the date of the initial public offering through July 31, 1986 and of each
class to .75% (exclusive of 12b-1 payments with respect to the Class A
Shares) from February 25, 1991 until December 30, 1992. In the absence of
such voluntary waivers, performance would have been affected negatively.
(2) Date of initial public offering was June 1, 1992.
(3) Date of initial public offering of Class A Shares.
<PAGE>
Class B Class B
Shares Shares
(Including (Excluding
Deferred Deferred
Sales Sales
Charge) Charge)
3 months
ended
12/31/95 (0.17%) 1.84%
6 months
ended
12/31/95 0.40% 2.39%
9 months
ended
12/31/95 3.03% 5.03%
1 year
ended
12/31/95 5.80% 7.80%
Period
5/2/94(1)
through
12/31/95 5.40% 7.32%
(1) Date of initial public offering of Class B Shares.
Class C Shares Class C Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
Period
11/29/95(1)
through
12/31/95 (0.01%) 1.01%
(1) Date of initial public offering of Class C Shares; total return for this
short of a time period may not be representative of longer-term results.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
-17-
<PAGE>
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Fund's, and other Delaware Group
funds', investment disciplines employed in seeking their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
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 Group 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 Redemption and
Exchange 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
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. It's called
the Power of Compounding and the following chart illustrates just how powerful
it can be.
-18-
<PAGE>
COMPOUNDED RETURNS
Results at various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:
7% 8% 9%
Rate of Rate of Rate of
Return Return Return
12-'85 $10,723 $10,830 $10,938
12-'86 $11,498 $11,729 $11,964
12-'87 $12,330 $12,702 $13,086
12-'88 $13,221 $13,757 $14,314
12-'89 $14,177 $14,898 $15,657
12-'90 $15,201 $16,135 $17,126
12-'91 $16,300 $17,474 $18,732
12-'92 $17,479 $18,924 $20,489
12-'93 $18,743 $20,495 $22,411
12-'94 $20,098 $22,196 $24,514
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes or sales charges, are not intended to
be a projection of investment results and do not reflect the actual performance
results of any of the Classes.
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<PAGE>
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
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged, but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make a good faith allocation of
brokerage and research services and will pay out of its own resources for
services used by the Manager in connection with administrative or other
functions not related to its investment decision-making process. In addition, so
long as no fund is disadvantaged, portfolio transactions which generate
commissions or their equivalent are allocated to broker/dealers who provide
daily portfolio pricing services to the Fund and to other funds in the Delaware
Group. Subject to best price and execution, commissions allocated to brokers
providing such pricing services may or may not be generated by the funds
receiving the pricing service.
-20-
<PAGE>
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board of
Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the Fund 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, and not for the purpose of realizing capital gains, although
capital gains may be realized on certain portfolio transactions. For example,
capital gains may be realized when a security is sold (i) so that, provided
capital is preserved or enhanced, another security can be purchased to obtain a
higher yield, (ii) to take advantage of what the Manager believes to be a
temporary disparity in the normal yield relationship between the two securities
to increase income or improve the quality of the portfolio, (iii) to purchase a
security which the Manager believes is of higher quality than its rating or
current market value would indicate, or (iv) when the Manager anticipates a
decline in value due to market risk or credit risk. 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 a turnover always being incidental to transactions undertaken with a view
to achieving the Fund's investment objective.
Although the Fund trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The portfolio turnover rate of the
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.
During the past two fiscal years ended December 31, 1994 and 1995, the
Fund's portfolio turnover rates were 148% and 73%, respectively.
-21-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
the Fund. See the Prospectuses for additional information on how to invest.
Shares of the Fund are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting Limited-Term
Funds, Inc. or its agent.
The minimum initial investment for each of the Classes generally is
$1,000. Subsequent purchases generally must be at least $100. The initial and
subsequent minimum investment with respect to Class A Shares will be waived for
purchases by officers, directors and employees of any Delaware Group fund, the
Manager or any of the Manager's affiliates if the purchases are made pursuant to
a payroll deduction program. 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 Group Asset Planner service are subject to a minimum initial investment
of $2,000 per Asset Planner Strategy selected. There are no minimum purchase
requirements for the Institutional Class, but certain eligibility requirements
must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Limited-Term Funds, Inc. will reject any order
for purchase of more than $250,000 of Class B Shares and $1,000,000 or more of
Class C Shares. An investor may exceed these limitations by making cumulative
purchases over a period of time. In doing so, an investor should keep in mind,
however, that reduced front-end sales charges apply to investments of $100,000
or more in Class A Shares, which are subject to lower annual 12b-1 Plan expenses
than Class B Shares and Class C Shares and generally are not subject to a CDSC.
Selling dealers have the responsibility of transmitting orders
promptly. Limited-Term Funds, Inc. reserves the right to reject any order for
the purchase of the Fund's shares if in the opinion of management such rejection
is in the Fund's best interest.
The NASD has adopted Rules of Fair Practice relating to investment
company sales charges. Limited- Term Funds, Inc. and the Distributor intend to
operate in compliance with these rules.
Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 3.00%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 2% if shares are redeemed within two years of purchase; and (ii) 1%
if shares are redeemed during the third year following purchase. Class B Shares
are also subject to annual 12b-1 Plan expenses which are higher than those to
which Class A Shares are subject and are assessed against Class B Shares for
approximately five years after purchase.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are (SAI-LTGF/PART B) redeemed within 12 months following
purchase. Class C Shares are also subject to annual 12b-1 Plan expenses for the
life of the investment which are equal to those to which Class B Shares are
subject.
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses.
Institutional Class shares, Class A Shares, Class B Shares and Class C
Shares represent a proportionate interest in the Fund's assets and will receive
a proportionate interest in the Fund's income, before application, as to Class
A, Class B and Class C Shares, of any expenses under the Fund's 12b-1 Plans.
-22-
<PAGE>
See Automatic Conversion of Class B Shares in the Fund Classes'
Prospectus, and Determining Offering Price and Net Asset Value and Plans Under
Rule 12b-1 for the Fund Classes in this Part B.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. Certificates are not issued in
the case of Class B Shares or Class C Shares. However, purchases not involving
the issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is made for any certificate issued. Investors who hold certificates
representing any of their shares may only redeem those shares by written
request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and the Class C Shares permit investors to choose the method of purchasing
shares that is most suitable for his or her 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 .30%
(currently, no more than .15% pursuant to Board action) 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% (.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 .30% (currently no more than .15%
pursuant to Board action) of average daily net assets of such shares. Unlike
Class B Shares, Class C Shares do not convert to another class.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by the purchaser. See Special Purchase Features - Class A
Shares, below, for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
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<PAGE>
Limited-Term Government Fund A Class
- --------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Amount of Purchase Offering Amount as % of
Price Invested** Offering Price
- --------------------------------------------------------------------------------
Less than $100,000 3.00% 3.09% 2.50%
$100,000 but under $250,000 2.50 2.54 2.00
$250,000 but under $500,000 2.00 2.04 1.60
$500,000 but under $1,000,000* 1.50 1.55 1.20
* There is no front-end sales charge on purchases of $1 million or more of
Class A Shares but, under certain limited circumstances, a 1% contingent
deferred sales charge may apply upon redemption of such shares. The
contingent deferred sales charge ("Limited CDSC") that may be applicable
arises only in the case of certain shares that were purchased at net asset
value and triggered the payment of a dealer's commission.
** Based on the net asset value per share of Class A Shares as of the end of
Limited-Term Funds, Inc.'s most recent fiscal year.
*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------
The Fund must be notified when a sale takes place which would qualify
for the reduced front-end sales charge on the basis of previous or
current purchases. The reduced front-end sales charge will be granted
upon confirmation of the shareholder's holdings by the Fund. Such
reduced front-end sales charges are not retroactive.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. Dealers who receive 90% or more
of the sales charge may be deemed to be underwriters under the
Securities Act of 1933.
- --------------------------------------------------------------------------------
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<PAGE>
Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to .15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.
Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:
Dealer's Commission
-------------------
(as a percentage of
Amount of Purchase amount purchased)
- ------------------
Up to $3 million .60%
Next $2 million up to $5 million .40
Amount over $5 million .20
In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Redemption and Repurchase) may be aggregated
with those of Class A Shares of the Fund. Financial advisers also may be
eligible for a dealer's commission in connection with certain purchases made
under a Letter of Intention or pursuant to an investor's Right of Accumulation.
Financial advisers should contact the Distributor concerning the applicability
and calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Group 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 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 below 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 redemption of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectus for the Fund Classes for a list of the instances
in which the CDSC is waived.
The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- ------------------------ ------------------
0-2 2%
3 1%
4 and thereafter None
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares, 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 Classes of Shares in the Fund
Classes' Prospectus.
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<PAGE>
Such conversion will constitute a tax-free exchange for federal income tax
purposes. See Taxes in the Prospectus for the Fund Classes.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Limited-Term Funds, Inc. has
adopted a separate plan for each of Class A Shares,Class B Shares and Class C
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 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 and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Fund may make payments out of the assets of Class A,
Class B and Class C 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 .30% of Class A
Shares' average daily net assets for the year, and up to 1% (.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of Class B
Shares' and Class C Shares' average daily net assets for the year. Limited-Term
Funds, Inc.'s Board of Directors may reduce these amounts at any time. The
Distributor has agreed to waive these distribution fees to the extent such fees
for any day exceeds the net investment income realized by the Fund Classes for
such day.
On May 21, 1987, the Board of Directors set the fee for Class A Shares,
pursuant to its Plan, at .15% of average daily net assets. This fee was
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors has
determined that the annual fee, payable on a monthly basis, under the Plan, will
be equal to the sum of: (i) the amount obtained by multiplying .10% by the
average daily net assets represented by 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 .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 .30% 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 and Class C Shares would be borne by such persons without any
reimbursement from such classes. Subject to seeking best price and execution,
the Fund may, from time to time, buy or sell portfolio securities from or to
firms which receive payments 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.
-26-
<PAGE>
The Plans and the Distribution Agreement, as amended, have been
approved by the Board of Directors of Limited-Term Funds, Inc., including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of Limited- Term Funds, Inc. 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 Directors in the same manner as specified
above.
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to a Fund Class providing a benefit to that Class. The Plans
and the Distribution Agreement, as amended, may be terminated at any time
without penalty by a majority of those directors who are not "interested
persons" or by a majority vote of the outstanding voting securities of the
relevant Fund Class. Any amendment materially increasing the percentage payable
under the Plans must likewise be approved by a majority vote of the outstanding
voting securities of the relevant Fund Class, as well as by a majority vote of
those directors who are not "interested persons." 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 directors, including a majority of the noninterested directors of
Limited-Term Funds, Inc. having no interest in the Plans. In addition, in order
for the Plans to remain effective, the selection and nomination of directors who
are not "interested persons" of Limited-Term Funds, Inc. must be effected by the
directors who themselves are not "interested persons" and who have no direct or
indirect financial interest in the Plans. Persons authorized to make payments
under the Plans must provide written reports at least quarterly to the Board of
Directors for their review.
For the fiscal year ended December 31, 1995, payments from Class A
Shares pursuant to its Plan amounted to $1,068,466 and such amount was used for
the following purposes: Advertising - $47; Annual and Semi-Annual Reports -
$10,003; Broker Trails - $966,845; Commission to Wholesalers - $28,478;
Promotional-Other - $18,301; Promotional-Broker Meetings - $23,745; Prospectus
Printing - $17,281; and Telephone Expenses - $3,966. For the fiscal year ended
December 31, 1995, payments from Class B Shares pursuant to its Plan amounted to
$100,318 and such amount was used for the following purposes: Advertising -
$437; Broker Sales Charges - $51,624; Broker Trails - $14,915; Commission to
Wholesalers - $11,518; Dealer Service Expenses - $1,432; Interest on Broker
Sales Charges - $18,600; Promotional Broker Meetings - $753; Promotional Other -
$650; Prospectus Printing - $156 and Telephone Expenses $233. For the period
November 29, 1995 (date of initial public offering through December 31, 1995,
payments from Class C Shares pursuant to its Plan amounted to $23 and such
amount was used for Broker Sales Charges.
The staff of the Securities and Exchange Commission ("SEC") has
proposed amendments to Rule 12b-1 and other related regulations that could
impact Rule 12b-1 Distribution Plans. Limited-Term Funds, Inc. intends to amend
the Plans, if necessary, to comply with any new rules or regulations the SEC may
adopt with respect to Rule 12b-1.
Other Payments to Dealers - Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Fund Classes exceed certain limits
as set by the Distributor, may receive from the Distributor an additional
payment of up to .25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.
Payment to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made. The Distributor may also pay a portion
of the expense of preapproved dealer advertisements promoting the sale of
Delaware Group fund shares.
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Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12- Month Reinvestment Privilege.
Current and former officers, directors and employees of Limited-Term
Funds, Inc., any other fund in the Delaware Group, the Manager or any of the
Manager's affiliates that may in the future be created, legal counsel to the
funds and registered representatives and employees of broker/dealers who have
entered into Dealer's Agreements with the Distributor may purchase Class A
Shares of the Fund and any of the funds in the Delaware Group, including any
fund that may be created, at the net asset value per share. Family members of
such persons at their direction, and any employee benefit plan established by
any of the foregoing funds, corporations, counsel or broker/dealers may also
purchase shares at net asset value. Purchases of Class A Shares may also be made
by clients of registered representatives of an authorized investment dealer at
net asset value within six months after the registered representative changes
employment, if the purchase is funded by proceeds from an investment where a
front-end sales charge has been assessed and the redemption of the investment
did not result in the imposition of a contingent deferred sales charge or other
redemption charges. Purchases of Class A Shares may also be made at net asset
value by bank employees that provide services in connection with agreements
between the bank and unaffiliated brokers or dealers concerning sales of
Delaware Group funds. Officers, directors and key employees of institutional
clients of the Manager, or any of its affiliates, may purchase Class A Shares at
net asset value. Moreover, purchases may be effected at net asset value for the
benefit of the clients of brokers, dealers and registered investment advisers
affiliated with a broker or dealer, if such broker, dealer or investment adviser
has entered into an agreement with the Distributor providing specifically for
the purchase of Class A Shares in connection with special investment products,
such as wrap accounts or similar fee based programs. Such purchasers are
required to sign a letter stating that the purchase is for investment only and
that the securities may not be resold except to the issuer. Such purchasers may
also be required to sign or deliver such other documents as Limited-Term Funds,
Inc. may reasonably require to establish eligibility for purchase at net asset
value. Limited-Term Funds, Inc. must be notified in advance that the trade
qualifies for purchase at net asset value.
Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.
Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made by
any such purchaser previously enumerated within a 13-month period pursuant to a
written Letter of Intention provided by the Distributor and signed by the
purchaser, and not legally binding on the signer or Limited-Term Funds, Inc.,
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
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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
the Delaware Group (except shares of any Delaware Group fund which do not carry
a front-end sales charge or CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC) previously purchased and still held as of the date of their Letter of
Intention toward the completion of such Letter. For purposes of satisfying an
investor's obligation under a Letter of Intention, Class B Shares and Class C
Shares of the Fund and the corresponding classes of shares of other Delaware
Group funds which offer such shares may be aggregated with Class A Shares of the
Fund and the corresponding class of shares of the other Delaware Group funds.
Employers offering a Delaware Group retirement plan may also complete a
Letter of Intention to obtain a reduced front-end sales charge on investments of
Class A Shares made by the plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
plan establishment. The level and any reduction in front-end sales charge will
be based on actual plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the Plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the 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 Group funds which offer corresponding classes of shares may also
be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of 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 Group
funds (except shares of any Delaware Group fund which do not carry a front-end
sales charge, CDSC or Limited CDSC, other than shares of Delaware Group Premium
Fund, Inc. beneficially owned in connection with the ownership of variable
insurance products, unless they were acquired through an exchange from a
Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC).
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Fund, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
shares from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC). If, for example, any such purchaser has previously purchased
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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 2.50%. For the
purpose of this calculation, the shares presently held shall be valued at the
public offering price that would have been in effect were the shares purchased
simultaneously with the current purchase. Investors should refer to the table of
sales charges for Class A Shares to determine the applicability of the Right of
Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares (and of Institutional Class shares which were
acquired through an exchange of one of the other mutual funds in the Delaware
Group offered with a front-end sales charge) who redeem such shares have one
year from the date of redemption to reinvest all or part of their redemption
proceeds in Class A Shares of the Fund or in Class A Shares of any of the other
funds in the Delaware Group, subject to applicable eligibility and minimum
purchase requirements, in states where shares of such other funds may be sold,
at net asset value without the payment of a front-end sales charge. This
privilege does not extend to Class A Shares where the redemption of the shares
triggered the payment of a Limited CDSC. Persons investing redemption proceeds
from direct investments in mutual funds in the Delaware Group offered without a
front-end sales charge will be required to pay the applicable sales charge when
purchasing Class A Shares. The reinvestment privilege does not extend to a
redemption of either Class B or Class C Shares.
Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectus) in connection with the
features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page 00, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund at the time of each
such purchase. Employees participating in such Group Investment Plans may also
combine the investments made in their plan account when determining the
applicable front-end sales charge on purchases to non-retirement Delaware Group
investment accounts if they so notify the Fund in connection with each purchase.
For other retirement plans and special services, see Retirement Plans
for the Fund Classes under Investment Plans.
Limited-Term Government Fund Institutional Class
The Institutional Class is available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee benefit
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plans of the Manager or its affiliates and securities dealer firms with a
selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, a division of the Manager, or its affiliates and
their corporate sponsors, as well as subsidiaries and related employee benefit
plans and rollover individual retirement account from such institutional
advisory accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.
Shares of the Institutional Class are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional Class
are reinvested in the account of the holders of such shares (based on the net
asset value 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. 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 Institutional Class, Class B and Class C
Shares at the net asset value, at the end of the day of receipt. A reinvestment
plan may be terminated at any time. This plan does not assure a profit nor
protect against depreciation in a declining market.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest their dividends and/or
distributions in any of the mutual funds in the Delaware Group, including the
Fund, in states where their shares may be sold. Such investments will be made at
the net asset value per share at the close of business on the reinvestment date
without any front-end sales charge or service fee. The shareholder must notify
the Transfer Agent in writing and must have established an account in the fund
into which the dividends and/or distributions are to be invested. Any
reinvestment directed to a fund in which the investor does not then have an
account, will be treated like all other initial purchases of a fund's shares.
Consequently, an investor should obtain and read carefully the prospectus for
the fund in which the investment is proposed to be made before investing or
sending money. The prospectus contains more complete information about the fund,
including charges and expenses. See also Dividend Reinvestment Plan in the
Prospectus for the Fund Classes.
Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the Fund at
net asset value, provided an account has been established. Dividends from Class
A Shares may not be directed to Class B or Class C Shares. Likewise, dividends
from Class B Shares may only be directed to other Class B Shares and dividends
from Class C Shares may only be directed to other Class C Shares. See Classes
Offered under Classes of Shares in the Fund Classes' Prospectus for the funds in
the Delaware Group that are eligible for investment by holders of Fund shares.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments by Electronic Fund
Transfer. This method of investment assures the timely credit to the
shareholder's account of payments such as social security, veterans' pension or
compensation benefits, federal salaries, Railroad Retirement benefits, private
payroll checks, dividends, and disability or pension fund benefits. It also
eliminates lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
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account. This type of investment will be handled in either of the two ways noted
below. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
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 option should contact the Shareholder Service Center at 800-523-1918
for the necessary authorization forms and information. These services can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the 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 the Fund for proper
instructions.
Retirement Plans for the Fund Classes
An investment in the Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 403(b)(7) Deferred Compensation Plans and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B and Class C
Shares under Redemption and Exchange in the Prospectus for the Fund Classes for
a list of the instances in which the CDSC is waived.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans, other than Individual Retirement Accounts
("IRAs"), for which there is a minimum initial purchase of $250 and a minimum
subsequent purchase of $25 regardless of which class is selected. Retirement
plans may be subject to plan establishment fees, annual maintenance fees and/or
other administrative or trustee fees. Fees are based upon the number of
participants in the plan as well as the services selected. Additional
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information about fees is included in retirement plan materials. Fees are quoted
upon request. Annual maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager and others that
provide services to such plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Class. See
Limited-Term Government Fund Institutional Class, above. For additional
information on any of the Plans and Delaware's retirement services, call the
Shareholder Service Center telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype plans are available for self-employed individuals,
partnerships and corporations which replace the former Keogh and corporate
retirement plans. These plans contain profit sharing or money purchase pension
plan provisions. Contributions may be invested only in Class A and Class C
Shares.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
by making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
A company or association may establish a Group IRA for employees or
members who want to purchase shares of the Fund. Purchases of $1 million or more
of the Class A Shares qualify for purchase at net asset value but may, under
certain circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on reduced front-end sales charges applicable to Class A Shares.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
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receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Class B Shares and Class C Shares under Alternative Purchase
Arrangements in the Fund Classes' Prospectus concerning the applicability of a
CDSC upon redemption.
See Appendix A for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Fund Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in Class
A Shares and Class C Shares only.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in only
Class A Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the Plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page 00.
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 any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page 00.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on page
00.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund after receipt of the order by the Fund or its
agent. Orders for purchases of Class B Shares, Class C Shares and the
Institutional Class are effected at the net asset value per share next
calculated by the Fund after receipt of the order by the Fund or its agent.
Selling dealers have the responsibility of transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable 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 New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas. When the
New York Stock Exchange is closed, the Fund will generally be closed, pricing
calculations will not be made and purchase and redemption orders will not be
processed.
An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in the
Fund's financial statements which are incorporated by reference into this Part
B.
The 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 valued
at the mean between the last reported bid and asked prices. Options are valued
at the last reported sales price or, if no sales are reported, at the mean
between the last reported bid and asked prices. Short-term investments having
remaining maturities of 60 days or less are valued at amortized cost. All other
securities and assets, including non-Exchange-traded options, are valued at fair
value as determined in good faith by the Board of Directors of Limited-Term
Funds, Inc.
Each Class of the Fund will bear, pro-rata, all of the common expenses
of the Fund. The net asset values of all outstanding shares of each Class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that Class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that the Institutional Class will not incur any of the expenses under the
Fund's 12b-1 Plans and Class A, Class B and Class C Shares alone will bear the
12b-1 Plan expenses payable under their respective Plans. Due to the specific
distribution expenses and other costs that 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.
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REDEMPTION AND REPURCHASE
Any shareholder may require the Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. The Fund reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Fund may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.
In addition to redemption of Fund shares by the Fund, the Distributor,
acting as agent of the Fund, offers to repurchase Fund shares from
broker/dealers acting on behalf of shareholders. The redemption or repurchase
price, which may be more or less than the shareholder's cost, is the net asset
value per share next determined after receipt of the request in good order by
the Fund or its agent, subject to any applicable CDSC or Limited CDSC. This is
computed and effective at the time the offering price and net asset value are
determined. See Determining Offering Price and Net Asset Value. The Fund and the
Distributor end their business days at 5 p.m., Eastern time. This offer is
discretionary and may be completely withdrawn without further notice by the
Distributor.
Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.
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 under
Redemption and Exchange in the Prospectus for the Fund Classes. Redemptions of
Class B Shares made within three years of purchase are subject to a CDSC of 2%
during the first two years of purchase and 1% during the third year of purchase.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months following purchase. See Contingent Deferred Sales Charge under Classes of
Shares in the Prospectus for the Fund Classes. Except for the applicable CDSC or
Limited CDSC and, with respect to the expedited payment by wire described below,
for which there is currently a $7.50 bank wiring cost, neither the Fund nor its
Distributor charges a fee for redemptions or repurchases, but such fees could be
charged at any time in the future.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order.
If a shareholder redeems an entire account, all dividends accrued to
the time of withdrawal will be paid by a separate check at the end of that
particular monthly dividend period.
If a shareholder who recently purchased shares by check seeks to redeem
all or a portion of those shares in a written request, the redemption request
will be honored but the proceeds will not be mailed until the Fund is reasonably
satisfied of the collection of the investment check. Redemption requests by wire
or the Checkwriting Feature in this case will not be honored. This hold period
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against a recent purchase may be up to but not in excess of 15 days, depending
upon the origin of the investment check. This potential delay can be avoided by
making investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Fund's 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 Commission has provided for such suspension for
the protection of shareholders, the Fund may postpone payment or suspend the
right of redemption or repurchase. In such case, the shareholder may withdraw
the request for redemption or leave it standing as a request for redemption at
the net asset value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash
or in kind, or partly in cash and partly in kind. Any portfolio securities paid
or distributed in kind would be valued as described in Determining Offering
Price and Net Asset Value. Subsequent sale by an investor receiving a
distribution in kind could result in the payment of brokerage commissions.
However, Limited-Term Funds, Inc. 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.
Small Accounts
Before the Fund involuntarily redeems shares from an account that,
under the circumstances listed in the relevant Prospectus, has remained below
the minimum amounts required by the Fund's Prospectuses and sends the proceeds
to the shareholder, the shareholder will be notified in writing that the value
of the Fund shares in the account is less than the minimum required and will be
allowed 60 days from the date of notice to make an additional investment to meet
the required minimum. See The Conditions of Your Purchase under How to Buy
Shares in the Fund's Prospectuses. Any redemption in an inactive account
established with a minimum investment may trigger mandatory redemption. No CDSC
or Limited CDSC will apply to the redemptions described in this paragraph.
Checkwriting Feature
Shareholders of the Class A Shares and the Institutional Class holding
shares for which certificates have not been issued may request on the investment
application that they be provided with special forms of checks which may be
issued to redeem their shares by drawing on the Delaware Group Limited-Term
Government Funds, Inc.- Limited-Term Government Fund account with CoreStates
Bank, N.A. Normally, it takes two weeks from the date the shareholder's initial
purchase check clears to receive the ten-check book. The use of any form of
check other than the 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
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continue to be entitled to distributions paid on these shares up to the time the
check is presented for payment.
(3) If a shareholder who recently purchased shares by check seeks to
redeem all or a portion of those shares through the Checkwriting Feature, the
Fund will not honor the redemption request unless it is reasonably satisfied of
the collection of the investment check. A hold period against a recent purchase
may be up to but not in excess of 15 days, depending upon the origin of the
investment check.
(4) If the amount of the check is greater than the value of the shares
held in the shareholder's account, the check will be returned and the
shareholder may be subject to extra charges.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of
shareholders who overdraw their accounts or if, in the opinion of management,
such revocation is in the Fund's best interest.
Shareholders will be subject to CoreStates Bank, N.A.'s rules and
regulations governing similar accounts. This service may be terminated or
suspended at any time by CoreStates Bank, N.A., the Fund or the Transfer Agent.
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 efforts to effect stop-payment instructions, but does
not promise or guarantee that such instructions will be effective. Shareholders
requesting stop payment will be charged a $5 service fee per check for each
six-month period which will be deducted from their accounts.
* * *
The Fund has made available certain special redemption privileges, as
described below. The Fund reserves the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.
Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of Fund shares of $50,000 or less for which
certificates have not been issued may call the Shareholder Service Center at
800-523-1918 or, in the case of shareholders of the Institutional Class, their
Client Services Representative at 800-828-5052 prior to the time the offering
price and net asset value are determined, as noted above, and have the proceeds
mailed to them at the record address. Checks payable to the shareholder(s) of
record will normally be mailed the next business day, but no later than seven
days, after the receipt of the redemption request. This option is only available
to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the Fund before the request is received. Payment will
be made by wire or check to the bank account designated on the authorization
form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
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mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the Fund
and a signature guarantee may be required. Each signature guarantee must be
supplied by an eligible guarantor institution. The Fund reserves the right to
reject a signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form. Telephone redemptions for Fund shares
recently purchased by check will not be honored unless the Fund is reasonably
satisfied that the purchase check has cleared.
If expedited payment under these procedures could adversely affect the
Fund, the Fund may take up to seven days to pay the shareholder.
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
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.
Systematic Withdrawal Plans
Shareholders of Class A Shares, Class B Shares and Class C Shares who
own or purchase $5,000 or more of shares at the offering price, or net asset
value, as applicable, for which certificates have not been issued may establish
a Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or
quarterly withdrawals of $75 or more, although the Fund does not recommend any
specific amount of withdrawal. This $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.
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 of the Fund may be disadvantageous to the shareholder.
Purchases of Class A Shares through a periodic investment program in a 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 funds of the
Delaware Group which do not carry a sales charge. Redemptions of Class A Shares
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pursuant to a Systematic Withdrawal Plan may be subject to a Limited CDSC if the
purchase was made at net asset value and a dealer's commission has been paid on
that purchase. Redemptions of Class B Shares or Class C Shares pursuant to a
Systematic Withdrawal Plan may be subject to a CDSC, unless the annual amount
selected to be withdrawn is less than 12% of the account balance on the date
that the Systematic Withdrawal Plan was established. See Waiver of Contingent
Deferred Sales Charge - Class B and Class C Shares and Waiver of Limited
Contingent Deferred Sales Charge - Class A Shares under Redemption and Exchange
in the Prospectus for the Fund Classes. Shareholders should consult their
financial advisers to determine whether a Systematic Withdrawal Plan would be
suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
The Systematic Withdrawal Plan is not available with respect to the
Institutional Class.
Wealth Builder Option
Shareholders of the Fund Classes may elect to invest in one or more of
the other mutual funds in the Delaware Group through our Wealth Builder Option.
Under this automatic exchange program, shareholders can authorize regular
monthly investments (minimum of $100 per fund) to be liquidated from their
account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectus. See Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund Classes.
The investment will be made on the 20th day of each month (or, if the
fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges.
Shareholders can also use the Wealth Builder Option to invest in the
Fund Classes through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Group, subject to the conditions and limitations
described in the Fund Classes' Prospectus. Shareholders can terminate their
participation at any time by written notice to the Fund.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans. This option also is not available to shareholders
of the Institutional Class.
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INCOME DIVIDENDS AND REALIZED
SECURITIES PROFITS DISTRIBUTIONS
It is the present policy of Limited-Term Funds, Inc. 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 on the last business day of each month. Checks are normally
mailed within three business days of that date. Any check in payment of
dividends or other distributions which cannot be delivered by the 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
and the Class C Shares (SAI-LTGF/PART B) 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, Inc. 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, Inc.'s Board of Directors, might be distributed less
frequently. Distributions of net long-term gains, if any, realized on sales of
investments will be distributed annually during the quarter following the close
of the fiscal year.
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INVESTMENT MANAGEMENT
AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of Limited-Term Funds, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. The aggregate assets of these funds on December 31,
1995 were approximately $10,522,726,000. Investment advisory services are also
provided to institutional accounts with assets on December 31, 1995 of
approximately $17,606,321,000.
The Investment Management Agreement for the Fund is dated April 3, 1995
and was approved by shareholders on March 29, 1995.
The Agreement has an initial term of two years and may be further
renewed only so long as such renewal and continuance are specifically approved
at least annually by the Board of Directors or by vote of a majority of the
outstanding voting securities of the Fund, and only if the terms and renewal
thereof have been approved by the vote of a majority of the directors of
Limited-Term Funds, Inc. who are not parties thereto or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement is terminable without penalty on 60 days' notice by
the directors of Limited-Term Funds, Inc. 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 annual rate of 1/2 of 1%, less all directors'
fees paid to the unaffiliated directors of the Fund. On December 31, 1995, the
Fund's total net assets were $703,256,727. Investment management fees paid by
the Fund for the fiscal years ended December 31, 1993, 1994 and 1995 amounted to
$5,455,430, $5,023,989 and $3,875,637, respectively.
Under the general supervision of the Board of Directors, 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 directors, officers and
employees of Limited-Term Funds, Inc. 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 ratios of expenses to average daily net assets for Class A Shares,
Class B Shares and the Institutional Class for the fiscal year ended December
31, 1995 were 0.96%, 1.81% and 0.81%, respectively. The ratios for Class A
Shares and Class B Shares reflect the impact of their respective 12b-1 Plans.
The Fund anticipates that the ratio of expenses to average daily net assets of
Class C Shares will be approximately equal to that of Class B Shares.
By California regulation, the Manager is required to waive certain fees
and reimburse the Fund for certain expenses to the extent that the Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of its first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1 1/2% of
any additional average daily net assets. For the fiscal year ended December 31,
1995, no such reimbursement was necessary or paid.
Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Fund shares under
a Distribution Agreement dated April 3, 1995, as amended on November 29, 1995.
The Distributor is an affiliate of the Manager and bears all of the costs of
promotion and distribution, except for payments by Class A Shares, Class B
Shares and Class C Shares of the Fund under their respective 12b-1 Plans. Prior
to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as the national
distributor of the Fund's shares. On that date, Delaware Distributors, L.P., a
newly formed limited partnership, succeeded to the business of DDI. All officers
and employees of DDI became officers and employees of Delaware Distributors,
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L.P. DDI is the corporate general partner of Delaware Distributors, L.P. and
both DDI and Delaware Distributors, L.P. are indirect, wholly-owned subsidiaries
of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated December 20, 1990. The
Transfer Agent is also an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc.
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OFFICERS AND DIRECTORS
The business and affairs of Limited-Term Funds, Inc. are managed under
the direction of its Board of Directors.
Certain officers and directors of Limited-Term Funds, Inc. hold
identical positions in each of the other funds in the Delaware Group. On January
31, 1996, the Fund's officers and directors, as a group, owned less than 1% of
the outstanding shares of the Class A Shares, Class B Shares, Class C Shares and
the Institutional Class, respectively.
As of January 31, 1996, management believes the following accounts held
5% or more of the outstanding shares of, respectively, the Class A Shares, Class
B Shares, Class C Shares and the Institutional Class: Merrill, Lynch, Pierce,
Fenner & Smith Inc., Mutual Fund Operations, P.O. Box 41621, Jacksonville, FL
32203 held of record for the benefit of others 6,463,114 shares (9.06%) of the
outstanding shares of the Class A Shares. Merrill, Lynch, Pierce, Fenner & Smith
Inc., Mutual Fund Operations, Attention Book Entry, 4800 Deer Lake Drive East
3rd Fl., Jacksonville, FL 32246 held of record for the benefit of others 91,980
shares (6.55%) of the outstanding shares of the Class B Shares. Cherie L.
Leonard, 24602 Tabuenca, Mission Viejo, CA 92692 held 27,777 shares (77.93%) and
Delaware Management Company, Inc., attn. Joseph H. Hastings, 1818 Market Street,
Philadelphia, PA 19103 held 2,800 shares (7.86%) of the outstanding shares of
the Class C Shares. Price Waterhouse, LLP 401(k) Savings Plan, National
Administrative Center, P.O. Box 30004, Tampa, FL 33630 held 2,153,292 shares
(54.12%); Merrill Lynch Trust Company, Trust Qualified Retirement Plans, 265
Davidson Avenue 3rd Fl., Somerset, NJ 08873 held 608,718 shares (15.30%); and
National Westminster Bank of New Jersey, FBO ITO Pension Plan, 2 Montgomery
Street 2nd Floor, Jersey City, NJ 07302 held 205,750 shares (5.17%) of the
outstanding shares of the Institutional Class.
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Investment
Counselors, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly-owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly-owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, a new Investment Management Agreement between Limited-Term
Funds, Inc. on behalf of the Fund and the Manager was executed following
shareholder approval. DMH and the Manager are now wholly-owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Directors and principal officers of Limited-Term Funds, Inc. are noted
below along with their ages and their business experience for the past five
years. Unless otherwise noted, the address of each officer and director is One
Commerce Square, Philadelphia, PA 19103.
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*Wayne A. Stork (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of Limited-Term Funds, Inc., 15 other investment companies in
the Delaware Group (which excludes Delaware Pooled Trust, Inc.),
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Investment Counselors, Inc. and Delaware Investment & Retirement
Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Distributors, Inc. and Delaware Service Company,
Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
Winthrop S. Jessup (50)
Executive Vice President of Limited-Term Funds, Inc. and 15 other
investment companies in the Delaware Group (which excludes
Delaware Pooled Trust, Inc.) and Delaware Management Holdings,
Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware
Management Company, Inc., Delaware International Holdings Ltd.
and Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (56)
Executive Vice President of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management
Company, Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
- ------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the Investment Company Act of 1940.
-46-
<PAGE>
Walter P. Babich (68)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (57)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989,
he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group, Inc.,
New York, from 1988 to 1990. Mr. Knerr founded The Publishing
Group, Inc. in 1988.
Ann R. Leven (55)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975 to
1994, she was Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (75)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Charles E. Peck (70)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer
of The Ryland Group, Inc., Columbia, MD.
-47-
<PAGE>
David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Limited-Term Funds, Inc., each of the other 16
investment companies in the Delaware Group and Delaware
Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director
of DMH Corp.
Senior Vice President/Chief Administrative Officer and Director of
Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer and Director of Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International Holdings
Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Investment Counselors, Inc.
Senior Vice President/Chief Financial Officer and Director of Founders
Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of
Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President from
December 1985 through March 1992, and Vice Chairman from March
1992 through August 1992.
George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of Limited-Term Funds, Inc., each
of the other 16 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., Delaware Distributors, L.P.
and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware Investment & Retirement
Services, Inc. and Founders Holdings, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
Paul E. Suckow (48)
Executive Vice President/Chief Investment Officer, Fixed Income of
Limited-Term Funds, Inc., each of the other 16 investment
companies in the Delaware Group and Delaware Management Company,
Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed income portfolio
manager for the Delaware Group.
-48-
<PAGE>
Roger A. Early (42)
Vice President/Senior Portfolio Manager of Limited-Term Funds, Inc.,
of nine other income investment companies in the Delaware Group
and of Delaware Management Company, Inc.
Before joining the Delaware Group in 1994, Mr. Early was Senior Vice
President/Portfolio Manager for Federated Investors, Pittsburgh,
PA from 1984 to 1994.
Joseph H. Hastings (46)
Vice President/Corporate Controller of Limited-Term Funds, Inc., each
of the other 16 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Investment Counselors, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P., New
York, NY from 1989 to 1992. Prior to that, Mr. Hastings served
as Controller and Treasurer for Fine Homes International, L.P.,
Stamford, CT from 1987 to 1989.
Michael P. Bishof (33)
Vice President/Treasurer of Limited-Term Funds, Inc., each of the
other 16 investment companies in the Delaware Group, Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
Distributors, L.P., Delaware Service Company, Inc., and Founders
Holdings, Inc.
Assistant Treasurer of Founders CBO Corporation.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from 1987
to 1993.
-49-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Limited-Term Funds, Inc. and the total compensation received from all Delaware
Group funds for the fiscal year ended December 31, 1995 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of December 31, 1995.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Total
Compensation Part of Annual Compensation
from Limited-Term Benefits from all 17
Limited-Term Funds, Inc. Upon Delaware
Name Funds, Inc. Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,702 None $18,100 $61,324
Ann R. Leven $2,895 None $18,100 $66,324
Walter P. Babich $2,776 None $18,100 $64,188
Anthony D. Knerr $2,857 None $18,100 $65,324
Charles E. Peck $2,544 None $18,100 $58,188
</TABLE>
* Under the terms of the Delaware Group Retirement Plan forDirectors/Trustees,
each disinterested director who, at the time of his or her retirement from
the Board, has attained the age of 70 and served on the Board for at least
five continuous years, is entitled to receive payments from each fund in the
Delaware Group for a period equal to the lesser of the number of years that
such person served as a director or the remainder of such person's life. The
amount of such payments will be equal, on an annual basis, to the amount of
the annual retainer that is paid to directors of each fund at the time of
such person's retirement. If an eligible director retired as of December 31,
1995, he or she would be entitled to annual payments totaling $18,100, in the
aggregate, from all of the funds in the Delaware Group, based on the number
of funds in the Delaware Group as of that date.
-50-
<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in the Delaware Group are set forth
in the relevant prospectuses for such classes. The following supplements that
information. The Fund may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional Class, their Client Services Representative at 800-828-5052 to
effect an exchange. The shareholder's current Fund account number must be
identified, as well as the registration of the account, the share or dollar
amount to be exchanged and the fund into which the exchange is to be made.
Requests received on any day after the time the offering price and net asset
value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Fund reserve the right to
record exchange instructions received by telephone and to reject exchange
requests at any time in the future.
As described in the Fund's Prospectuses, neither the Fund nor 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.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
-51-
<PAGE>
Group funds from Timing Firms. The Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing Timing Agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) the Fund, (5)
Tax-Free USA Fund, (6) Delaware Cash Reserve, (7) Delchester Fund and (8)
Tax-Free Pennsylvania Fund. No other Delaware Group funds are available for
Timed Exchanges. Assets redeemed or exchanged out of Timing Accounts in Delaware
Group funds not listed above may not be reinvested back into that Timing
Account. The Fund reserves the right to apply these same restrictions to the
account(s) of any person whose transactions seem to follow a time pattern (as
described above).
The Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Group funds:
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
Government securities and commercial paper.
U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
U.S. Government Money Fund seeks maximum current income with
preservation of principal and maintenance of liquidity by investing only in
short-term securities issued or guaranteed as to principal and interest by the
-52-
<PAGE>
U.S. Government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable net asset value.
Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth.
Delaware Group Premium Fund offers nine funds available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. Government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective.
For more complete information about any of the Delaware Group funds,
including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
-53-
<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager or its
affiliate, Delaware International Advisers Ltd., also manages the other funds in
the Delaware Group. The Manager, through a separate division, also manages
private investment accounts. While investment decisions of the Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Fund.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager, Delaware International Advisers Ltd. or their
affiliates, are permitted to engage in personal securities transactions subject
to the exceptions set forth in Rule 17j-1 and the following general restrictions
and procedures: (1) certain blackout periods apply to personal securities
transactions of those persons; (2) transactions must receive advance clearance
and must be completed on the same day as the clearance was received; (3) certain
persons are prohibited from investing in initial public offerings of securities
and other restrictions apply to investments in private placements of securities;
(4) opening positions may only be closed-out at a profit after a 60-day holding
period has elapsed; and (5) the Compliance Officer must be informed periodically
of all securities transactions and duplicate copies of brokerage confirmations
and account statements must be supplied to the Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Group. As previously described, prior to
January 3, 1995, DDI served as the national distributor for the Fund.
For the fiscal years ended December 31, 1993, 1994 and 1995, in its
capacity as the Fund's national distributor, DDI or as relevant, the
Distributor, received Limited CDSC payments in the aggregate amounts of $7,980,
$118,234 and $9,568, respectively, with respect to the Class A Shares.
For the period May 2, 1994 (date of initial public offering) through
December 31, 1994 and for the fiscal year ended December 31, 1995, DDI or as
relevant, the Distributor, received CDSC payments in the aggregate amounts of
$2,817 and $31,134, respectively, with respect to the Class B Shares.
For the period November 29, 1995 (date of initial public offering)
through December 31, 1995, there were no CDSC payments received with respect to
Class C Shares.
Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the Fund
for providing these services consisting of an annual per account charge of
$11.00 plus transaction charges for particular services according to a schedule.
Compensation is fixed each year and approved by the Board of Directors,
including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Limited-Term Funds, Inc.'s
advisory relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Limited- Term Funds,
Inc. to delete the words "Delaware Group" from Limited-Term Funds, Inc.'s name.
Morgan Guaranty Trust Company of New York ("Morgan"), 60 Wall Street,
New York, NY 10260, is custodian of the Fund's securities and cash. As custodian
for the Fund, Morgan maintains a separate account or accounts for the Fund;
receives, holds and releases portfolio securities on account of the Fund;
receives and disburses money on behalf of the Fund; and collects and receives
income and other payments and distributions on account of the Fund's portfolio
securities.
The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Limited-Term
Funds, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia,
Pennsylvania.
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<PAGE>
Capitalization
As a result of a ten-to-one stock split of the U.S. Government Money
Series shares, effective (SAI-LTGF/PART B) January 1, 1991 the authorized
capital of Limited- Term Funds, Inc. consists of three billion shares of $.001
par value common stock, of which two billion shares constitutes the Fund and one
billion shares constitutes the U.S. Government Money Series. Of the two billion
shares allocated to the Fund, nine hundred fifty million shares have been
allocated to Class A Shares, two hundred million shares each have been allocated
to Class B Shares and the Institutional Class and fifty million shares have been
allocated to Class C Shares.
Identifiable expenses to each fund will be paid by that fund. General
expenses of all funds will be allocated on a pro-rata basis according to asset
size. Where matters must be submitted to a vote of shareholders, the holders of
a majority of shares of each fund affected must vote affirmatively for that
class to be affected.
The Class A Shares, Class B Shares and Class C Shares represent a
proportionate interest in the assets of the Fund and have the same voting and
other rights and preferences as the Institutional Class of shares, except that
shares of the Institutional Class may not vote on matters affecting the Fund's
Distribution Plans under Rule 12b-1. Similarly, as a general matter,
shareholders of Class A Shares, Class B Shares and Class C Shares may vote only
on matters affecting the 12b-1 Plan that relates to the class of shares that
they hold. However, 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 12b-1 Plans of
Class A, Class B Shares and Class C 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.
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
Fund shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of Limited-Term Funds, Inc. voting for
the election of directors can elect all the directors if they choose to do so,
and, in such event, the holders of the remaining shares will not be able to
elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
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<PAGE>
APPENDIX A - IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated,
the tax deductibility of IRA contributions. Under the Act, the full deduction
for IRAs ($2,000 for each working spouse and $2,250 for one-income couples) was
retained for all taxpayers who are not covered by an employer-sponsored
retirement plan. Even if a taxpayer (or his or her spouse) is covered by an
employer-sponsored retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers filing
joint returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an
employer-sponsored retirement plan. Taxpayers who were not allowed deductions on
IRA contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual
Retirement Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with
its tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
-56-
<PAGE>
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 7% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any fees. Of
course, earnings accumulated in your IRA will be subject to tax upon withdrawal.
If you choose a mutual fund with a fluctuating net asset value, like the Fund,
your bottom line at retirement could be lower--it could also be much higher.
$2,000 Invested Annually Assuming a 7% Annualized Return
<TABLE>
<CAPTION>
15% Tax Bracket Single - $0-$24,000
--------------- Joint - $0-$40,100
<S> <C> <C> <C>
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
1 $ 2,000 $ 1,801 $ 2,140
5 10,000 10,143 12,307
10 20,000 23,685 29,567
15 30,000 41,764 53,776
20 40,000 65,901 87,730
25 50,000 98,126 135,353
30 60,000 141,149 202,146
35 70,000 198,587 295,827
40 80,000 275,271 427,219
</TABLE>
[Without IRA-investment of $1,700 ($2,000 less 15%) earning 5.95% (7% less 15%)]
28% Tax Bracket Single - $24,001-$58,150
Joint - $40,101-$96,900
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full
Year Investment Amount Have Without IRA No Deduction IRA Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,513 $ 1,541 $ 2,140
5 10,000 8,365 8,861 12,307
10 20,000 19,061 21,288 29,567
15 30,000 32,738 38,719 53,776
20 40,000 50,227 63,166 87,730
25 50,000 72,590 97,454 135,353
30 60,000 101,187 145,545 202,146
35 70,000 137,754 212,995 295,827
40 80,000 184,512 307,598 427,219
</TABLE>
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 5.04% (7% less
28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 7%]
-57-
<PAGE>
31% Tax Bracket Single - $58,151-$121,300
Joint - $96,901-$147,700
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,447 $ 1,477 $ 2,140
5 10,000 7,967 8,492 12,307
10 20,000 18,052 20,401 29,567
15 30,000 30,820 37,106 53,776
20 40,000 46,985 60,534 87,730
25 50,000 67,448 93,394 135,353
30 60,000 93,355 139,481 202,146
35 70,000 126,152 204,121 295,827
40 80,000 167,673 294,781 427,219
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.83% (7% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 7%]
</TABLE>
36% Tax Bracket* Single - $121,301-$263,750
Joint - $147,701-$263,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,337 $ 1,370 $ 2,140
5 10,000 7,313 7,876 12,307
10 20,000 16,418 18,923 29,567
15 30,000 27,754 34,417 53,776
20 40,000 41,867 56,147 87,730
25 50,000 59,437 86,626 135,353
30 60,000 81,312 129,373 202,146
35 70,000 108,545 189,329 295,827
40 80,000 142,451 273,420 427,219
</TABLE>
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 4.48% (7% less
36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 7%]
-58-
<PAGE>
39.6% Tax Bracket* Single - over $263,750
Joint - over $263,750
<TABLE>
<CAPTION>
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,259 $ 1,293 $ 2,140
5 10,000 6,851 7,433 12,307
10 20,000 15,277 17,859 29,567
15 30,000 25,643 32,481 53,776
20 40,000 38,392 52,989 87,730
25 50,000 54,075 81,753 135,353
30 60,000 73,366 122,096 202,146
35 70,000 97,094 178,679 295,827
40 80,000 126,281 258,040 427,219
</TABLE>
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 4.23% (7% less
39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%)
earning 7%]
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-59-
<PAGE>
<TABLE>
<CAPTION>
$2,000 SINGLE INVESTMENT AT A RETURN OF 7% COMPOUNDED MONTHLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
10 $ 3,050 $ 3,128 $ 3,239 $ 3,307 $ 3,621 $ 4,019
15 3,767 3,911 4,121 4,253 4,872 5,698
20 4,652 4,891 5,245 5,469 6,555 8,077
30 7,094 7,650 8,493 9,043 11,867 16,233
40 10,820 11,963 13,753 14,953 21,483 32,623
$2,000 INVESTED ANNUALLY AT A RETURN OF 7% COMPOUNDED MONTHLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -----------------------------------------------------------------------------------------------------------------------------------
10 $ 25,411 $ 25,788 $ 26,322 $ 26,649 $ 28,125 $ 29,953
15 42,752 43,708 45,079 45,927 49,833 54,851
20 64,166 66,117 68,947 70,716 79,042 90,148
30 123,271 129,187 137,973 143,581 171,220 211,120
40 213,412 227,820 249,750 264,078 338,096 454,233
</TABLE>
* For tax years beginning after 1992, a 36% tax rate applies to all taxable
income in excess of the maximum dollar amounts subject to the 31% tax rate.
In addition, a 10% surtax (not applicable to capital gains) applies to
certain high-income taxpayers. It is computed by applying a 39.6% rate to
taxable income in excess of $250,000. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-60-
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return,
compounded monthly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
--------- ----------
10 years $31,291 $35,602
30 years $244,692 $361,887
The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for the Fund either in the past or in the
future.
-61-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Limited-Term
Funds, Inc. and, in its capacity as such, audits the financial statements
contained in the Fund's Annual Report. The Delaware Group Limited-Term
Government Funds, Inc. - Limited-Term Government Fund's Statement of Net Assets,
Statement of Operations, Statement of Changes in Net Assets and Notes to
Financial Statements, as well as the report of Ernst & Young LLP, independent
auditors, for the fiscal year ended December 31, 1995 are included in the Fund's
Annual Report to shareholders. The financial statements, the notes relating
thereto and the report of Ernst & Young LLP listed above are incorporated by
reference from the Annual Report into this Part B.
<PAGE>
The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.
INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Morgan Guaranty Trust Company of New
York
60 Wall Street
New York, NY 10260
- ----------------------------------------------------------
U.S. GOVERNMENT MONEY FUND A CLASS
- ----------------------------------------------------------
U.S. GOVERNMENT MONEY FUND
CONSULTANT CLASS
- ----------------------------------------------------------
CLASSES OF DELAWARE GROUP LIMITED-
TERM GOVERNMENT
FUNDS, INC.
(FORMERLY DELAWARE GROUP TREASURY
RESERVES, INC.)
- ----------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ----------------------------------------------------------
FEBRUARY 29, 1996
DELAWARE
GROUP
-----
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 29, 1996
- --------------------------------------------------------------------------------
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For Prospectus and Performance: Nationwide 800-523-4640
Information on Existing Accounts:
(SHAREHOLDERS ONLY) Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page
- --------------------------------------------------------------------------------
Investment Objective and Policy
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Retirement Plans
- --------------------------------------------------------------------------------
Offering Price
- --------------------------------------------------------------------------------
Redemption
- --------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- --------------------------------------------------------------------------------
Taxes
- --------------------------------------------------------------------------------
Investment Management Agreement
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Appendix A--IRA Information
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
<PAGE>
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") offers two series of portfolios: U.S. Government Money Series (the
"Fund") and Limited-Term Government Fund. The Fund currently offers two classes
of shares--the U.S. Government Money Fund A Class and the U.S. Government Money
Fund Consultant Class. This Statement of Additional Information ("Part B" of the
registration statement) describes both classes of the Fund, except where noted.
This Part B supplements the information contained in the current
Prospectus of the classes dated February 29, 1996, as may be amended from time
to time. It should be read in conjunction with the classes' Prospectus. This
Part B is not itself a prospectus but is, in its entirety, incorporated by
reference into the classes' Prospectus. A Prospectus for the classes' may be
obtained by writing or calling your investment dealer or by contacting the
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"),
1818 Market Street, Philadelphia, PA 19103.
<PAGE>
INVESTMENT OBJECTIVE AND POLICY
The objective of the Fund is to obtain maximum current income
consistent with preservation of principal and maintenance of liquidity. There is
no assurance that this objective can be achieved. This objective is a matter of
fundamental policy and may not be changed without approval by the holders of a
majority of the outstanding voting securities of the Fund, which is the lesser
of more than 50% of the outstanding voting securities or 67% of the voting
securities present at a shareholder meeting if 50% or more of the voting
securities are present in person or represented by proxy. See also General
Information.
The Fund intends to achieve its objective by investing only in
short-term securities issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities, and repurchase agreements
secured by such permitted investments. All securities purchased by the Fund
mature within 13 months from the date of purchase, although repurchase
agreements may be collateralized by securities maturing in more than 13 months.
Direct obligations issued by the U.S. Treasury include bills, notes and
bonds which differ from each other only in interest rates, maturities and dates
of issuance. These issues, plus some federal agency obligations, are guaranteed
by the full faith and credit of the U.S. Government. Examples include Federal
Housing Administration, Farmers Home Administration, Government National
Mortgage Association and Export-Import Bank of the United States. Other federal
agency obligations only have the guarantee of the agency. Examples include
Federal Home Loan Banks, Federal Land Banks, Federal Home Loan Mortgage
Corporation, The Tennessee Valley Authority and the International Bank for
Reconstruction and Development. Although obligations of agencies and
instrumentalities are not direct obligations of the U.S. Treasury, payment of
the interest and principal on such obligations is generally backed directly or
indirectly by the U.S. Government. This support can range from the backing of
the full faith and credit of the United States, to U.S. Treasury guarantees, or
to the backing solely of the issuing agency or instrumentality itself.
The Fund may invest up to 10% of its assets, together with any illiquid
investments, in fully-insured deposits maturing in 60 days or less from members
of the FDIC. While the Fund is permitted under certain circumstances to borrow
money, it does not normally do so.
The Fund maintains its net asset value at $1.00 per share by valuing
its securities on an amortized cost basis. See Offering Price. The Fund
maintains a dollar weighted average portfolio maturity of not more than 90 days
and does not purchase any issue having a remaining maturity of more than 13
months. In addition, the Fund limits its investments, including repurchase
agreements, to those instruments which the Board of Directors determines present
minimal credit risks and which are of high quality and which are otherwise in
accordance with the maturity, quality and diversification conditions with which
taxable money market funds must comply. In the event of a marked increase in
current interest rates or of a national credit crisis, principal values could be
adversely affected. While the Fund will make every effort to maintain a fixed
net asset value of $1.00 per share, there can be no assurance that this
objective will be achieved.
The 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;
(4) defray normal administrative expenses; or
(5) maintain a constant net asset value per unit pursuant to, and in
compliance with, an order or rule of the United States Securities and Exchange
Commission.
-3-
<PAGE>
While the Fund intends to hold its investments until maturity when they
will be redeemable at their full principal value plus accrued interest, attempts
may be made from time to time to increase its yield by trading to take advantage
of market variations. Also, redemptions may cause sales of portfolio investments
prior to maturity or at times when such sales might otherwise not be desirable.
The Fund's right to borrow to facilitate redemptions may reduce but does not
guarantee a reduction in the need for such sales. The Fund will not purchase new
securities while any borrowings are outstanding. See Dividends and Realized
Securities Profits Distributions and Taxes for effect of any capital gains
distributions.
A shareholder's rate of return will vary with the general interest rate
levels applicable to the instruments in which the Fund invests. The rate of
return and the net asset value will be affected by such other factors as sales
of portfolio securities prior to maturity and the Fund's operating expenses.
Repurchase Agreements
The Fund may also invest in repurchase agreements sold by banks or
brokers secured by the foregoing securities. A repurchase agreement is an
instrument under which securities are purchased from a bank or securities dealer
with an agreement by the seller to repurchase the securities. Under a repurchase
agreement, the purchaser acquires ownership of the security but the seller
agrees, at the time of sale, to repurchase it at a mutually agreed-upon time and
price. The Fund will take custody of the collateral under repurchase agreements.
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred. The resale price
is in excess of the purchase price and reflects an agreed-upon market rate
unrelated to the coupon rate or maturity of the purchased security. Such
transactions afford an opportunity for the Fund to invest temporarily available
cash on a short-term basis. The Fund's risk is limited to the seller's ability
to buy the security back at the agreed-upon sum at the agreed-upon time, since
the repurchase agreement is secured by the underlying government obligation.
Should such an issuer default, Delaware Management Company, Inc. (the "Manager")
believes that, barring extraordinary circumstances, the Fund will be entitled to
sell the underlying securities or otherwise receive adequate protection for its
interest in such securities, although there could be a delay in recovery. The
Fund considers the creditworthiness of the bank or dealer from whom it purchases
repurchase agreements. The Fund will monitor such transactions to assure that
the value of the underlying securities subject to repurchase agreements is at
least equal to the repurchase price. The underlying securities will be limited
to those described above.
Investment Restrictions
Limited-Term Funds, Inc. has adopted the following restrictions and
fundamental policies for the Fund, which cannot be changed without approval by
the holders of a majority of the outstanding voting securities of the Fund, as
described above. The Fund may not under any circumstances:
1. Invest in issues other than those described under Investment
Objective and Policy above.
2. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The 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 Securities and Exchange
Commission may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings shall be
at least 300%. The Fund will not pledge more than 10% of its net assets. The
Fund will not issue senior securities as defined in the Investment Company Act
of 1940, except for notes to banks. Any outstanding borrowing shall be repaid
before additional securities are purchased.
3. Sell securities short or purchase securities on margin.
-4-
<PAGE>
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers.
6. Purchase or sell commodities or commodity contracts.
7. Purchase or sell real estate, but this shall not prevent the Fund
from investing in securities secured by real estate or interests therein.
8. Make loans to other persons except by the purchase of obligations in
which the Fund is authorized to invest and to enter into repurchase agreements.
Not more than 10% of the Fund's total assets will be invested in repurchase
agreements maturing in more than seven days and in other illiquid assets.
9. Invest for purposes of exercising control.
10. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets.
11. Invest in direct interests in oil, gas or other mineral exploration
or development programs.
Although not a fundamental investment restriction, the Fund currently
does not invest its assets in real estate limited partnerships.
-5-
<PAGE>
PERFORMANCE INFORMATION
For the seven-day period ended December 31, 1995, the annualized
current yield of the U.S. Government Money Fund A Class and the U.S. Government
Money Fund Consultant Class was 4.79% for each class and the compounded
effective yield was 4.90% for each class. These yields will fluctuate daily as
income earned fluctuates. On that date the weighted average portfolio maturity
was 46 days for both classes. The current yield of the U.S. Government Money
Fund A Class is expected to be slightly higher than that of the U.S. Government
Money Fund Consultant Class during any period that the distribution fee under
the Fund's 12b-1 Plan for the U.S. Government Money Fund Consultant Class is
being paid. The Board of Directors of the Fund suspended 12b-1 Plan payments
from the U.S. Government Money Fund Consultant Class to the Distributor
effective June 1, 1990. Such payments may be reinstituted in the future with
prior approval of the Board of Directors.
Shareholders and prospective investors will be interested in learning
from time to time the current and the effective compounded yield of a class of
shares. As explained under Dividends and Realized Securities Profits
Distributions, dividends are declared daily from net investment income. In order
to determine the current return, yield is calculated as follows:
The calculation begins with the value of a hypothetical account of one
share at the beginning of a seven-day period; this is compared with the value of
that same account at the end of the same period (including shares purchased for
the account with dividends earned during the period). The net change in the
account value is generally the net income earned per share during the period,
which consists of accrued interest income plus or minus amortized purchase
discount or premium, less all accrued expenses (excluding expenses reimbursed by
the investment manager) but does not include realized gains or losses or
unrealized appreciation or depreciation.
The current yield of the Fund represents the net change in this
hypothetical account annualized over 365 days. In addition, a shareholder may
achieve a compounding effect through reinvestment of dividends which is
reflected in the effective yield shown below.
The following is an example, for purpose of illustration only, of the
current and effective yield calculations for the seven-day period ended December
31, 1995:
-6-
<PAGE>
U.S. U.S. Government
Government Money Fund
Money Fund Consultant
A Class Class
Value of a hypothetical
account with one share at
the beginning of the period ............. $1.00000000 $1.00000000
Value of the same account
at the end of the period ................ $1.00091824 $1.00091824
Net change in account value ............... .00091824* .00091824*
Base period return = net
change in account value
/ beginning account value ............... .00091824 .00091824
Current yield
[base period return x (365 / 7)] ........ 4.79%** 4.79%**
Effective yield
(1 + base period) (365/7) - 1 ............. 4.90%*** 4.90%***
Weighted average life to maturity of the portfolio on December 31, 1995
was 46 days.
* This represents the net income per share for the seven calendar days ended
December 31, 1995.
** This represents the average of annualized net investment income per share
for the seven calendar days ended December 31, 1995.
*** This represents the current yield for the seven calendar days ended
December 31, 1995 compounded daily.
The following table, for purposes of illustration only, reflects the
average annual total return performance of each class through December 31, 1995,
calculated as an average annual compounded rate of return for the period
indicated. For this purpose, the calculations assume the reinvestment of all
dividend distributions paid during the indicated periods. Interest rates
fluctuated during the period covered by the table and the Fund's results should
not be considered as representative of future performance. Total return for the
U.S. Government Money Fund Consultant Class for the periods prior to the
commencement of operations of such class is based on the performance of the U.S.
Government Money Fund A Class. For periods prior to the commencement of
operations of the U.S. Government Money Fund Consultant Class, the total return
does not reflect the 12b-1 payments applicable to such class during the period
March 29, 1988 through June 1, 1990. If such payments were reflected in the
calculations, performance would have been affected.
-7-
<PAGE>
The Fund's average annual total compounded rate of return is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000;
T = average annual total return;
n = number of years;
ERV = redeemable value of the hypothetical $1,000 purchase at
the end of the period.
Average Annual Total Return
U.S.
U.S. Government
Government Money Fund
Money Fund Consultant
A Class Class*
1 year
ended
12/31/95 4.57% 4.57%
3 years
ended
12/31/95 3.17% 3.17%
5 years
ended
12/31/95 3.59% 3.59%
10 years
ended
12/31/95 5.06% 5.01%
9/17/81**
through
12/31/95 6.07% 6.05%
* Commenced operations on March 29, 1988.
** Date of initial public offering of U.S. Government Money Series.
From time to time, the Fund may also quote yield information of the
classes with the sample average rates paid on bank money market deposit
accounts. The bank money market deposit averages are the stated rates of 100
large banks and thrifts in the top five standard metropolitan statistical areas
as determined by the Bank Rate Monitor. The Fund's figures for a class will be
the annualized yields representing an average of that class' after-expense per
share earnings divided by cost per share for each day of the fiscal month, or
period, noted. Yield fluctuates depending on portfolio type, quality, maturity
and operating expenses. Principal is not insured and the results shown should
not be considered as representative of the yield which may be realized from an
investment made in the Fund at any time in the future.
As well, the Fund may quote actual yield and total return performance
of each class in advertising and other types of literature compared to indices
or averages of alternative financial products available to prospective
investors. For example, the performance comparisons may include the average
return of various bank instruments, some of which may carry certain return
guarantees offered by leading banks and thrifts, as monitored by the Bank Rate
Monitor, and those of corporate and government security price indices of various
durations prepared by Lehman Brothers and Salomon Brothers, Inc. These indices
are not managed for any investment goal.
Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable Fund activity and performance. From time to time,
certain mutual fund performance ranking information, calculated and provided by
these organizations, may also be used in the promotion of sales in the Fund. Any
indices used are not managed for any investment goal.
-8-
<PAGE>
CDA Investment Technologies, Lipper Analytical Services, Inc. and
IBC/Donoghue are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.
Interactive Data Corporation is a statistical access service that
maintains a database of various international industry indicators, such
as historical and current price/earning information, individual equity
and fixed income price and return information.
Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This
information, as well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative illustrations.
Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. Also, current rate information on municipal
debt obligations of various durations, as reported daily by the Bond Buyer, may
also be used. The Bond Buyer is published daily and is an industry-accepted
source for current municipal bond market information.
Comparative information on the Consumer Price Index may also be
included. The Consumer Price Index, as prepared by the U.S. Bureau of Labor
Statistics, is the most commonly used measure of inflation. It indicates the
cost fluctuations of a representative group of consumer goods. It does not
represent a return on investment.
Total return performance of each class will reflect the reinvestment of
all dividends and any capital gains, if any, during the indicated period. Shares
of the Fund are sold without a sales charge. The results will not reflect any
income taxes payable by shareholders on the reinvested distributions included in
the calculations. An illustration of past Fund performance should not be
considered as representative of future results.
The following table is an example, for purposes of illustration only,
of cumulative total return performance for the each class through December 31,
1995. Total return for the U.S. Government Money Fund Consultant Class for the
periods prior to commencement of such class is based on the performance of the
U.S. Government Money Fund A Class. For periods prior to the commencement of
operations of the U.S. Government Money Fund Consultant Class, the total return
calculation does not reflect the 12b-1 payments that were applicable to such
class during the periods March 29, 1988 through June 1, 1990. If such payments
were reflected in the calculations, performance would have been affected.
Cumulative Total Return
U.S. Government U.S. Government
Money Fund Money Fund
A Class Consultant Class*
3 months
ended
12/31/95 1.10% 1.10%
6 months
ended
12/31/95 2.22% 2.22%
9 months
ended
12/31/95 3.39% 3.39%
1 year
ended
12/31/95 4.57% 4.57%
3 years
ended
12/31/95 9.81% 9.81%
5 years
ended
12/31/95 19.26% 19.26%
10 years
ended
12/31/95 63.90% 63.01%
9/17/81**
through
12/31/95 124.10% 123.59%
* Commenced operations on March 29, 1988.
** Date of initial public offering of U.S. Government Money Series.
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<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Group, will provide general information about investment alternatives and
scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the overriding investment philosophy of
the Manager and how that philosophy impacts the Fund's, and other Delaware Group
funds', investment disciplines employed in meeting their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.
Dollar-Cost Averaging
Money market funds, which are generally intended for your short-term
investment needs, can often be used as a basis for building a long-term
investment plan. For many people, deciding when to purchase long-term
investments, such as stock or longer-term bond funds, can be a difficult
decision. Unlike money market fund shares, prices of other securities, such as
stocks and bonds, tend to move up and down over various market cycles. Though
logic says to invest when prices are low, 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 (perhaps using assets from your money market fund) 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 Group 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 Purchasing Shares and Wealth Builder Option under
Redemption and Exchange for a complete description of these options including
restrictions or limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share of a stock or bond fund over a
period of time will be lower than the average price per share of the fund for
the same time period.
Table to illustrate Dollar cost averaging
Price Number of
Investment Per Shares
Amount Share Purchased
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to represent
the actual performance of the Fund. Dollar-cost averaging can be appropriate
-10-
<PAGE>
for investments in shares of funds that tend to fluctuate in value. Please
obtain the Prospectus of any Delaware Group fund in which you plan to invest
through a dollar-cost averaging program. The Prospectus contains additional
information, including charges and expenses. Please read it carefully before you
invest or send money.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. It's called
the Power of Compounding and the following chart illustrates just how powerful
it can be.
COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:
4% 6% 8%
Rate of Rate of Rate of
Return Return Return
------ ------ ------
12-'85 $10,407 $10,617 $10,830
12-'86 $10,831 $11,272 $11,729
12-'87 $11,273 $11,967 $12,702
12-'88 $11,732 $12,705 $13,757
12-'89 $12,210 $13,488 $14,898
12-'90 $12,707 $14,320 $16,135
12-'91 $13,225 $15,203 $17,474
12-'92 $13,764 $16,141 $18,924
12-'93 $14,325 $17,137 $20,495
12-'94 $14,908 $18,194 $22,196
These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes, are not intended to be a projection
of investment results and do not reflect the actual performance results of
either of the classes.
The Prospectus and this Part B may be in use for a full year and,
accordingly, it can be expected that yields will fluctuate substantially from
the example shown above.
The yield quoted at any time represents the amount being earned on a
current basis and is a function of the types of instruments in the Fund's
portfolio, their quality and length of maturity and the Fund's operating
expenses. The length of maturity for the portfolio is the average dollar
weighted maturity of the portfolio. This means that the portfolio has an average
maturity of a stated number of days for its issues. The calculation is weighted
by the relative value of the investment.
The yield will fluctuate daily as the income earned on the investments
of the Fund fluctuates. Accordingly, there is no assurance that the yield quoted
on any given occasion will remain in effect for any period of time. It should
also be emphasized that the Fund is an open-end management investment company
and that there is no guarantee that the net asset value or any stated rate of
return will remain constant. A shareholder's investment in the Fund is not
insured. Investors comparing results of the Fund with investment results and
yields from other sources such as banks or savings and loan associations should
understand these distinctions. Historical and comparative yield information may,
from time to time, be presented by the Fund. Although the Fund determines the
yield on the basis of a seven-calendar-day period, it may from time to time use
a different time span.
Other funds of the money market type may calculate their yield on a
different basis and the yield quoted by the Fund could vary upward or downward
if another method of calculation or base period were used. Shareholders and
prospective investors who wish to learn the current yield of the Fund may call
toll free, nationwide 800-523-4640.
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<PAGE>
TRADING PRACTICES
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
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Fund pays reasonably competitive brokerage
commission rates based upon the professional knowledge of its trading department
as to rates paid and charged for similar transactions throughout the securities
industry. In some instances, the Fund pays a minimal share transaction cost when
the transaction presents no difficulty. Trades are generally made on a net basis
where securities are either bought or sold directly from or to a broker, dealer
or bank. In these instances, there is no direct commission charged, but there is
a spread (the difference between the buy and sell price) which is the equivalent
of a commission.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 and the Investment
Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Fund believes that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager which constitute in some part brokerage and research services used
by the Manager in connection with its investment decision-making process and
constitute in some part services used by the Manager in connection with
administrative or other functions not related to its investment decision-making
process. In such cases, the Manager will make good faith allocation of brokerage
and research services and will pay out of its own resources for services used by
the Manager in connection with administrative or other functions not related to
its investment decision-making process. In addition, so long as no fund is
disadvantaged, portfolio transactions which generate commissions or their
equivalent are allocated to broker/dealers who provide daily portfolio pricing
services to the Fund and to other funds in the Delaware Group. Subject to best
price and execution, commissions allocated to brokers providing such pricing
services may or may not be generated by the funds receiving the pricing service.
-12-
<PAGE>
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and the Board of
Directors that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Portfolio trading will be undertaken principally to accomplish the
Fund's objective, and not for the purpose of realizing capital gains, although
capital gains may be realized on certain portfolio transactions. For example,
capital gains may be realized when a security is sold (i) so that, provided
capital is preserved or enhanced, another security can be purchased to obtain a
higher yield, (ii) to take advantage of what the Manager believes to be a
temporary disparity in the normal yield relationship between the two securities
to increase income or improve the quality of the portfolio, (iii) to purchase a
security which the Manager believes is of higher quality than its rating or
current market value would indicate, or (iv) when the Manager anticipates a
decline in value due to market risk or credit risk. Since portfolio assets will
consist of short-term instruments, replacement of portfolio securities will
occur frequently. However, since the Manager expects usually to transact
purchases and sales of portfolio securities on a net basis, it is not
anticipated that the Fund will pay any significant brokerage commissions. The
Fund is free to dispose of portfolio securities at any time, subject to
complying with the Internal Revenue Code and the Investment Company Act of 1940,
when changes in circumstances or conditions make such a move desirable in light
of the investment objective.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the Fund as a factor
in the selection of brokers and dealers to execute Fund portfolio transactions.
-13-
<PAGE>
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.
Shares of the U.S. Government Money Fund Consultant Class are offered
through broker/dealers, financial institutions and other entities which have a
dealer agreement with the Fund's Distributor or a service agreement with the
Fund. In some states, banks and/or other institutions effecting transactions in
U.S. Government Money Fund Consultant Class shares may be required to register
as dealers pursuant to state laws. U.S. Government Money Fund A Class shares may
also be purchased directly by contacting Limited-Term Funds, Inc. or its agent.
The minimum initial investment is $1,000 and all subsequent investments must be
at least $100. The minimum initial and subsequent investment for Class A Shares
will be waived for purchases by officers, directors and employees of any
Delaware Group fund, the Manager or any of the Manager's affiliates if the
purchases are made pursuant to a payroll deduction program. Shares purchased
pursuant to the Uniform Gifts to Minors Act or the 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 Group Asset Planner service are
subject to a minimum initial investment of $2,000 per Asset Planner strategy
selected. (See Retirement Plans for minimums applicable to each of the
retirement plans.)
Shares of the Fund are offered on a continuous basis, and are sold
without a front-end or contingent deferred sales charge at the net asset value
next determined after the receipt and effectiveness of a purchase order, as
described below. See the Prospectus for information on how to invest. The Fund
reserves the right to reject any order for the purchase of its shares if in the
opinion of management such rejection is in the Fund's best interest.
Certificates representing shares purchased are not ordinarily issued
unless a shareholder submits a specific request. However, such purchases are
confirmed to the investor and credited to the shareholder's account on the books
maintained by Delaware Service Company, Inc. (the "Transfer Agent"). The
investor will have the same rights of ownership with respect to such shares as
if certificates had been issued. An investor may receive a certificate
representing shares purchased by sending a letter to the Transfer Agent
requesting the certificate. No charge is made for any certificate issued.
Investors who hold certificates representing their shares may only redeem these
shares by written requests. The investor's certificate(s) must accompany such
request.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment, through an agent bank, preauthorized government or
private recurring payments by Electronic Fund Transfer. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.
Automatic Investing Plan--The Automatic Investing Plan enables
shareholders to make regular monthly investments without writing checks.
Shareholders may authorize the Fund, in advance, to make arrangements for their
bank to withdraw a designated amount monthly directly from their checking
account for deposit into the Fund. This type of investment will be handled in
either of the two ways noted below. (1) If the shareholder's bank is a member of
the National Automated Clearing House Association ("NACHA"), the amount of the
investment will be electronically deducted from the shareholder's account by
Electronic Fund Transfer ("EFT"). The shareholder's checking account will
reflect a debit each month at a specified date although no check is required to
initiate the transaction. (2) If the shareholder's bank is not a member of
NACHA, deductions will be made by preauthorized checks, known as Depository
Transfer Checks. Should the shareholder's bank become a member of NACHA in the
future, his or her investments would be handled electronically through EFT.
-14-
<PAGE>
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
must be for $25 or more. Investors wishing to take advantage of either option
should contact the Shareholder Service Center at 800-523-1918 for the necessary
authorization forms and information. These services can be discontinued by the
shareholder at any time without penalty by giving written notice.
Payments to the 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 account. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact the Fund for proper
instructions.
When Orders are Effective
Transactions in money market instruments in which the Fund invests
normally require same day settlement in Federal Funds. The Fund intends at all
times to be as fully invested as possible in order to maximize its earnings.
Thus, purchase orders will be executed at the net asset value next determined
after their receipt by the Fund only if the Fund has received payment in Federal
Funds by wire. Dividends begin to accrue on the next business day. Thus,
investments effective the day before a weekend or holiday will not accrue
earnings for that period but will earn dividends on the next business day. If,
however, the Fund is given prior notice of Federal Funds wire and an acceptable
written guarantee of timely receipt from an investor satisfying the Fund's
credit policies, the purchase will start earning dividends on the date the wire
is received. If remitted in other than the foregoing manner, such as by money
order or personal check, purchase orders will be executed as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open, on the day on which the payment is
converted into Federal Funds and is available for investment, normally one
business day after receipt of payment. Conversion into Federal Funds may be
delayed when the Fund receives (1) a check drawn on a non-member bank of the
Federal Reserve, (2) a check drawn on a foreign bank, (3) a check payable in a
foreign currency, or (4) a check requiring special handling. With respect to
investments made other than by wire, the investor becomes a shareholder after
declaration of the dividend on the day on which the order is effective.
Information on how to procure a negotiable bank draft or to transmit
Federal Funds by wire is available at any national bank or any state bank which
is a member of the Federal Reserve System. Any commercial bank can transmit
Federal Funds by wire. The bank may charge the shareholder for these services.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the amount
credited by the check plus any dividends earned thereon.
-15-
<PAGE>
Plan Under Rule 12b-1 for the U.S. Government Money Fund Consultant Class
Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
Limited-Term Funds, Inc. has adopted a plan (the "Plan") for the U.S. Government
Money Fund Consultant Class which permits the Fund to pay for certain
distribution and promotional expenses related to marketing shares of the U.S.
Government Money Fund Consultant Class.
The Plan does not apply to the Fund's U.S. Government Money Fund A
Class of shares. Those shares are not included in calculating the Plan's fees,
and the Plan is not used to assist in the distribution and marketing of U.S.
Government Money Fund A Class shares. Shareholders of the U.S. Government Money
Fund A Class may not vote on matters affecting the Plan.
The Plan permits the Fund, pursuant to the Distribution Agreement, to
pay from the assets of the U.S. Government Money Fund Consultant Class, a
monthly fee to the Distributor for its services and expenses in distributing and
promoting sales of the shares of such class. These expenses include preparing
and distributing advertisements, sales literature and prospectuses and reports
used for sales purposes, compensating sales and marketing personnel, and paying
distribution and maintenance fees to securities brokers and dealers who enter
into Dealer's Agreements with the Distributor or service agreements with the
Fund. Registered representatives of brokers, dealers or other entities, who have
sold a specified level of Delaware Group funds having a 12b-1 Plan, were, prior
to June 1, 1990, paid a .25% continuing trail fee by the Distributor from 12b-1
payments relating to the U.S. Government Money Fund Consultant Class for assets
maintained in that class. As noted below, payment of these fees has been
suspended but may be reinstituted in the future with prior approval of the Board
of Directors.
In addition, the Fund may make payments from the assets of the U.S.
Government Money Fund Consultant Class directly to other unaffiliated parties,
such as banks, who either aid in the distribution of shares of such class or
provide services to that class.
The maximum aggregate fee payable on behalf of the U.S. Government
Money Fund Consultant Class under the Plan and the agreements relating to
distribution is, on an annual basis, .30% of its average daily net assets for
the year. Limited-Term Funds, Inc.'s directors may reduce these amounts at any
time. Limited-Term Funds, Inc.'s directors suspended 12b-1 Plan payments from
the assets of U.S. Government Money Fund Consultant Class to the Distributor
effective June 1, 1990. Prior to that time, the Board of Directors had set the
fee for U.S. Government Money Fund Consultant Class at .25% of average daily net
assets and the Distributor had agreed to waive this distribution fee to the
extent such fee for any day exceeded the net investment income realized by that
class for such day. Payments under the Plan may be reinstituted in the future
with prior approval of the Board of Directors. All of the distribution expenses
incurred by the Distributor and others, such as broker/dealers, in excess of the
amount paid on behalf of the U.S. Government Money Fund Consultant Class will be
borne by such persons without any reimbursement from that class. Subject to
seeking best price and execution, Limited-Term Funds, Inc. may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
on behalf of the U.S. Government Money Fund Consultant Class under the Plan.
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement have been approved by the Board
of Directors of Limited-Term Funds, Inc. including a majority of the directors
who are not "interested persons" (as defined in the Investment Company Act of
1940) of Limited-Term Funds, Inc. and who have no direct or indirect financial
interest in the Plan or any related agreements, by vote cast in person at a
meeting duly called for the purpose of voting on the Plan and such Agreement.
Continuation of the Plan and the Distribution Agreement must be approved
annually by the Board of Directors in the same manner as specified above.
Each year, the directors must determine whether continuation of the
Plan is in the best interest of shareholders of the U.S. Government Money Fund
Consultant Class and that there is a reasonable likelihood of its providing a
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<PAGE>
benefit to them. The Plan and the Distribution Agreement may be terminated at
any time without penalty by a majority of those directors who are not
"interested persons" or by a majority vote of the outstanding voting securities
of the U.S. Government Money Fund Consultant Class. Any amendment materially
increasing the maximum percentage payable under the Plan must likewise be
approved by a majority vote of the outstanding voting securities of the U.S.
Government Money Fund Consultant Class, as well as by a majority vote of those
directors who are not "interested persons." Also, any other material amendment
to the Plan must be approved by a majority vote of the directors including a
majority of the noninterested directors of Limited-Term Funds, Inc. having no
interest in the Plan. In addition, in order for the Plan to remain effective,
the selection and nomination of directors who are not "interested persons" of
Limited-Term Funds, Inc. must be effected by the directors who themselves are
not "interested persons" and who have no direct or indirect financial interest
in the Plan. Persons authorized to make payments under the Plan must provide
written reports at least quarterly to the Board of Directors for their review.
For the fiscal year ended December 31, 1995, there were no payments
from the U.S. Government Money Fund Consultant Class pursuant to the Plan.
The NASD has adopted amendments to its Rules of Fair Practice relating
to investment company sales charges. Limited-Term Funds, Inc. and the
Distributor intend to operate in compliance with these rules.
Reinvestment Privilege
Shareholders who have acquired Fund shares through an exchange of one
of the other mutual funds in the Delaware Group offered with a sales charge and
who have redeemed such shares of the Fund have one year from the date of
redemption to reinvest all or part of their redemption proceeds in shares of any
of the other funds in the Delaware Group, subject to eligibility and minimum
purchase requirements, in states where their shares may be sold, at net asset
value without payment of a sales charge. Any such reinvestment cannot exceed the
redemption proceeds (plus any amount necessary to purchase a full share). The
reinvestment will be made at the net asset value next determined after receipt
of remittance. A redemption and reinvestment could have income tax consequences.
It is recommended that a tax adviser be consulted with respect to such
transactions. Any reinvestment directed to a fund in which the investor does not
then have an account will be treated like all other initial purchases of a
fund's shares. Consequently, an investor should obtain and read carefully the
prospectus for the fund in which the investment is proposed to be made before
investing or sending money. The prospectus contains more complete information
about the fund, including charges and expenses.
Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum purchase requirements,
shareholders may automatically reinvest their dividends and/or distributions
into certain of the other mutual funds in the Delaware Group. Such investments
will be at net asset value at the close of business on the payable date without
any front-end sales charge or exchange fee. The shareholder must notify the
Transfer Agent in writing and must have established an account in the fund into
which the dividends and/or distributions are to be invested. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is proposed to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Dividends from the shares of each class may be reinvested in shares of
any other mutual fund in the Delaware Group, other than Class B Shares and Class
C Shares of funds in the Delaware Group that offer such class of shares.
-17-
<PAGE>
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
Account Statements
You will receive quarterly statements of your account summarizing all
transactions during the period. Accounts in which there has been activity will
receive a monthly statement confirming each transaction.
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<PAGE>
RETIREMENT PLANS
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts
("IRAs") for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25 regardless of which class is selected. Retirement
plans may be subject to plan establishment fees, annual maintenance fees and/or
other administrative or trustee fees. Fees are based upon the number of
participants in the plan as well as the services selected. Additional
information about fees is included in retirement plan materials. Fees are quoted
upon request. Annual maintenance fees may be shared by Delaware Management Trust
Company, the Transfer Agent, other affiliates of the Manager and others that
provide services to such Plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. For
additional information on any of the plans and Delaware's retirement services,
call the Shareholder Service Center telephone number.
With respect to the annual maintenance fees per account referred to
above, "account" shall mean any account or group of accounts within a plan type
identified by a common tax identification number between or among them.
Shareholders are responsible for notifying the Fund when more than one account
is maintained under a single tax identification number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype plans are available for self-employed individuals,
partnerships and corporations which replace the former Keogh and corporate
retirement plans. These plans contain profit sharing or money purchase pension
plan provisions.
Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
by making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year.
The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.
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A company or association may establish a Group IRA for employees or
members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of the excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution.
See Appendix A for additional IRA information.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in shares
of the Fund.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Internal Revenue Code of 1986 (the "Code")
permits employers to establish qualified plans based on salary deferral
contributions. Plan documents are available to enable employers to establish a
plan. An employer may also elect to make profit sharing contributions and/or
matching contributions with investments in the Fund or certain other funds in
the Delaware Group.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of the Fund in conjunction with such an arrangement.
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 Group 457 Deferred Compensation Plan.
Interested investors should contact the Distributor or their investment dealers
to obtain further information.
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OFFERING PRICE
The offering price of shares is the net asset value per share next to
be determined after an order is received and becomes effective. There is no
sales charge.
The purchase will be effected at the net asset value next computed
after the receipt of Federal Funds provided they are received by the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year except for New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving and Christmas. When the New York Stock Exchange is closed, the
Fund will generally be closed, pricing calculations will not be made and
purchase and redemption orders will not be processed.
An example showing how to calculate the net asset value per share is
included in the Fund's financial statements which are incorporated by reference
into this Part B.
The investor becomes a shareholder at the close of and after
declaration of the dividend on the day on which the order is effective. See
Purchasing Shares. Dividends begin to accrue on the next business day. In the
event of changes in Securities and Exchange Commission requirements or the
Fund's change in time of closing, the Fund reserves the right to price at a
different time, to price more often than once daily or to make the offering
price effective at a different time.
The 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 of the Fund and dividing by the number of Fund shares outstanding.
Expenses and fees are accrued daily. The Fund's total net assets are determined
by valuing the portfolio securities at amortized cost.
The Board of Directors has adopted certain procedures to monitor and
stabilize the Fund's price per share. Calculations are made each day to compare
part of the Fund's value with the market value of instruments of similar
character. At regular intervals all issues in the portfolio are valued at market
value. Securities maturing in more than 60 days are valued more frequently by
obtaining market quotations from market makers. The portfolio will also be
valued by market makers at such other times as is felt appropriate. In the event
that a deviation of more than 1/2 of 1% exists between the Fund's $1.00 per
share offering and redemption prices and the net asset value calculated by
reference to market quotations, or if there is any other deviation which the
Board of Directors believes would result in a material dilution to shareholders
or purchasers, the Board of Directors will promptly consider what action, if
any, should be initiated, such as changing the price to more or less than $1.00
per share.
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REDEMPTION
Any shareholder may require the Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. If stock certificates have been
issued for shares being redeemed, they must accompany the written request. For
redemptions of $50,000 or less paid to the shareholder at the address of record,
the request must be signed by all owners of the shares or the investment dealer
of record, but a signature guarantee is not required. When the redemption is for
more than $50,000 or if payment is made to someone else or to another address,
signatures of all record owners and a signature guarantee are required. Each
signature guarantee must be supplied by an eligible guarantor institution. The
Fund reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may request further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians. The redemption price is the net asset value next
calculated after receipt of the redemption request in good order. See Offering
Price for time of calculation of net asset value.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order. If a shareholder redeems an entire account, all dividends accrued
to the time of the withdrawal will be paid by separate check at the end of that
particular monthly dividend period. Except with respect to the expedited payment
by wire, for which there is currently a $7.50 bank wiring cost, there is no fee
charged for redemptions, but such fees could be charged at any time in the
future.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the 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 Securities and Exchange Commission has provided for such
suspension for the protection of shareholders, the Fund may postpone payment or
suspend the right of redemption. In such case, the shareholder may withdraw a
request for redemption or leave it standing as a request for redemption at the
net asset value next determined after the suspension has been terminated.
See Account Statements under Purchasing Shares for information relating
to the mailing of confirmations of redemptions.
If a shareholder who recently purchased shares by check seeks to redeem
all or a portion of those shares in a written request, the redemption request
will be honored but the proceeds will not be mailed until the Fund is reasonably
satisfied of the collection of the investment check. Redemption requests by wire
or the Checkwriting Feature in this case will not be honored. The hold period
against a recent purchase may be up to but not in excess of 15 days, depending
upon the origin of the investment check. Dividends will continue to be earned
until the redemption is processed. This potential delay can be avoided by making
investments by wiring Federal Funds.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund will automatically redeem from the shareholder's account the Fund's shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
Small Accounts
Before the Fund involuntarily redeems shares from an account that,
under the circumstances noted in the Prospectus, has remained below the minimum
amounts required by the Prospectus, the shareholder will be notified in writing
that the value of the shares in the account is less than the minimum amounts
required by the Fund's Prospectus and will be allowed 60 days from the date of
notice to make an additional investment to meet the required minimum. If no such
action is taken by the shareholder, the proceeds will be sent to the
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shareholder. Any redemption in an inactive account established with a minimum
investment may trigger mandatory redemption.
Expedited Telephone Redemptions
The Fund has made available certain redemption privileges, as described
below. The Fund reserves the right to suspend or terminate the expedited payment
procedures upon 60 days' written notice to shareholders.
Shareholders or their investment dealers of record wishing to redeem
any amount of shares of $50,000 or less for which certificates have not been
issued may call the Shareholder Service Center at 800-523-1918 prior to the time
the offering price (net asset value) is determined, as noted above, and have the
proceeds mailed to them at the record address. Checks payable to the
shareholder(s) of record will normally be mailed the next business day, but no
later than seven days, after receipt of the redemption request. This option is
only available to individual, joint and individual fiduciary-type accounts.
In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the Fund before the request is received. Payment will
be made by wire or check to the bank account designated on the authorization
form as follows:
1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.
2. Payment by Check: Request that a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.
Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the Fund
with a signature guarantee. Each signature guarantee must be supplied by an
eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness.
To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.
If expedited payment under these procedures could adversely affect the
Fund, the Fund may take up to seven days to pay the shareholder.
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 from
shareholders are generally tape recorded, and a written confirmation will be
provided for all purchase, exchange and redemption transactions initiated by
telephone.
Checkwriting Feature
Shareholders holding shares for which certificates have not been issued
may request on the investment application that they be provided with special
forms of checks which may be issued to redeem their shares by drawing on the
Delaware Group Limited-Term Government Funds, Inc.-- U.S. Government Money
Series' account with CoreStates Bank, N.A. Normally, it takes two weeks from the
date the shareholder's initial purchase check clears to receive the first order
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of checks. The use of any form of check other than the Fund's check will not be
permitted unless approved by the Fund.
(1) These redemption checks must be made payable in an amount of $500
or more.
(2) Checks must be signed by the shareholder(s) of record or, in the
case of an organization, by the authorized person(s). If registration is in more
than one name, unless otherwise indicated on the investment application or your
checkwriting authorization form, these checks must be signed by all owners
before the Fund will honor them. Shareholders using redemption checks will
continue to be entitled to distributions paid on those shares up to the time
such checks are presented for payment.
(3) If a shareholder who recently purchased shares by check seeks to
redeem all or a portion of those shares through the Checkwriting Feature, the
Fund will not honor the redemption request unless it is reasonably satisfied of
the collection of the investment check. The hold period against a recent
purchase may be up to but not in excess of 15 days, depending upon the origin of
the investment check.
(4) If the amount of the check is greater than the value of the shares
held in the shareholder's account, the check will be returned and the
shareholder may be subject to extra charges.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of
shareholders who overdraw their accounts or if, in the opinion of management,
such revocation is in the Fund's best interest.
Shareholders will be subject to CoreStates Bank, N.A.'s rules and
regulations governing similar accounts. There is a one-time $5 charge by the
Fund to shareholders for this service. This service may be terminated or
suspended at any time by CoreStates Bank, N.A., the Fund or the Fund's Transfer
Agent. The Fund and its Transfer Agent will not be responsible for the
inadvertent processing of post-dated checks or checks more than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks
by providing the Fund with a written authorization to do so. Oral requests will
be accepted provided that the Fund promptly receives a written authorization.
Such requests will remain in effect for six months unless renewed or cancelled.
The Fund will use its best efforts to effect stop-payment instructions, but does
not promise or guarantee that such instructions will be effective. Shareholders
requesting stop payment will be charged a $5 service fee per check for each
six-month period which will be deducted from their accounts.
Return of Checks--Checks used in redeeming shares from a shareholder's
account will be accumulated and returned semi-annually. Shareholders needing a
copy of a redemption check before the regular mailing should contact the
Transfer Agent nationwide 800-523-1918.
Systematic Withdrawal Plan
Shareholders who own or purchase $5,000 or more of shares for which
certificates have not been issued may establish a Systematic Withdrawal Plan for
monthly withdrawals of $25 or more or quarterly withdrawals of $75 or more,
although the Fund does not recommend any specific amount of withdrawal. This
$5,000 minimum does not apply for the Fund's prototype Retirement Plans. Shares
purchased with the initial investment and through reinvestment of cash dividends
and realized securities profits distributions will be credited to the
shareholder's account, and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated 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 mailed
within two business days. Both ordinary income dividends and realized securities
profits distributions will be automatically reinvested in additional shares at
net asset value. This plan is not recommended for all investors and should be
started only after careful consideration of its operation and effect upon the
investor's savings and investment program. To the extent that withdrawal
payments from the plan exceed any dividends and/or realized securities profits
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distributions paid on shares held under the plan, the withdrawal payments will
represent a return of capital and the share balance may in time be depleted,
particularly in a declining market.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes, although the Fund expects to maintain a fixed net asset value. If
there were a gain or loss, it would be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Shareholders should consult their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Wealth Builder Option
Shareholders may elect to invest in one or more of the other mutual
funds in the Delaware Group through our Wealth Builder Option. Under this
automatic exchange program, shareholders can authorize regular monthly
investments (minimum of $100 per fund) to be liquidated from their account and
invested automatically into other mutual funds in the Delaware Group, subject to
the same conditions and limitations set forth in each fund's prospectus. See
Wealth Builder Option and Redemption and Exchange in the 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 applicable
public offering price of the fund selected on the date of investment. No
investment will be made in any month in which the value of the shareholder's
account is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges.
Shareholders can also use the Wealth Builder Option to invest in the
Fund through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group, subject to the same conditions and limitations set
forth in the Prospectus. Shareholders can terminate their participation at any
time by written notice to the Fund.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.
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DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
Limited-Term Funds, Inc. declares a dividend of the Fund's net
investment income on a daily basis to shareholders of record of each class of
Fund shares at the time of the previous calculation of the Fund's net asset
value each day that the Fund is open for business. The amount of net investment
income will be determined at the time the offering price and net asset value are
determined, and shall include investment income accrued, less the estimated
expenses of the Fund incurred since the last determination of net asset value.
Gross investment income consists principally of interest accrued and, where
applicable, net pro-rata amortization of premiums and discounts since the last
determination. The dividend declared, as noted above, will be deducted
immediately before the net asset value calculation is made. See Offering Price.
Net investment income earned on days when the Fund is not open will be declared
as a dividend on the next business day.
Each class of shares of the Fund will share proportionately in the
investment income and expenses of the Fund, except that until June 1, 1990, the
U.S. Government Money Fund Consultant Class incurred distribution fees under its
12b-1 Plan. The Board of Directors of Limited-Term Funds, Inc. suspended 12b-1
Plan payments from the assets of the U.S. Government Money Fund Consultant Class
to the Distributor effective June 1, 1990. See Plan Under Rule 12b-1 for the
U.S. Government Money Fund Consultant Class.
Purchases of Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if the Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning dividends
on the date the wire is received. Investors desiring to guarantee wire payments
must have an acceptable financial condition and credit history in the sole
discretion of the Fund. The Fund reserves the right to terminate this option at
any time. Purchases by check earn dividends upon conversion to Federal Funds,
normally one business day after receipt.
Payment of dividends will be made monthly on the last day of each
month. Payment by check of cash dividends will ordinarily be mailed within three
business days after the payable date. Dividends are automatically reinvested in
additional shares of the same class of the Fund at the net asset value in effect
on the payable date, which provides the effect of compounding dividends, unless
the election to receive dividends in cash has been made. Dividend payments of
$1.00 or less will be automatically reinvested, notwithstanding a shareholder's
election to receive dividends in cash. If such a shareholder's dividends
increase to greater than $1.00, the shareholder would have to file a new
election in order to begin receiving dividends in cash again. If a shareholder
redeems an entire account, all dividends accrued to the time of the withdrawal
will be paid by separate check at the end of that particular monthly dividend
period, consistent with the payment and mailing schedule described above. Any
check in payment of dividends or other distributions which cannot be delivered
by the 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 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
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location services. To the extent necessary to maintain a $1.00 per share net
asset value, Limited-Term Funds, Inc.'s Board of Directors will consider
temporarily reducing or suspending payment of daily dividends, or making a
distribution of realized securities profits or other distributions at the time
the net asset value per share has changed.
Short-term realized securities profits or losses, if any, may be paid
with the daily dividend. Any such profits not so paid will be distributed
annually during the first quarter following the close of the fiscal year. See
Account Statements under Purchasing Shares for the statement mailing of dividend
information. Information as to the tax status of dividends will be provided
annually.
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TAXES
The Fund has qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, and intends to be
so qualified for the current year. By so qualifying, the Fund is not subject to
federal income taxes to the extent that it distributes its net investment income
and realized capital gains. The term "regulated investment company" does not
imply the supervision of management or investment practices or policies by any
government agency. Each fund of Limited-Term Funds, Inc. is treated as a
separate tax entity and any capital gains and losses for each fund are
calculated separately.
Distributions paid by the Fund representing net investment income
received by the Fund and short-term capital gains will be taxable to
shareholders as ordinary income and will not qualify for the dividends-received
deduction available to corporations. The tax status of dividends and
distributions paid to shareholders will not be affected by whether they are paid
in cash or in additional shares. The Fund does not expect to realize long-term
capital gains and, therefore, does not contemplate payment of any capital gains
dividends.
In addition to federal tax, shareholders also may be subject to state
and local taxes on distributions from the Fund. Shareholders who are
Pennsylvania residents will not be subject to Pennsylvania county personal
property taxes on their shares. You should consult your tax adviser with respect
to the tax status of distributions from the Fund in your state and locality.
Statements setting forth the full federal income tax status of
distributions made during the year will be mailed annually. In some states,
distributions that came from earnings on U.S. Treasury securities and other
direct U.S. obligations may be exempt from state income tax.
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INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund subject to the supervision
and direction of Limited-Term Funds, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. The aggregate assets of these funds on December 31,
1995 were approximately $10,522,726,000. Investment advisory services are also
provided to institutional accounts with assets on December 31, 1995 of
approximately $17,606,321,000.
Subject to the supervision and direction of the Board of Directors, 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 Fund's Investment Management Agreement with the Manager, dated
April 3, 1995, was approved by shareholders on March 29, 1995. The Agreement may
be renewed only so long as such renewal and continuance are specifically
approved at least annually by the directors or by vote of a majority of the
outstanding voting securities of the Fund, and only if the terms and the renewal
thereof have been approved by the vote of a majority of the directors of
Limited-Term Funds, Inc., who are not parties thereto or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval. The Agreement is terminable without penalty on 60 days' notice by
the directors of Limited-Term Funds, Inc. or by the Manager. The Agreement will
terminate automatically in the event of its assignment.
The annual compensation paid by the Fund for investment management
services is equal to 1/2 of 1% of the Fund's average daily net assets, less the
Fund's proportionate share of all directors' fees paid to the unaffiliated
directors by the Fund. The Manager pays the salaries of all directors, officers
and employees of Limited-Term Funds, Inc. who are affiliated with the Manager.
Investment management fees paid by the Fund were 0.44% of average daily net
assets for the fiscal year ended December 31, 1995.
On December 31, 1995, the total net assets of the Fund were
$14,115,502. Investment management fees paid by the Fund during the past three
fiscal years were $155,071 for 1993, $94,711 for 1994 and $70,149 for 1995.
Beginning January 26, 1996, the Manager elected voluntarily to waive
that portion, if any, of the annual management fees payable by the Fund and to
reimburse the Fund's expenses to the extent necessary to ensure that the Total
Operating Expenses (after voluntary waiver and reimbursements) of the Fund do
not exceed 0.70% (exclusive of taxes, interest, brokerage commissions,
extraordinary expenses and, in the case of U.S. Government Money Fund Consultant
Class, 12b-1 fees) through July 31, 1996.
Except for those expenses borne by the Manager under the Investment
Management Agreement and the Distributor under the Distribution Agreement, the
Fund is responsible for all of its own expenses. Among others, these include the
investment management fees; shareholder servicing, dividend disbursing and
transfer agent fees and costs; custodian expenses; federal and state securities
registration fees; proxy costs; the costs of preparing prospectuses and reports
sent to shareholders; and the Fund's proportionate share of rent and other
administrative expenses. The ratio of expenses to average daily net assets for
the fiscal year ended December 31, 1995 was 1.39% for each class of shares.
By California regulation, the Manager is required to waive certain fees
and reimburse the Fund for certain expenses to the extent that the Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed specified percentages of average net assets. The
most restrictive limit is 2 1/2% of the first $30 million of average daily net
assets, 2% of the next $70 million of average daily net assets and 1 1/2% of any
additional average daily net assets.
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Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of Fund shares under
a Distribution Agreement dated April 3, 1995. The Distributor is an affiliate of
the Manager and bears all of the costs of promotion and distribution except for
any payments which may be made under the U.S. Government Money Fund Consultant
Class' 12b-1 Plan. Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI")
served as the national distributor of the Fund's shares. On that date Delaware
Distributors, L.P., a newly formed limited partnership, succeeded to the
business of DDI. All officers and employees of DDI became officers and employees
of Delaware Distributors, L.P. DDI is the corporate general partner of Delaware
Distributors, L.P. and both DDI and Delaware Distributors, L.P. are indirect,
wholly-owned subsidiaries of Delaware Management Holdings, Inc.
The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Fund's shareholder servicing, dividend disbursing and transfer agent
pursuant to a Shareholders Services Agreement dated December 20, 1990. The
Transfer Agent is also an indirect, wholly-owned subsidiary of Delaware
Management Holdings, Inc.
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OFFICERS AND DIRECTORS
The business and affairs of Limited-Term Funds, Inc. are managed under
the direction of its Board of Directors.
Certain officers and directors of Limited-Term Funds, Inc. hold
identical positions in each of the other funds in the Delaware Group. On January
31, 1996, Limited-Term Funds, Inc.'s officers and directors, as a group, owned
less than 1% of the shares outstanding of each class of the Fund.
As of January 31, 1996, management believes Baltimore Life Insurance
Company, 10075 Red Run Blvd., Owings Mills, MD 21117 held 733,723 shares (5.47%)
of the outstanding shares of the U.S. Government Money Fund A Class.
As of the same date, management believes the following accounts held 5%
or more of the outstanding shares of the U.S. Government Money Fund Consultant
Class: Louis Motzer, 109 Fairborn Dr., Hamilton, OH 45013 held 42,793 shares
(13.36%); Gary Kronick, 2210 Budd Terrace, Schenectady, NY 12309 held 38,891
shares (12.15%); James K. Bost, 531 Madison, Lockport, IL 60441 held 21,239
shares (6.63%); Warren H. Derstine and Grace Derstine, 539 Dock Dr., Lansdale,
PA 19446 held 18,670 shares (5.83%); Mary P. Kernan, 123 E. 37th Street, New
York, NY 10016 held 18,096 shares (5.65%); and Lawrence M. Yalich and Sandra
Yalich, 18 Wildon Ct., Kingsville, MD 21087 held 18,066 shares (5.64%).
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Investment
Counselors, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly-owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly-owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, a new Investment Management Agreement between Limited-Term
Funds, Inc. on behalf of the Fund and the Manager was executed following
shareholder approval. DMH and the Manager are now wholly-owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.
Directors and principal officers of Limited-Term Funds, Inc. are noted
below along with their ages and their business experience for the past five
years. Unless otherwise noted, the address of each officer and director is One
Commerce Square, Philadelphia, PA 19103.
*Wayne A. Stork (58)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of Limited-Term Funds, Inc., 15 other investment companies in
the Delaware Group (which excludes Delaware Pooled Trust, Inc.),
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Investment Counselors, Inc. and Delaware Investment & Retirement
Services, Inc.
Chairman, President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Distributors, Inc. and Delaware Service Company,
Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
- -----------------
*Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the Investment Company Act of 1940.
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Winthrop S. Jessup (50)
Executive Vice President of Limited-Term Funds, Inc. and 15 other
investment companies in the Delaware Group (which excludes
Delaware Pooled Trust, Inc.) and Delaware Management Holdings,
Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Investment Counselors, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and Founders
Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various executive
capacities at different times within the Delaware organization.
Richard G. Unruh, Jr. (56)
Executive Vice President of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware organization.
Walter P. Babich (68)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.
Anthony D. Knerr (57)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to 1989,
he was also a lecturer in English at the University. In
addition, Mr. Knerr was Chairman of The Publishing Group, Inc.,
New York, from 1988 to 1990. Mr. Knerr founded The Publishing
Group, Inc. in 1988.
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<PAGE>
Ann R. Leven (55)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975 to
1994, she was Adjunct Professor of Columbia Business School.
W. Thacher Longstreth (75)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
Charles E. Peck (70)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 16 investment companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer
of The Ryland Group, Inc., Columbia, MD.
David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Limited-Term Funds, Inc., each of the other 16
investment companies in the Delaware Group and Delaware
Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer/Treasurer of Delaware Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director of
DMH Corp.
Senior Vice President/Chief Administrative Officer and Director of
Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer and Director of Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International
Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Investment Counselors, Inc.
Senior Vice President/Chief Financial Officer and Director of Founders
Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer of
Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President from
December 1985 through March 1992, and Vice Chairman from March
1992 through August 1992.
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<PAGE>
George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of Limited-Term Funds, Inc., each
of the other 16 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., Delaware Distributors, L.P.
and Delaware Investment Counselors, Inc.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company. Senior Vice President, Secretary and Director of
DMH Corp., Delaware Management Company, Inc., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Investment & Retirement Services, Inc. and Founders Holdings,
Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware organization.
Paul E. Suckow (48)
Executive Vice President/Chief Investment Officer, Fixed Income of
Limited-Term Funds, Inc., each of the other 16 investment
companies in the Delaware Group and Delaware Management Company,
Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Senior Vice President and Director of Founders Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and
Director of Fixed Income for Oppenheimer Management Corporation, New
York, NY from 1985 to 1992. Prior to that, Mr. Suckow was a
fixed income portfolio manager for the Delaware Group.
Gary A. Reed (41)
Vice President/Senior Portfolio Manager of Limited-Term Funds, Inc.,
of nine other income (including and tax-exempt) investment
companies in the Delaware Group, Delaware Investment Counselors,
Inc. and Delaware Management Company, Inc.
During the past five years, Mr. Reed has served in such capacities
within the Delaware organization.
Joseph H. Hastings (46)
Vice President/Corporate Controller of Limited-Term Funds, Inc., each
of the other 16 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., Delaware
Investment Counselors, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P., New
York, NY from 1989 to 1992. Prior to that, Mr. Hastings served
as Controller and Treasurer for Fine Homes International, L.P.,
Stamford, CT from 1987 to 1989.
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<PAGE>
Michael P. Bishof (33)
Vice President/Treasurer of Limited-Term Funds, Inc., each of the
other 16 investment companies in the Delaware Group, Delaware
Management Company, Inc., Delaware Distributors, Inc., Delaware
Distributors, L.P., Delaware Service Company, Inc., and Founders
Holdings, Inc.
Assistant Treasurer of Founders CBO Corporation.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995, a
Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for
Equitable Capital Management Corporation, New York, NY from 1987
to 1993.
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Limited-Term Funds, Inc. and the total compensation received from all Delaware
Group funds for the fiscal year ended December 31, 1995 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of December 31, 1995.
Pension or
Retirement
Benefits
Aggregate Accrued as Estimated Total
Compensation Part of Annual Compensation
from Limited-Term Benefits from all 17
Limited-Term Funds, Inc. Upon Delaware
Name Funds, Inc. Expenses Retirement *Group Funds
W. Thacher Longstreth $2,702 None $18,100 $61,324
Ann R. Leven $2,895 None $18,100 $66,324
Walter P. Babich $2,776 None $18,100 $64,188
Anthony D. Knerr $2,857 None $18,100 $65,324
Charles E. Peck $2,544 None $18,100 $58,188
* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of
his or her retirement from the Board, has attained the age of 70 and
served on the Board for at least five continuous years, is entitled to
receive payments from each fund in the Delaware Group for a period
equal to the lesser of the number of years that such person served as
a director or the remainder of such person's life. The amount of such
payments will be equal, on an annual basis, to the amount of the
annual retainer that is paid to directors of each fund at the time of
such person's retirement. If an eligible director retired as of
December 31, 1995, he or she would be entitled to annual payments
totaling $18,100, in the aggregate, from all of the funds in the
Delaware Group, based on the number of funds in the Delaware Group as
of that date.
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<PAGE>
EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the classes and
for shareholders of classes of other funds in the Delaware Group are set forth
in the relevant prospectuses for such classes. The following supplements that
information. The Fund may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.
All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.
An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.
In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.
Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the Fund receives written notice from the
shareholder to the contrary.
Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 to effect an exchange. The
shareholder's current Fund account number must be identified, as well as the
registration of the account, the share or dollar amount to be exchanged and the
fund into which the exchange is to be made. Requests received on any day after
the time the offering price and net asset value are determined will be processed
the following day. See Offering Price. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
eligibility and investment minimums, must be met and may entail the payment of a
front-end sales charge which will be deducted from the investment. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent.)
Certain funds are not available for retirement plans.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Fund reserve the right to
record exchange instructions received by telephone and to reject exchange
requests at any time in the future.
As described in the Fund's Prospectus, neither the Fund nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.
Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new Timing
Arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. The Fund reserves the right to temporarily or
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permanently terminate the exchange privilege or reject any specific
purchase order for any person whose transactions seem to follow a timing pattern
who: (i) makes an exchange request out of the Fund within two weeks of an
earlier exchange request out of the Fund, or (ii) makes more than two exchanges
out of the Fund per calendar quarter, or (iii) exchanges shares equal in value
to at least $5 million, or more than 1/4 of 1% of the Fund's net assets.
Accounts under common ownership or control, including accounts administered so
as to redeem or purchase shares based upon certain predetermined market
indicators, will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing Timing Agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited-Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund, and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for Timed Exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. The Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).
The Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.
* * *
Following is a summary of the investment objectives of the other
Delaware Group funds:
Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in income-
producing common stocks, with a focus on common stocks the Manager believes have
the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.
DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.
Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.
Delchester Fund seeks as high a current income as possible by investing
principally in high yield, high risk corporate bonds, and also in U.S.
Government securities and commercial paper.
U.S. Government Fund seeks high current income by investing in
long-term U.S. Government debt obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
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<PAGE>
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 Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.
Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.
Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital.
International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed income securities that may also provide the
potential for capital appreciation. Global Assets Fund seeks to achieve
long-term total return by investing in global securities which will provide
higher current income than a portfolio comprised exclusively of equity
securities, along with the potential for capital growth.
Delaware Group Premium Fund offers nine funds available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. Government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the market place and to have fundamental
characteristics to support growth. Income is not an objective.
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<PAGE>
For more complete information about any of the Delaware Group funds,
including charges and expenses, you can obtain a prospectus from the
Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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<PAGE>
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager or its
affiliate, Delaware International Advisers Ltd., manages the other funds in the
Delaware Group. The Manager, through a separate division, also manages private
investment accounts. While investment decisions for the Fund are made
independently from those of the other funds and accounts, investment decisions
for such other funds and accounts may be made at the same time as investment
decisions for the Fund.
Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to Delaware Management Company, Inc., Delaware International Advisers
Ltd. or their affiliates, are permitted to engage in personal securities
transactions subject to the exceptions set forth in Rule 17j-1 and the following
general restrictions and procedures: (1) certain blackout periods apply to
personal securities transactions of those persons; (2) transactions must receive
advance clearance and must be completed on the same day as the clearance was
received; (3) certain persons are prohibited from investing in initial public
offering of securities and other restrictions apply to investments in private
placements of securities; (4) opening positions may only be closed- out at a
profit after a 60-day holding period has elapsed; and (5) the Compliance Officer
must be informed periodically of all securities transactions and duplicate
copies of brokerage confirmations and account statements must be supplied to the
Compliance Officer.
The Distributor acts as national distributor for the Fund and for the
other mutual funds in the Delaware Group.
The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for the Fund and for the other
mutual funds in the Delaware Group. The Transfer Agent is paid a fee by the Fund
for providing these services consisting of an annual per account charge of
$11.00 plus transaction charges for particular services according to a schedule.
Compensation is fixed each year and approved by the Board of Directors,
including a majority of the disinterested directors.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of Limited-Term Funds, Inc.'s
advisory relationship with the Manager or its distribution relationship with the
Distributor, the Manager and its affiliates could cause Limited-Term Funds, Inc.
to delete the words "Delaware Group" from Limited-Term Funds, Inc.'s name.
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, NY
10260, is custodian of the Fund's securities and cash. As custodian for the
Fund, Morgan Guaranty Trust Company of New York maintains a separate account or
accounts for the Fund; receives, holds and releases portfolio securities on
account of the Fund; receives and disburses money on behalf of the Fund; and
collects and receives income and other payments and distributions on account of
the Fund's portfolio securities.
The legality of the issuance of the shares offered hereby, pursuant to
Rule 24f-2 under the Investment Company Act of 1940, has been passed upon for
Limited-Term Funds, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia,
Pennsylvania.
Capitalization
Limited-Term Funds, Inc. offers two series of shares, Limited-Term
Government Fund (formerly known as the Treasury Reserves Intermediate Series and
the Investors Series) and the U.S. Government Money Series (formerly known as
the Cashiers Series). Limited-Term Funds, Inc. has a total authorized
capitalization of three billion shares with a $.001 par value common stock. The
Fund has an authorized capitalization of one billion shares of common stock with
a par value of $.001 per share. The Limited-Term Government Fund has an
authorized capitalization of two billion shares of common stock with a par value
of $.001 per share. The directors are authorized to issue different series and
classes of shares of common stock. At the present time, two series have been
issued. The U.S. Government Money Series offers two classes of shares and the
Limited-Term Government Fund offers four classes of shares.
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<PAGE>
The classes offered by the Fund are the U.S. Government Money Fund A
Class and the U.S. Government Money Fund Consultant Class. General expenses of
the Fund will be allocated on a pro-rata basis to the classes according to asset
size, except that any expenses of the Rule 12b-1 Plan of the U.S. Government
Money Fund Consultant Class will be allocated solely to that class. Each class
of the U.S. Government Money Series represents a proportionate interest in the
assets of that Fund, and each has the same voting and other rights and
preferences as the other class, except that shares of the U.S. Government Money
Fund A Class may not vote on any matter affecting the U.S. Government Money Fund
Consultant Class' Distribution Plan under Rule 12b-1.
Shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable.
Prior to March 1994, the U.S. Government Money Fund A Class was known
as the U.S. Government Money Fund class, and prior to June 1992, the
U.S. Government Money Fund class was known as the original class. Prior to March
1994, the U.S. Government Money Fund Consultant Class was known as the U.S.
Government Money Fund Consultant class, and prior to November 1992, the U.S.
Government Money Fund Consultant class was known as the U.S. Government Money
Fund (Institutional) class. The U.S. Government Money Fund (Institutional) class
was known as the consultant class prior to June 1992.
Noncumulative Voting
The Fund's shares have noncumulative voting rights which means that the
holders of more than 50% of the shares of Limited-Term Funds, Inc. voting for
the election of directors can elect all the directors if they choose to do so,
and, in such event, the holders of the remaining shares will not be able to
elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the Securities and Exchange
Commission.
Shareholder Inquiries
Shareholders who have questions concerning their accounts or wish to
obtain additional information may call the Transfer Agent, 800-523-1918
nationwide.
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APPENDIX A - IRA INFORMATION
The Tax Reform Act of 1986 restructured, and in some cases eliminated,
the tax deductibility of IRA contributions. Under the Act, the full deduction
for IRAs ($2,000 for each working spouse and $2,250 for one-income couples) was
retained for all taxpayers who are not covered by an employer-sponsored
retirement plan. Even if a taxpayer (or his or her spouse) is covered by an
employer-sponsored retirement plan, the full deduction is still available if the
taxpayer's adjusted gross income is below $25,000 ($40,000 for taxpayers filing
joint returns). A partial deduction is allowed for married couples with incomes
between $40,000 and $50,000, and for single individuals with incomes between
$25,000 and $35,000. The Act does not permit deductions for contributions to
IRAs by taxpayers whose adjusted gross income before IRA deductions exceeds
$50,000 ($35,000 for singles) and who are active participants in an
employer-sponsored retirement plan. Taxpayers who were not allowed deductions on
IRA contributions still can make nondeductible IRA contributions of as much as
$2,000 for each working spouse ($2,250 for one-income couples), and defer taxes
on interest or other earnings from the IRAs. Special rules apply for determining
the deductibility of contributions made by married individuals filing separate
returns.
As illustrated in the following tables, maintaining an Individual
Retirement Account remains a valuable opportunity.
For many, an IRA will continue to offer both an up-front tax break with
its tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.
-42-
<PAGE>
Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 6% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any fees. Of
course, earnings accumulated in your IRA will be subject to tax upon withdrawal.
If you choose a money market fund with fluctuating income like the Fund, your
bottom line at retirement could be lower--it could also be much higher.
$2,000 Invested Annually Assuming a 6% Annualized Return
15% Tax Bracket Single- $0-$24,000
Joint - $0-$40,100
How Much You
End of Cumulative How Much You Have With Full
Year Investment Amount Have Without IRA IRA Deduction
1 $ 2,000 $ 1,787 $ 2,120
5 10,000 9,892 11,951
10 20,000 22,578 27,943
15 30,000 38,846 49,345
20 40,000 59,707 77,985
25 50,000 86,459 116,313
30 60,000 120,765 167,603
35 70,000 164,758 236,242
40 80,000 221,173 328,095
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.10% (6% less
15%)]
28% Tax Bracket Single- $24,001-$58,150
Joint - $40,101-$96,900
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
1 $ 2,000 $ 1,502 $ 1,526 $ 2,120
5 10,000 8,189 8,604 11,951
10 20,000 18,306 20,119 27,943
15 30,000 30,805 35,528 49,345
20 40,000 46,248 56,150 77,985
25 50,000 65,327 83,745 116,313
30 60,000 88,899 120,674 167,603
35 70,000 118,023 170,094 236,242
40 80,000 154,004 236,229 328,095
[Without IRA--investment of $1,440 ($2,000 less 28%) earning 4.32% (6%
less 28%)]
[With IRA--No Deduction--investment of $1,440 ($2,000 less
28%) earning 6%]
-43-
<PAGE>
31% Tax Bracket Single- $58,151-$121,300
Joint - $96,901-$147,700
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
1 $ 2,000 $ 1,437 $ 1,463 $ 2,120
5 10,000 7,806 8,246 11,951
10 20,000 17,367 19,281 27,943
15 30,000 29,078 34,048 49,345
20 40,000 43,422 53,810 77,985
25 50,000 60,992 80,256 116,313
30 60,000 82,513 115,646 167,603
35 70,000 108,872 163,007 236,242
40 80,000 141,160 226,386 328,095
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.14% (6%
less 31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 6%]
36% Tax Bracket* Single- $121,301-$263,750
Joint - $147,701-$263,750
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
1 $ 2,000 $ 1,329 $ 1,357 $ 2,120
5 10,000 7,176 7,648 11,951
10 20,000 15,840 17,884 27,943
15 30,000 26,300 31,581 49,345
20 40,000 38,929 49,911 77,985
25 50,000 54,176 74,440 116,313
30 60,000 72,584 107,266 167,603
35 70,000 94,808 151,195 236,242
40 80,000 121,640 209,981 328,095
[Without IRA--investment of $1,280 ($2,000 less 36%) earning 3.84% (6%
less 36%)]
[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 6%]
-44-
<PAGE>
39.6% Tax Bracket* Single - over $263,750
Joint - over $263,750
End of Cumulative How Much You How Much You Have with Full IRA
Year Investment Amount Have Without IRA No Deduction Deduction
1 $ 2,000 $ 1,252 $ 1,280 $ 2,120
5 10,000 6,729 7,218 11,951
10 20,000 14,770 16,878 27,943
15 30,000 24,376 29,804 49,345
20 40,000 35,854 47,103 77,985
25 50,000 49,569 70,253 116,313
30 60,000 65,955 101,232 167,603
35 70,000 85,533 142,690 236,242
40 80,000 108,926 198,170 328,095
[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 3.624% (6%
less 39.6%)]
[With IRA--No Deduction--investment of $1,208 ($2,000 less
39.6%) earning 6%]
* For tax years beginning after 1992, a 36% tax rate applies to all
taxable income in excess of the maximum dollar amounts subject to the
31% tax rate. In addition, a 10% surtax (not applicable to capital
gains) applies to certain high-income taxpayers. It is computed by
applying a 39.6% rate to taxable income in excess of $250,000. The
above tables do not reflect the personal exemption phaseout nor the
limitations of itemized deductions that may apply.
-45-
<PAGE>
$2,000 SINGLE INVESTMENT AT A RETURN OF 6% COMPOUNDED MONTHLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -------------------------------------------------------------------------------
10 $2,872 $2,934 $ 3,024 $ 3,078 $ 3,327 $ 3,639
15 3,442 3,555 3,718 3,819 4,291 4,908
20 4,124 4,306 4,571 4,738 5,534 6,620
30 5,922 6,317 6,910 7,292 9,206 12,045
40 8,504 9,269 10,447 11,224 15,315 21,915
$2,000 INVESTED ANNUALLY AT A RETURN OF 6% COMPOUNDED MONTHLY
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -------------------------------------------------------------------------------
10 $ 24,536 $ 24,845 $ 25,281 $ 25,548 $ 26,744 $ 28,209
15 40,564 41,330 42,424 43,098 46,173 50,059
20 59,770 61,298 63,502 64,870 71,232 79,532
30 110,365 114,785 121,282 125,393 145,237 172,910
40 183,019 193,262 208,634 218,545 268,344 342,801
*For tax years beginning after 1992, a 36% tax rate applies to all
taxable income in excess of the maximum dollar amounts subject to the
31% tax rate. In addition, a 10% surtax (not applicable to capital
gains) applies to certain high-income taxpayers. It is computed by
applying a 39.6% rate to taxable income in excess of $250,000. The above
tables do not reflect the personal exemption phaseout nor the
limitations of itemized deductions that may apply.
-46-
<PAGE>
THE VALUE OF STARTING YOUR IRA EARLY
The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return,
compounded monthly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!
8% Return 10% Return
--------- ----------
10 years $31,726 $35,833
30 years $256,433 $390,389
The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for the Fund either in the past or in the
future.
-47-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Limited-Term
Funds, Inc. and, in its capacity as such, audits the financial statements
contained in the Fund's Annual Report. The Delaware Group Limited- Term
Government Funds, Inc.--U.S. Government Money Series' Statement of Net Assets,
Statement of Operations, Statement of Changes in Net Assets and Notes to
Financial Statements, as well as the report of Ernst & Young LLP, independent
auditors, for the fiscal year ended December 31, 1995 are included in the Fund's
Annual Report to shareholders. The financial statements, the notes relating
thereto and the report of Ernst & Young LLP listed above are incorporated by
reference from the Annual Report into this Part B.
-48-
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
PART C
Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part A - Financial Highlights
*Part B - Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report
listed above for each Series are incorporated by
reference into Part B from the Registrant's Annual
Reports for the fiscal year ended December 31, 1995.
(b) Exhibits:
(1) Articles of Incorporation.
(a) Articles of Incorporation, as amended
and supplemented through November 22,
1995 incorporated into this filing by
reference to Post-Effective Amendment
No. 42 filed November 22, 1995.
(b) Executed Articles Supplementary
(November 28, 1995) to be filed by
Post-Effective Amendment.
(2) By-Laws. By-Laws, as amended through November
22, 1995, incorporated into this filing by
reference to Post-Effective Amendment No. 42
filed November 22, 1995.
(3) Voting Trust Agreement. Inapplicable.
i
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
(4) Copies of All Instruments Defining the Rights
of Holders.
(a) Articles of Incorporation and Articles
Supplementary. Articles Fifth and Ninth
of the Articles of Incorporation
(September 12, 1990), Article Second to
Articles Supplementary (June 1, 1992
and April 29, 1994) and Article Third
of form of Articles Supplementary
(November 28, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 42 filed
November 22, 1995.
(b) By-Laws. Article II, Article III, as
amended, and Article XIV incorporated
into this filing by reference to
Post-Effective Amendment No. 42 filed
November 22, 1995.
(5) Investment Management Agreements. Investment
Management Agreement between Delaware Management
Company, Inc. and the Registrant on behalf of
each Series (April 3, 1995) incorporated into
this filing by reference to Post- Effective
Amendment No. 42 filed November 22, 1995.
(6) (a) Distribution Agreements.
(i) Form of Distribution Agreement
(April 1995) on behalf of
Limited-Term Government Fund
incorporated into this filing
by reference to Post-Effective
Amendment No. 42 filed November
22, 1995.
(ii) Form of Amendment No. 1 to
Distribution Agreement
(November 1995) on behalf of
Limited-Term Government Fund
incorporated into this filing
by reference to Post-Effective
Amendment No. 42 filed November
22, 1995.
(iii) Form of Distribution Agreement
(April 1995) on behalf of U.S.
Government Money Series
incorporated into this filing
by reference to Post-Effective
Amendment No. 42 filed November
22, 1995.
(b) Administration and Service Agreement.
Form of Administration and Service
Agreement (as amended November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 42 filed November 22, 1995.
ii
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
(c) Dealer's Agreement. Dealer's Agreement
(as amended November 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 42 filed
November 22, 1995.
(d) Mutual Fund Agreement for the Delaware
Group of Funds (November 1995) included
as Module.
(7) Bonus, Profit Sharing, Pension Contracts.
(a) Amended and Restated Profit Sharing
Plan incorporated into this filing by
reference to Post-Effective Amendment
No. 42 filed November 22, 1995.
(b) Amendment to Profit Sharing Plan
(December 21, 1995) included as Module.
(8) Custodian Agreements. Incorporated into this
filing by reference to Post-Effective Amendment
No. 28 filed February 28, 1991 and
Post-Effective Amendment No. 29 filed February
28, 1991.
(9) Other Material Contracts. Shareholders Services
Agreements incorporated into this filing by
reference to Post-Effective Amendment No. 28
filed February 28, 1991 and Post-Effective
Amendment No. 29 filed February 28, 1991.
(10) Opinions of Counsel. Filed with letter
relating to Rule 24f-2 on February 27,
1996.
(11) Consents of Auditors. Attached as Exhibit.
(12) Inapplicable.
*(13) Investment Letter of Initial Shareholder.
Incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed February 20,
1985.
(14) Model Plans. Incorporated into this filing by
reference to Post-Effective Amendment No. 36
filed March 1, 1993, Post-Effective Amendment
No. 38 filed February 22, 1994 and
Post-Effective Amendment No. 41 filed February
28, 1995.
* Relates only to Registrant's U.S. Government Money Series.
iii
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
**(15) Plans under Rule 12b-1.
(a) Form of Plan under Rule 12b-1 for Class
A of Limited-Term Government Fund
(November 1995) incorporated into this
filing by reference to Post-Effective
Amendment No. 42 filed November 22,
1995.
(b) Form of Plan under Rule 12b-1 for Class
B of Limited-Term Government Fund
(November 1995) incorporated into this
filing by reference to Post-Effective
Amendment No. 42 filed November 22,
1995.
(c) Form of Plan under Rule 12b-1 for Class
C of Limited-Term Government Fund
(November 1995) incorporated into this
filing by reference to Post-Effective
Amendment No. 42 filed November 22,
1995.
(d) Form of Plan under Rule 12b-1 for
Consultant Class of U.S. Government
Money Series (November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 42 filed November 22, 1995.
(16) Schedules of Computation for each Performance
Quotation. Incorporated into this filing by
reference to Post-Effective Amendment No. 41
filed February 28, 1995.
Schedules of Computation for each Performance
Quotation for periods not previously
electronically filed for each Series attached as
Exhibit.
(17) Financial Data Schedules. Attached as Exhibit.
(18) Inapplicable.
(19) Other: Directors' Power of Attorney.
Incorporated into this filing by
reference to Post-Effective Amendment No.
42 filed November 22, 1995.
** Relates only to the Class A Shares, Class B Shares
and Class C Shares of Registrant's Limited-Term
Government Fund and the Consultant Class of
Registrant's U.S. Government Money Series.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
iv
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Item 26. Number of Holders of Securities.
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
Delaware Group Limited-Term Government
Funds, Inc.'s
Limited-Term Government Fund series:
Limited-Term Government Fund A Class
Common Stock Par Value 29,934 Accounts as of
$.001 Per Share January 31, 1996
Limited-Term Government Fund B Class
Common Stock Par Value 674 Accounts as of
$.001 Per Share January 31, 1996
Limited-Term Government Fund C Class
Common Stock Par Value 9 Accounts as of
$.001 Per Share January 31, 1996
Limited-Term Government Fund
Institutional Class
Common Stock Par Value 32 Accounts as of
$.001 Per Share January 31, 1996
Delaware Group Limited-Term Government
Funds, Inc.'s
U.S. Government Money Series:
U.S. Government Money Fund A Class
Common Stock Par Value 999 Accounts as of
$.001 Per Share January 31, 1996
U.S. Government Money Fund
Consultant Class
Common Stock Par Value 70 Accounts as of
$.001 Per Share January 31, 1996
v
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Item 27. Indemnification. Incorporated into this filing by reference
to Post-Effective Amendment No. 7 filed September 25, 1985 and
Post-Effective Amendment No. 42 filed November 22, 1995.
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. (the "Manager") or its
affiliate, Delaware International Advisers Ltd., also serves as investment
manager to the other funds in the Delaware Group (Delaware Group Delaware Fund,
Inc., Delaware Group Trend Fund, Inc., Delaware Group Value Fund, Inc., Delaware
Group DelCap Fund, Inc., Delaware Group Decatur Fund, Inc., Delaware Group
Delchester High-Yield Bond Fund, Inc., Delaware Group Government Fund, Inc.,
Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund, Inc., DMC
Tax-Free Income Trust-Pennsylvania, Delaware Group Tax-Free Money Fund, Inc.,
Delaware Group Premium Fund, Inc., Delaware Group Global & International Funds,
Inc., Delaware Pooled Trust, Inc., Delaware Group Dividend and Income Fund,
Inc., and Delaware Group Global Dividend and Income Fund, Inc.) and provides
investment advisory services to institutional accounts, primarily retirement
plans and endowment funds. In addition, certain directors of the Manager also
serve as directors/trustees of the other Delaware Group funds, and certain
officers are also officers of these other funds. A company indirectly owned by
the Manager's parent company acts as principal underwriter to the mutual funds
in the Delaware Group (see Item 29 below) and another such company acts as the
shareholder servicing, dividend disbursing and transfer agent for all of the
mutual funds in the Delaware Group.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- --------------------- -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief
Executive Officer, Chief Investment Officer and
Director of Delaware Management Company, Inc.;
President, Chief Executive Officer, Chairman of
the Board and Director of the Registrant and,
with the exception of Delaware Pooled Trust,
Inc., each of the other funds in the Delaware
Group, Delaware Management Holdings, Inc., DMH
Corp., Delaware International Holdings Ltd. and
Founders Holdings, Inc.; Chairman of the Board
and Director of Delaware Pooled Trust, Inc.,
Delaware Investment Counselors, Inc. and
Delaware Investment & Retirement Services, Inc.;
Chairman, Chief Executive Officer and Director
of Delaware International Advisers Ltd.; and
Director of Delaware Distributors, Inc. and
Delaware Service Company, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vi
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------- -----------------------------------------------
Winthrop S. Jessup Executive Vice President and Director of
Delaware Management Company, Inc., DMH Corp.,
Delaware International Holdings Ltd. and
Founders Holdings, Inc.; Executive Vice
President of the Registrant and, with the
exception of Delaware Pooled Trust, Inc., each
of the other funds in the Delaware Group and
Delaware Management Holdings, Inc.; President
and Chief Executive Officer of Delaware Pooled
Trust, Inc.; Vice Chairman of Delaware
Distributors, L.P.; Vice Chairman and Director
of Delaware Distributors, Inc.; Director of
Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International
Advisers Ltd. and Delaware Investment &
Retirement Services, Inc.; and President and
Director of Delaware Investment Counselors, Inc.
Richard G. Unruh, Jr. Executive Vice President and Director of
Delaware Management Company, Inc.; Executive
Vice President of the Registrant and each of the
other funds in the Delaware Group; Senior Vice
President of Delaware Management Holdings, Inc.;
and Director of Delaware International Advisers
Ltd.
Board of Directors, Chairman of Finance
Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA;
Board of Directors, Chairman of Finance
Committee, Mid Atlantic, Inc. since 1989, 2040
Market Street, Philadelphia, PA
Paul E. Suckow Executive Vice President/Chief Investment
Officer, Fixed Income of Delaware Management
Company, Inc., the Registrant and each of the
other funds in the Delaware Group; Senior Vice
President/Chief Investment Officer, Fixed Income
of Delaware Management Holdings, Inc.; Senior
Vice President and Director of Founders
Holdings, Inc.; and Director of Founders CBO
Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
vii
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
David K. Downes Senior Vice President, Chief Administrative
Officer and Chief Financial Officer of Delaware
Management Company, Inc., the Registrant and
each of the other funds in the Delaware Group;
Chairman and Director of Delaware Management
Trust Company; Senior Vice President, Chief
Administrative Officer, Chief Financial Officer
and Treasurer of Delaware Management Holdings,
Inc.; Senior Vice President, Chief Financial
Officer, Treasurer and Director of DMH Corp.;
Senior Vice President and Chief Administrative
Officer of Delaware Distributors, L.P.; Senior
Vice President, Chief Administrative Officer and
Director of Delaware Distributors, Inc.; Senior
Vice President, Chief Administrative Officer,
Chief Financial Officer and Director of Delaware
Service Company, Inc.; Chief Financial Officer
and Director of Delaware International Holdings
Ltd.; Senior Vice President, Chief Financial
Officer and Treasurer of Delaware Investment
Counselors, Inc.; Senior Vice President, Chief
Financial Officer and Director of Founders
Holdings, Inc.; Chief Executive Officer and
Director of Delaware Investment & Retirement
Services, Inc.; and Director of Delaware
International Advisers Ltd.
Chief Executive Officer, Chief Financial Officer
and Treasurer of Forewarn, Inc. since 1992, 8
Clayton Place, Newtown Square, PA
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of
Delaware Management Company, Inc., DMH Corp.,
Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc. and
Delaware Investment & Retirement Services, Inc.;
Senior Vice President and Secretary of the
Registrant, each of the other funds in the
Delaware Group, Delaware Distributors, L.P.,
Delaware Investment Counselors, Inc. and
Delaware Management Holdings, Inc.; Executive
Vice President, Secretary and Director of
Delaware Management Trust Company; Secretary and
Director of Delaware International Holdings
Ltd.; and Director of Delaware International
Advisers Ltd.
Director of ICI Mutual Insurance Co. since 1992,
P.O. Box 730, Burlington, VT
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
viii
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
Richard J. Flannery Managing Director/Corporate Tax & Affairs of
Delaware Management Company, Inc., Delaware
Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Investment
Counselors, Inc., Founders CBO Corporation and
Delaware Investment & Retirement Services, Inc.;
Vice President of the Registrant and each of the
other funds in the Delaware Group; Managing
Director/Corporate Tax & Affairs and Director of
Founders Holdings, Inc.; Managing Director and
Director of Delaware International Holdings
Ltd.; and Director of Delaware International
Advisers Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bullt0own Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall
Links, Inc. since 1991, Bulltown Rd., Elverton,
PA
Michael P. Bishof(1) Vice President and Treasurer of Delaware
Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group,
Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company,
Inc. and Founders Holdings, Inc.; Assistant
Treasurer of Founders CBO Corporation; and Vice
President and Manager of Investment Accounting
of Delaware International Holdings Ltd.
Eric E. Miller Vice President and Assistant Secretary of
Delaware Management Company, Inc., the
Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings,
Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service
Company, Inc., Delaware Management Trust
Company, Founders Holdings, Inc., Delaware
Investment Counselors, Inc. and Delaware
Investment & Retirement Services, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
ix
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
Richelle S. Maestro Vice President and Assistant Secretary of
Delaware Management Company, Inc., the
Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings,
Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company,
Inc., DMH Corp., Delaware Management Trust
Company, Delaware Investment Counselors, Inc.,
Founders Holdings, Inc. and Delaware Investment
& Retirement Services, Inc.; and Assistant
Secretary of Founders CBO Corporation and
Delaware International Holdings Ltd.
General Partner of Tri-R Associates since 1989,
10001 Sandmeyer Ln., Philadelphia, PA
John M. Zerr(2) Vice President and Assistant Secretary of
Delaware Management Company, Inc., the
Registrant, each of the other funds in the
Delaware Group, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Investment
Counselors, Inc. and Delaware Investment &
Retirement Services, Inc.
Secretary and Counsel of Renovisions, Inc. since
1990, 4284 South Dixi Road, Resaca, GA
Joseph H. Hastings Vice President/Corporate Controller of Delaware
Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp.,
Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company,
Inc., Delaware Investment Counselors, Inc.,
Founders Holdings, Inc. and Delaware
International Holdings Ltd.; Executive Vice
President, Chief Financial Officer and Treasurer
of Delaware Management Trust Company; Chief
Financial Officer and Treasurer of Delaware
Investment & Retirement Services, Inc.; and
Assistant Treasurer of Founders CBO Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
x
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
Bruce A. Ulmer Vice President/Director of Internal Audit of
Delaware Management Company, Inc., the
Registrant, each of the other funds in the
Delaware Group, Delaware Management Holdings,
Inc., DMH Corp. and Delaware Management Trust
Company; and Vice President/Internal Audit of
Delaware Investment & Retirement Services, Inc.
Steven T. Lampe(3) Vice President/Taxation of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware Management
Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings,
Inc., Founders CBO Corporation and Delaware
Investment Counselors, Inc.
Lisa O. Brinkley(4) Vice President/Compliance of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware Investment
Counselors, Inc. and Delaware Investment &
Retirement Services, Inc.
Rosemary E. Milner Vice President/Legal of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Distributors,
Inc.
Douglas L. Anderson Vice President/Operations of Delaware Management
Company, Inc., Delaware Service Company, Inc.
and Delaware Investment & Retirement Services,
Inc.; and Vice President/Operations and Director
of Delaware Management Trust Company
Michael T. Taggart Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
Gerald T. Nichols Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the
fixed income funds and the closed-end funds in
the Delaware Group; Vice President of Founders
Holdings, Inc.; and Treasurer and Director of
Founders CBO Corporation
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xi
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
J. Michael Pokorny Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the
fixed income funds in the Delaware Group
Gary A. Reed Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the
fixed income funds in the Delaware Group and
Delaware Investment Counselors, Inc.
Paul A. Matlack Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the
fixed income funds and the closed-end funds in
the Delaware Group; Vice President of Founders
Holdings, Inc.; and Secretary and Director of
Founders CBO Corporation
Patrick P. Coyne Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the
fixed income funds in the Delaware Group
Roger A. Early(5) Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the
fixed income funds in the Delaware Group
Edward N. Antoian Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group General
Partner of Zeke Investment Partners since 1991,
569 Canterbury Lane, Berwyn, PA
George H. Burwell Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
John B. Fields Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc., each of the
equity funds in the Delaware Group and Delaware
Investment Counselors, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xii
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
David C. Dalrymple Vice President/Senior Portfolio Manager of
Delaware Management Company, Inc. and each of
the equity funds in the Delaware Group
Faye P. Staples(6) Vice President/Human Resources of Delaware
Management Company, Inc., Delaware Distributors,
L.P. and Delaware Distributors, Inc.; and Vice
President/Director of Human Resources of
Delaware Service Company, Inc.
Daniel H. Carlson(7) Vice President/Marketing Manager of Delaware
Management Company, Inc.
1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
2 ATTORNEY, Ballard, Spahr, Andrews and Ingersoll prior to July 1995.
3 TAX MANAGER, Price Waterhouse prior to October 1995.
4 VICE PRESIDENT AND COMPLIANCE OFFICER, Banc One Securities Corporation
prior to June 1994 and ASSISTANT VICE PRESIDENT AND COMPLIANCE OFFICER,
Aetna Life and Casualty prior to March 1993.
5 SENIOR VICE PRESIDENT AND PORTFOLIO MANAGER, Federated Investors prior to
July 1994.
6 VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
7 PRINCIPAL AND CONSULTANT, Buck Consultants prior to October 1995.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal
underwriter for all the mutual funds in the Delaware
Group.
(b) Information with respect to each director, officer or
partner of principal underwriter:
<TABLE>
<CAPTION>
<S> <C> <C>
Positions and Positions and
Name and Principal Officers with Offices with
Business Address* Underwriter Registrant
- ----------------- ----------- ----------
Delaware Distributors, Inc. General Partner None
Delaware Management
Company, Inc. Limited Partner Investment Manager
Delaware Investment
Counselors, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiii
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
<S> <C> <C>
- ------------------------------ --------------------- ---------------------
Keith E. Mitchell President and Chief None
Executive Officer
David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer
George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary
J. Lee Cook Senior Vice President/ None
National Sales Manager
Stephen H. Slack Senior Vice President/ None
Wholesaler
William F. Hostler Senior Vice President/ None
Marketing Services
Minette van Noppen Senior Vice President/ None
Retirement Services
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
John M. Zerr Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xiv
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
<S> <C> <C>
- ------------------------------ --------------------- ---------------------
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Diane M. Anderson Vice President/ None
Retirement Services
Denise F. Guerriere Vice President/Client Services None
Julia R. Vander Els Vice President/ None
Retirement Services
Jerome J. Alrutz Vice President/ None
Retirement Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Thomas S. Butler Vice President/ None
DDI Administration
Stephen J. DeAngelis Vice President/Product None
Development
Susan T. Friestedt Vice President/Customer None
Service
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xv
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------------------ --------------------- ---------------------
<S> <C> <C>
Dinah J. Huntoon Vice President/Product None
Management
Jodie L. Johnson Vice President/National None
Accounts
Ellen M. Krott Vice President/Communications None
Holly W. Reimel Vice President/Telemarketing None
Frank Albanese Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William S. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Alan D. Kessler Vice President/Wholesaler None
William M. Kimbrough Vice President/Wholesaler None
Mac McAuliffe Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Henry W. Orvin Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
xvi
<PAGE>
Form N-1A
File No. 2-75526
Delaware Group Limited-Term
Government Funds, Inc.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------------------ --------------------- ---------------------
<S> <C> <C>
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/Human Resources None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the question
of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding
shares.
xvii
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 28th day of February, 1996.
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
By/s/Wayne A. Stork
----------------------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------------------------- ------------------------------------ -----------------
<S> <C> <C>
Chairman of the Board, President,
/s/Wayne A. Stork Chief Executive Officer and Director February 28, 1996
- ---------------------------
Wayne A. Stork
Senior Vice President/Chief Financial
Officer/Chief Administrative Officer
(Principal Financial Officer and
/s/David K. Downes Principal Accounting Officer) February 28, 1996
- ----------------------------
David K. Downes
/s/Walter P. Babich * Director February 28, 1996
- ----------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director February 28, 1996
- ---------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director February 28, 1996
- ---------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director February 28, 1996
- ---------------------------
W. Thacher Longstreth
/s/Charles E. Peck * Director February 28, 1996
- ---------------------------
Charles E. Peck
</TABLE>
*By/s/Wayne A. Stork
---------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.B6D Mutual Fund Agreement for the Delaware Group of Funds
(Module Name (November 1995)
MFAGMT95)
EX-99.B7B Amendment to Profit Sharing Plan (December 21, 1995)
(Module Name
AMEND_PROF_SHAR)
EX-99.B11 Consents of Auditors
EX-99.B16 Schedules of Computation for each Performance Quotation
for periods not previously electronically filed for
each Series
EX-27 Financial Data Schedules
<PAGE>
MUTUAL FUND AGREEMENT
FOR THE DELAWARE GROUP OF FUNDS
Gentlemen:
We are the national distributor for the Delaware Group of Funds with exclusive
right to sell and distribute Fund shares. (The term "Funds" in this Agreement
refers to each or any of the Funds that from time to time comprise the Delaware
Group and for whom we act as distributor.) You have indicated that you wish to
act as agent for your customers in connection with the purchase, sale and
redemption of Fund shares and desire to provide certain services to your
customers relating to their ownership of Fund shares, all in accordance with the
terms of this Agreement.
AGENT FOR CUSTOMERS: In placing orders for the purchase and sale of Fund shares,
you will be acting as agent for your customers and will not have any authority
to act as agent for us, any of the Funds or any of our affiliates or
representatives. Neither you nor any of your employees or agents are authorized
to make any representations concerning the Funds or Fund shares except those
contained in the then current "Prospectus" and in written information issued by
the Fund or by us as a supplement to the Prospectus. In purchasing Fund shares
your customers may rely on such authorized information.
OFFERING PRICE TO PUBLIC: Orders for shares received from you and accepted by
the Fund or its agent, Delaware Service Co., Inc., will be at the public
offering price applicable to each order as set forth in the Prospectus. The
manner of computing the net asset value, the public offering price and the
effective time of orders received from you are described in the Prospectus for
each Fund. We reserve the right at any time, without notice, to suspend the sale
of Fund shares or withdraw the public offering.
SALES, ORDERS AND CONFIRMATIONS: All orders must be made subject to
confirmation. Your orders must be wired, telephoned or written to the Fund or
its agent. You agree to place orders on behalf of your customers for the number
of shares, and at the price, as in bona fide orders from your customers. We will
not accept any conditional orders. We will send a written confirmation of each
trade indicating that the trade was on a fully disclosed basis to your customer.
It is agreed and understood that, whether shares are registered in the
purchaser's name, in your name or in the name of your nominee, your customer
will have full beneficial ownership of the Fund shares.
AGENCY FEES: On each order accepted by us for a Fund with a sales charge, we
understand that you will charge your customer an agency commission or agency
transaction fee ("agency fee") as set forth in the schedule of sales concessions
and agency fees set forth in that Fund's Prospectus, as it may be amended from
time to time. This fee shall be subject to the provisions of all terms set forth
in the Prospectus for volume purchases and special plans and accounts (e.g.
retirement plans, letters of intent, etc.) You will not receive from us a
<PAGE>
dealer's concession or similar allowance out of the sales charge. In accordance
with interpretations by the Staff of the Securities and Exchange Commission (the
"Commission"), the agency fee will be your sole charge to your customers for
placing such orders. You may elect to make payments in either of two ways: (a)
you may send us the public offering price for the Fund shares purchased less the
amount of the agency fee due you or (b) you or your customer may send us the
entire public offering price for the Fund shares and we will, on a periodic
basis, remit to you the agency fee due. You will notify us in writing of which
method of payment you elect. If any shares sold to your customer under the terms
of this Agreement are repurchased by the Fund or by us, or are tendered to a
Fund for redemption or repurchase, within seven (7) business days after the date
of the confirmation of the original purchase order, you will promptly refund to
us full agency fee paid or allowed to you on such shares.
PAYMENT AND ISSUANCE OF CERTIFICATES: Regardless of the payment method elected,
Fund shares purchased by you for your customers hereunder shall be paid for in
full by check payable to the Fund at its office within three business days after
our acceptance of your order. If not so paid, the Fund reserves the right,
without notice, to cancel the sale and to hold you responsible for any loss,
including lost profit, sustained by us or the Fund in consequence. Certificates
representing Fund shares will not be issued unless a specific request is
received from you or your customer. Certificates, if requested, will be issued
in the names indicated by registration instructions accompanying payment.
REDEMPTION: The Prospectus describes the provisions whereby the Fund, under all
ordinary circumstances, will repurchase its shares from shareholders on demand.
You agree that you will not make any representations to shareholders relating to
the purchase of their Fund shares other than the statements contained in the
Prospectus and the underlying organizational documents of the Fund, to which it
refers, and that you will quote to your customers as the redemption price only
the price determined by the Fund.
12b-1 PLAN: With respect to any Fund that has a Distribution Plan under Rule
12b-1 (a "12b-1Plan") of the Investment Company Act of 1940 (the "1940 Act"), we
expect you will provide shareholder and administrative services to your
customers who own Fund shares, such as: answering inquiries regarding the Fund;
assisting in changing dividend options, account designations and addresses;
establishing and maintaining shareholder accounts and records; arranging for
bank wires; or such other services as the Fund may require to the extent
permitted by applicable statutes, rules or regulations. You will promptly answer
all written complaints received by you relating to Fund accounts or promptly
forward such complaints to us and assist us in answering such complaints. For
such services we will pay you a fee as set by us from time to time, based on a
portion of the net asset value of the accounts of your clients in the Fund. We
are permitted to make this payment under the terms of the 12b-1 Plan adopted by
2
<PAGE>
certain of the Funds, as such 12b-1 Plans may be in effect from time to time.
Each Fund reserves the right, at any time, to suspend payments under its 12b-1
Plan. You will furnish the Fund and us with such information as may be
reasonably requested by the Fund or its directors or trustees or by us with
respect to fees paid to you pursuant to this Agreement. In accordance with
interpretations and rulings to the Staff of the Commission, you will not charge
your customers any fees for services for which you are being compensated under a
12b-1 Plan of a Fund.
SALES OF NO-LOAD - NON 12b-1 PLAN FUNDS: In connection with any orders placed by
you on behalf of your customers for shares of Funds that do not charge a sales
load and do not have a 12b-1 Plan, we understand that you may charge your
customers a limited service or transaction fee, in accordance with
interpretations and rulings of the Staff of the Commission.
LEGAL COMPLIANCE: This Agreement and any transaction with or payment to you
pursuant to the terms hereof is conditioned on your representation to us that,
as of the date of this Agreement you are and at all times during its
effectiveness you will be (a) a registered broker-dealer under the Securities
Exchange Act of 1934 and qualified under applicable state securities laws, if
any, to act as a broker or dealer in securities, and a member in good standing
of the National Association of Securities Dealers, Inc. (the "NASD"); or (b) a
"bank" as defined in Section 3(a)(6) of the Securities and Exchange Act of 1934
(or other financial institution) and not otherwise required to register as a
broker or dealer under such Act. You agree to notify us promptly in writing if
this representation ceases to be true. You also agree that you will comply with
the rules of the NASD including, in particular, Sections 2 and 26 of Article III
thereof, to the extent applicable, that you will maintain adequate records with
respect to your customers and their transactions, and that such transactions
will be without recourse against you by your customers. We recognize that, in
addition to applicable provisions of state and federal securities laws, you may
be subject to the provisions of the Glass-Steagall Act and other laws governing,
among other things, the conduct of activities by federal and state chartered and
supervised financial institutions and their affiliated organizations. Because
you will be the only one having a direct relationship with the customer, you
will be responsible in that relationship for insuring compliance with all laws
and regulations, including those of all applicable federal and state regulatory
authorities and bodies having jurisdiction over you or your customers to the
extent applicable to securities purchases hereunder.
BLUE SKY MATTERS: We shall have no obligation or responsibility with respect to
your right to sell Fund shares in any state or jurisdiction. From time to time
we shall furnish you with information identifying the states under the
securities laws of which it is believed a Fund's shares may be sold. You will
not transact orders for Fund shares in states which we indicate Fund shares may
not be sold.
LITERATURE: We will furnish you with copies of each Fund's Prospectus, sales
literature and other information made publicly available by the Fund, in
3
<PAGE>
reasonable quantities upon your request. We shall file Fund sales literature and
promotional material with the NASD and SEC as required. You may not publish or
use any sales literature or promotional material with respect to the Funds
without our prior review and written approval.
CUSTOMERS: The name of your customers will remain your sole property and will
not be used by us except for servicing or informational mailings and other
correspondence in the normal course of business.
NOTICES AND COMMUNICATIONS: All communications from you should be addressed to
us at 1818 Market Street, Philadelphia, PA 19103. Any notice from us to you
shall be deemed to have been duly given if mailed or telegraphed to you at the
address set forth above. Each of us may change the address to which notices
shall be sent by notice to the other in accordance with the terms hereof.
TERMINATION: This Agreement may be terminated by either party at any time by
written notice to that effect. Notwithstanding the termination of this
Agreement, you shall remain liable for any amounts otherwise owing to us or the
Fund and for your portion of any transfer tax or other liability which may be
asserted or assessed against the Fund, us or any one or more of our dealers,
based upon the claim that you and such dealers or any of them constitute a
partnership, an unincorporated business or other separate entity.
AMENDMENT: This Agreement may be amended or revised at any time by us upon
notice to you and, unless you promptly notify us in writing to the contrary, you
will be deemed to have accepted such modifications.
GENERAL: Your acceptance hereof will constitute an obligation on your part to
observe all the terms and conditions hereof. In the event you breach any of the
terms and conditions of this Agreement, you will indemnify us, the Funds, and
our affiliates for any damages, losses, costs and expenses (including reasonable
attorneys' fees) arising out of or relating to such breach. Nothing contained
herein shall constitute you, us and any dealers an association or partnership.
All references in this Agreement to the "Prospectus" include the Statement of
Additional Information incorporated by reference therein and any stickers or
supplements thereto, provided that any requirement in this Agreement to deliver
a copy of the Prospectus shall not include the Statement of Additional
Information unless requested by the customer. This Agreement is to be construed
in accordance with the laws of the State of Delaware.
4
<PAGE>
Please confirm this Agreement by executing one copy of this Agreement below and
returning it to us. Keep the enclosed duplicate copy for your records.
Date: DELAWARE DISTRIBUTORS, L.P.
----------------------------
BY: DELAWARE DISTRIBUTORS, INC.
General Partner
BY:
--------------------------------
Accepted and Agreed to:
- ---------------------------------
(Name of Firm)
BY:
------------------------------
Name:
Title:
5
AMENDMENT NO. 1
TO THE
SECOND AMENDMENT AND RESTATEMENT OF THE
PROFIT SHARING PLAN OF
DELAWARE GROUP DELAWARE FUND, INC.
EFFECTIVE APRIL 1, 1989
This Amendment is made this 21st day of December, 1995, by Delaware
Group Delaware fund, Inc. (the "Employer").
WITNESSETH:
-----------
WHEREAS, the Employer adopted the second amendment and restatement of
the Profit Sharing Plan of Delaware Management Company, Inc. (the "Plan"),
effective April 1, 1989; and
WHEREAS, the Employer desires to clarify the provisions of the Plan
pertaining to the crediting of service for vesting purposes.
NOW THEREFORE, Section 2.28 of the Plan is hereby amended as follows:
"2.28 "Year of Service" shall mean the completion by an Employee of
1,000 or more Hours of Service during his initial Eligibility
Computation Period and during any Plan Year, beginning with the Plan
Year which commences after the Employee first performs an Hour of
Service. However, for the period from October 1, 1988 through March 31,
1990, an Employee shall be given credit for a Year of Service if he
completes 1,000 Hours of Service during the period October 1, 1988 to
September 30, 1989 and shall be given credit for an additional Year of
Service if he completes 1,000 Hours of Service during the period April
1, 1989 to March 31, 1990. For purposes of determining a Participant's
nonforfeitable right to his Employer Contribution Account, Years of
Service shall include an Employee's prior service with Delaware
Management Company, Inc. or any other Entity required to be aggregated
with Delaware Management Company, Inc. under Sections 414(b) or (c) of
the Code."
IN WITNESS WHEREOF, the Employer has caused this Amendment to be
executed by its duly authorized officers and its corporate seal to be impressed
hereon the date first written above.
ATTEST: DELAWARE GROUP DELAWARE FUND, INC.
/s/ George M. Chamberlain, Jr. By: /s/ Wayne A. Stork
- ------------------------------- -------------------------
Senior Vice President/Secretary Chairman
Consent of Independent Auditors
We consent to the references to our firm under the caption "Financial
Highlights" in the Prospectuses of Delaware Group Limited-Term Government Funds,
Inc.--Limited-Term Government Fund for the A, B, C, and Institutional Classes,
and of Delaware Group Limited-Term Government Funds, Inc.--U.S. Government
Money Series for the A Class, and Consultant Class and "Financial Statements" in
the Statements of Additional Information of Delaware Group Limited-Term
Government Funds, Inc.--Limited-Term Government Fund and U.S. Government Money
Series and to the incorporation by reference in this Post-Effective Amendment
No. 43 to the Registration Statement (Form N-1A) (No. 2- 75526) of Delaware
Group Limited-Term Government Funds, Inc. of our reports dated February 15,
1996, included in the 1995 Annual Reports to Shareholders of Delaware Group
Limited-Term Government Funds, Inc.--Limited-Term Government Fund and of
Delaware Group Limited-Term Government Funds, Inc.--U.S. Government Money
Series.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania ----------------------
February 26, 1996 Ernst & Young LLP
<PAGE>
Report of Independent Auditors
To The Shareholders and Board of Directors
Delaware Group Limited-Term
Government Funds, Inc.--Limited-Term Government Fund
We have audited the accompanying statement of net assets of Delaware Group
Limited-Term Government Funds, Inc.--Limited-Term Government Fund as of December
31, 1995, 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 five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Limited-Term Government Funds, Inc.--Limited-Term Government Fund
at December 31, 1995, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania ----------------------
February 15, 1996 Ernst & Young LLP
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Limited-Term
Government Funds, Inc.--U.S. Government Money Series
We have audited the accompanying statement of net assets of Delaware Group
Limited-Term Government Funds, Inc.--U.S. Government Money Series as of December
31, 1995, 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 five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Limited-Term Government Funds, Inc.-- U.S. Government Money
Series at December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
Philadelphia, Pennsylvania ----------------------
February 15, 1996 Ernst & Young LLP
<PAGE>
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUND A
ANNUALIZED RATE OF RETURN (AT OFFER)
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
TEN
YEARS
- ---------
10
$1000(1 - T) = $1,885.69
T = 6.55%
<PAGE>
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUND A
ANNUALIZED RATE OF RETURN (AT NAV)
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
TEN
YEARS
- ---------
10
$1000(1 - T) = $1,943.87
T = 6.87%
<PAGE>
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
TEN
YEARS
- ---------
10
$1000(1 - T) = $1,966.20
T = 6.99%
<PAGE>
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUND A
TOTAL RETURN PERFORMANCE
TEN YEARS
- ------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.67
Initial Shares 93.721
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------------------------
1986 93.721 $0.893 11.257 104.978
- ------------------------------------------------------------------------------
1987 104.978 $0.694 7.648 112.626
- ------------------------------------------------------------------------------
1988 112.626 $0.730 8.701 121.327
- ------------------------------------------------------------------------------
1989 121.327 $0.843 10.982 132.309
- ------------------------------------------------------------------------------
1990 132.309 $0.814 11.594 143.903
- ------------------------------------------------------------------------------
1991 143.903 $0.799 12.062 155.965
- ------------------------------------------------------------------------------
1992 155.965 $0.740 11.898 167.863
- ------------------------------------------------------------------------------
1993 167.863 $0.681 11.789 179.652
- ------------------------------------------------------------------------------
1994 179.652 $0.667 13.293 192.945
- ------------------------------------------------------------------------------
1995 192.945 $0.692 15.419 208.364
- ------------------------------------------------------------------------------
Ending Shares 208.364
Ending NAV $9.05
----------
Investment Return $1,885.69
Total Return Performance
- ------------------------
Investment Return $1,885.69
Less Initial Investment $1,000.00
----------
$885.69/$1,000.00 x 100
Total Return: 88.57%
<PAGE>
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL
TOTAL RETURN PERFORMANCE
TEN YEARS
- ------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $10.04
Initial Shares 99.602
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------------------------
1986 99.602 $0.893 12.364 108.219
- ------------------------------------------------------------------------------
1987 108.219 $0.692 12.364 116.072
- ------------------------------------------------------------------------------
1988 116.072 $0.744 12.364 125.215
- ------------------------------------------------------------------------------
1989 125.215 $0.857 12.364 136.744
- ------------------------------------------------------------------------------
1990 136.744 $0.828 12.364 148.944
- ------------------------------------------------------------------------------
1991 148.944 $0.816 12.364 161.695
- ------------------------------------------------------------------------------
1992 161.695 $0.754 12.364 174.271
- ------------------------------------------------------------------------------
1993 174.271 $0.696 12.364 186.776
- ------------------------------------------------------------------------------
1994 186.776 $0.681 12.364 200.889
- ------------------------------------------------------------------------------
1995 200.889 $0.712 12.364 217.260
- ------------------------------------------------------------------------------
Ending Shares 217.260
Ending NAV $9.05
----------
Investment Return $1,966.20
Total Return Performance
- ------------------------
Investment Return $1,966.20
Less Initial Investment $1,000.00
----------
$966.20/$1,000.00 x 100
Total Return: 96.62%
<PAGE>
Delaware Group Limited-Term Goverment Fund c
Yield Quotation for the Month Ended December 31, 1995
Interest Earned $181
Expense Accrued $44
Net Income $136
Average Shares Outstanding 3,442
Maximum Offering Price
December 31, 1995 $9.05
Yield 5.31%
Limited-Term Government Fund C Yield 2 [( 181-44 + 1)6 -1] = 5.31%
-----------
(3,442 x 9.05)
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
- -----------
1
$1000(1 - T) = $1,045.74
T = 4.57%
THREE
YEARS
- -----------
3
$1000(1 - T) = $1,098.07
T = 3.17%
FIVE
YEARS
- ------------
5
$1000(1 - T) = $1,192.60
T = 3.59%
TEN
YEARS
- -----------
10
$1000(1 - T) = $1,638.98
T = 5.06%
LIFE OF
FUND
- ------------
13.70136986
$1000(1 - T) = $2,241.02
T = 6.07%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
ONE YEAR
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1995 1000.000 $0.045 45.737 1,045.737
- -------------------------------------------------------------------------------
Ending Shares 1045.737
Ending NAV x $1.00
---------
Investment Return $1,045.74
Total Return Performance
- ------------------------
Investment Return $1,045.74
Less Initial Investment $1,000.00
-----------
$45.74/$1,000.00 x 100
Total Return: 4.57%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
THREE YEARS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1993 1,000.000 $0.0200 20.148 1,020.148
- -------------------------------------------------------------------------------
1994 1,020.148 $0.0289 29.897 1,050.045
- -------------------------------------------------------------------------------
1995 1,050.045 $0.0448 48.026 1,098.071
- -------------------------------------------------------------------------------
Ending Shares 1,098.071
Ending NAV x $1.00
-----------
Investment Return $1,098.07
Total Return Performance
- ------------------------
Investment Return $1,098.07
Less Initial Investment $1,000.00
-----------
$98.07/$1,000.00 x 100
Total Return: 9.81%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
FIVE YEARS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1991 1000.000 $0.0519 53.169 1,053.169
- -------------------------------------------------------------------------------
1992 1053.169 $0.0308 32.917 1,086.086
- -------------------------------------------------------------------------------
1993 1086.086 $0.0200 21.884 1,107.970
- -------------------------------------------------------------------------------
1994 1107.970 $0.0289 32.470 1,140.440
- -------------------------------------------------------------------------------
1995 1140.440 $0.0448 52.160 1,192.600
- -------------------------------------------------------------------------------
Ending Shares 1192.600
Ending NAV x $1.00
------------
Investment Return $1,192.60
- ------------------------
Investment Return $1,192.60
Less Initial Investment $1,000.00
------------
$192.60/$1,000.00 x 100
Total Return: 19.26%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
TEN YEARS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1986 1000.000 $0.0575 58.998 1,058.998
- -------------------------------------------------------------------------------
1987 1058.998 $0.0525 56.994 1,115.992
- -------------------------------------------------------------------------------
1988 1115.992 $0.0608 69.807 1,185.799
- -------------------------------------------------------------------------------
1989 1185.799 $0.0769 94.404 1,280.203
- -------------------------------------------------------------------------------
1990 1280.203 $0.0711 94.092 1,374.295
- -------------------------------------------------------------------------------
1991 1374.295 $0.0519 73.071 1,447.366
- -------------------------------------------------------------------------------
1992 1447.366 $0.0308 45.237 1,492.603
- -------------------------------------------------------------------------------
1993 1492.603 $0.0200 30.074 1,522.677
- -------------------------------------------------------------------------------
1994 1522.677 $0.0289 44.621 1,567.298
- -------------------------------------------------------------------------------
1995 1567.298 $0.0448 71.682 1,638.980
- -------------------------------------------------------------------------------
Ending Shares 1638.980
Ending NAV $1.00
-----------
Investment Return $1,638.98
Total Return Performance
- ------------------------
Investment Return $1,638.98
Less Initial Investment $1,000.00
----------
$638.98/$1,000.00 x 100
Total Return: 63.90%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1982 1000.000 $0.0699 72.055 1,072.055
- -------------------------------------------------------------------------------
1983 1072.055 $0.0804 89.469 1,161.524
- -------------------------------------------------------------------------------
1984 1161.524 $0.0913 110.586 1,272.110
- -------------------------------------------------------------------------------
1985 1272.110 $0.0724 95.209 1,367.319
- -------------------------------------------------------------------------------
1986 1367.319 $0.0575 80.673 1,447.992
- -------------------------------------------------------------------------------
1987 1447.992 $0.0525 77.931 1,525.923
- -------------------------------------------------------------------------------
1988 1525.923 $0.0608 95.449 1,621.372
- -------------------------------------------------------------------------------
1989 1621.372 $0.0769 129.080 1,750.452
- -------------------------------------------------------------------------------
1990 1750.452 $0.0711 128.655 1,879.107
- -------------------------------------------------------------------------------
1991 1879.107 $0.0519 99.912 1,979.019
- -------------------------------------------------------------------------------
1992 1979.019 $0.0308 61.856 2,040.875
- -------------------------------------------------------------------------------
1993 2040.875 $0.0200 41.121 2,081.996
- -------------------------------------------------------------------------------
1994 2081.996 $0.0289 61.012 2,143.008
- -------------------------------------------------------------------------------
1995 2143.008 $0.0448 98.013 2,241.021
- -------------------------------------------------------------------------------
Ending Shares 2,241.021
Ending NAV $1.00
----------
Investment Return $2,241.02
Total Return Performance
- ------------------------
Investment Return $2,241.02
Less Initial Investment $1,000.00
---------
$1,241.02/$1,000.00 x 100
Total Return: 124.10%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
THREE MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------
1995 1000.00 $0.0110 11.000 1,011.000
- ------------------------------------------------------------
Ending Shares 1011.000
Ending NAV $1.00
---------
Investment Return $1,011.00
Total Return Performance
- ------------------------
Investment Return $1,011.00
Less Initial Investment $1,000.00
---------
$11.00/$1,000.00 x 100
Total Return: 1.10%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
SIX MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------
1995 1000.000 $0.0220 22.175 1,022.175
- -------------------------------------------------------------
Ending Shares 1022.175
Ending NAV $1.00
---------
Investment Return $1,022.18
Total Return Performance
- ------------------------
Investment Return $1,022.18
Less Initial Investment $1,000.00
---------
$22.17/$1,000.00 x 100
Total Return: 2.22%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CLASS A
TOTAL RETURN PERFORMANCE
NINE MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------
1995 1000.000 $0.0334 33.908 1,033.908
- ----------------------------------------------------------
Ending Shares 1033.908
Ending NAV $1.00
---------
Investment Return $1,033.91
Total Return Performance
- ------------------------
Investment Return $1,033.91
Less Initial Investment $1,000.00
---------
$33.91/$1,000.00 x 100
Total Return: 3.39%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1995
- -------------------------------------------------------------------------------
Average Annual Compounded Rate of Return:
n
P(1 + T) = ERV
ONE
YEAR
----
1
$1000(1 - T) = $1,045.74
T = 4.57%
THREE
YEARS
- -----
3
$1000(1 - T) = $1,098.07
T = 3.17%
FIVE
YEARS
- -----
5
$1000(1 - T) = $1,192.60
T = 3.59%
TEN
YEARS
- -----
10
$1000(1 - T) = $1,630.09
T = 5.01%
LIFE OF
FUND
- -------
13.70136986
$1000(1 - T) = $2,235.94
T = 6.05%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
ONE YEAR
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ----------------------------------------------------------
1995 1000.000 $0.0448 45.737 1,045.737
- ----------------------------------------------------------
Ending Shares 1,045.737
Ending NAV x $1.00
----------
Investment Return $1,045.74
Total Return Performance
- ------------------------
Investment Return $1,045.74
Less Initial Investment $1,000.00
---------
$45.74/$1,000.00 x 100
Total Return: 4.57%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
THREE YEARS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1993 1,000.000 $0.0200 20.148 1,020.148
- -------------------------------------------------------------------------------
1994 1,020.148 $0.0289 29.897 1,050.045
- -------------------------------------------------------------------------------
1995 1,050.045 $0.0448 48.026 1,098.071
- -------------------------------------------------------------------------------
Ending Shares 1,098.071
Ending NAV x $1.00
----------
Investment Return $1,098.07
Total Return Performance
- ------------------------
Investment Return $1,098.07
Less Initial Investment $1,000.00
---------
$98.07/$1,000.00 x 100
Total Return: 9.81%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
FIVE YEARS
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ---------------------------------------------------------------
1991 1000.000 $0.0519 53.169 1,053.169
- ---------------------------------------------------------------
1992 1053.169 $0.0308 32.917 1,086.086
- ---------------------------------------------------------------
1993 1086.086 $0.0200 21.884 1,107.970
- ---------------------------------------------------------------
1994 1107.970 $0.0289 32.470 1,140.440
- ---------------------------------------------------------------
1995 1140.440 $0.0448 52.160 1,192.600
- ---------------------------------------------------------------
Ending Shares 1,192.600
Ending NAV x $1.00
----------
Investment Return $1,192.60
- ------------------------
Investment Return $1,192.60
Less Initial Investment $1,000.00
---------
$192.60/$1,000.00 x 100
Total Return: 19.26%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
TEN YEARS
- ------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1986 1000.000 $0.0574 12.364 1,058.998
- -------------------------------------------------------------------------------
1987 1058.998 $0.0525 12.364 1,115.992
- -------------------------------------------------------------------------------
1988 1115.992 $0.0590 12.364 1,183.607
- -------------------------------------------------------------------------------
1989 1183.607 $0.0744 12.364 1,274.680
- -------------------------------------------------------------------------------
1990 1274.680 $0.0700 12.364 1,366.840
- -------------------------------------------------------------------------------
1991 1366.840 $0.0519 12.364 1,439.514
- -------------------------------------------------------------------------------
1992 1439.514 $0.0308 12.364 1,484.506
- -------------------------------------------------------------------------------
1993 1484.506 $0.0200 12.364 1,514.419
- -------------------------------------------------------------------------------
1994 1514.419 $0.0289 12.364 1,558.800
- -------------------------------------------------------------------------------
1995 1558.800 $0.0448 12.364 1,630.093
- -------------------------------------------------------------------------------
Ending Shares 1630.093
Ending NAV $1.00
----------
Investment Return $1,630.09
Total Return Performance
- ------------------------
Investment Return $1,630.09
Less Initial Investment $1,000.00
----------
$630.09/$1,000.00 x 100
Total Return: 63.01%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
LIFE OF FUND
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------------------------
1982 1000.000 $0.0730 75.465 1,075.465
- -------------------------------------------------------------------------------
1983 1075.465 $0.0804 89.755 1,165.220
- -------------------------------------------------------------------------------
1984 1165.220 $0.0913 110.936 1,276.156
- -------------------------------------------------------------------------------
1985 1276.156 $0.0724 95.512 1,371.668
- -------------------------------------------------------------------------------
1986 1371.668 $0.0575 80.930 1,452.598
- -------------------------------------------------------------------------------
1987 1452.598 $0.0525 78.178 1,530.776
- -------------------------------------------------------------------------------
1988 1530.776 $0.0590 92.744 1,623.520
- -------------------------------------------------------------------------------
1989 1623.520 $0.0744 124.921 1,748.441
- -------------------------------------------------------------------------------
1990 1748.441 $0.0711 126.412 1,874.853
- -------------------------------------------------------------------------------
1991 1874.853 $0.0519 99.684 1,974.537
- -------------------------------------------------------------------------------
1992 1974.537 $0.0308 61.714 2,036.251
- -------------------------------------------------------------------------------
1993 2036.251 $0.0200 41.028 2,077.279
- -------------------------------------------------------------------------------
1994 2077.279 $0.0289 60.874 2,138.153
- -------------------------------------------------------------------------------
1995 2138.153 $0.0448 97.789 2,235.942
- -------------------------------------------------------------------------------
Ending Shares 2,235.942
Ending NAV $1.00
---------
Investment Return $2,235.94
Total Return Performance
- ------------------------
Investment Return $2,235.94
Less Initial Investment $1,000.00
---------
$1,235.94/$1,000.00 x 100
Total Return: 123.59%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
THREE MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -------------------------------------------------------------
1995 1000.000 $0.0110 11.000 1,011.000
- -------------------------------------------------------------
Ending Shares 1011.000
Ending NAV $1.00
---------
Investment Return $1,011.00
Total Return Performance
- ------------------------
Investment Return $1,011.00
Less Initial Investment $1,000.00
---------
$11.00/$1,000.00 x 100
Total Return: 1.10%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
SIX MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------
1995 1000.000 $0.0220 22.175 1,022.175
- --------------------------------------------------------------
Ending Shares 1022.175
Ending NAV $1.00
---------
Investment Return $1,022.18
Total Return Performance
- ------------------------
Investment Return $1,022.18
Less Initial Investment $1,000.00
---------
$22.17/$1,000.00 x 100
Total Return: 2.22%
<PAGE>
DELAWARE GROUP US GOVERNMENT MONEY FUND CONSULTANT CLASS
TOTAL RETURN PERFORMANCE
NINE MONTHS
- -------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $1.00
Initial Shares 1000.000
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- ------------------------------------------------------------
1995 1000.000 $0.0334 33.908 1,033.908
- ------------------------------------------------------------
Ending Shares 1033.908
Ending NAV $1.00
---------
Investment Return $1,033.91
Total Return Performance
- ------------------------
Investment Return $1,033.91
Less Initial Investment $1,000.00
---------
$33.91/$1,000.00 x 100
Total Return: 3.39%
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 011
<NAME> U.S. GOVERNMENT MONEY FUND A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 14,063,485
<INVESTMENTS-AT-VALUE> 14,063,485
<RECEIVABLES> 137,306
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,250
<TOTAL-ASSETS> 14,203,041
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 87,538
<TOTAL-LIABILITIES> 87,538
<SENIOR-EQUITY> 14,116
<PAID-IN-CAPITAL-COMMON> 14,101,387
<SHARES-COMMON-STOCK> 13,786,436
<SHARES-COMMON-PRIOR> 17,119,479
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 13,786,436
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 925,451
<OTHER-INCOME> 0
<EXPENSES-NET> 220,279
<NET-INVESTMENT-INCOME> 705,172
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 705,172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 668,878
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,699,903
<NUMBER-OF-SHARES-REDEEMED> 15,674,682
<SHARES-REINVESTED> 732,776
<NET-CHANGE-IN-ASSETS> (4,080,589)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 70,149
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 220,279
<AVERAGE-NET-ASSETS> 15,017,550
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.045
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.045
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 012
<NAME> U.S. GOVERNMENT MONEY FUND CONSULANT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 14,063,485
<INVESTMENTS-AT-VALUE> 14,063,485
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<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 2,250
<TOTAL-ASSETS> 14,203,041
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<OTHER-ITEMS-LIABILITIES> 87,538
<TOTAL-LIABILITIES> 87,538
<SENIOR-EQUITY> 14,116
<PAID-IN-CAPITAL-COMMON> 14,101,387
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<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 329,069
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 925,451
<OTHER-INCOME> 0
<EXPENSES-NET> 220,279
<NET-INVESTMENT-INCOME> 705,172
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<NET-CHANGE-FROM-OPS> 705,172
<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 732,776
<NUMBER-OF-SHARES-REDEEMED> 1,515,439
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<NET-CHANGE-IN-ASSETS> (4,080,589)
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<GROSS-EXPENSE> 220,279
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<PER-SHARE-NAV-BEGIN> 1.000
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<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 021
<NAME> LIMITED-TERM GOVERNMENT FUND A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 690,495,474
<INVESTMENTS-AT-VALUE> 697,717,835
<RECEIVABLES> 9,353,646
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<OTHER-ITEMS-ASSETS> 487,382
<TOTAL-ASSETS> 707,558,863
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,302,136
<TOTAL-LIABILITIES> 4,302,136
<SENIOR-EQUITY> 816,013
<PAID-IN-CAPITAL-COMMON> 815,196,742
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<ACCUMULATED-NET-GAINS> (119,978,389)
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<ACCUM-APPREC-OR-DEPREC> 7,222,361
<NET-ASSETS> 653,450,966
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 67,635,006
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<EXPENSES-NET> 7,473,887
<NET-INVESTMENT-INCOME> 60,161,119
<REALIZED-GAINS-CURRENT> (29,734,372)
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<EQUALIZATION> 0
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<NUMBER-OF-SHARES-SOLD> 7,879,835
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,473,887
<AVERAGE-NET-ASSETS> 729,893,578
<PER-SHARE-NAV-BEGIN> 8.990
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<PER-SHARE-DIVIDEND> 0.699
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<PER-SHARE-NAV-END> 9.050
<EXPENSE-RATIO> 0.960
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 022
<NAME> LIMITED-TERM GOVERNMENT FUND B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 690,495,474
<INVESTMENTS-AT-VALUE> 697,717,835
<RECEIVABLES> 9,353,646
<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 707,558,863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,302,136
<TOTAL-LIABILITIES> 4,302,136
<SENIOR-EQUITY> 816,013
<PAID-IN-CAPITAL-COMMON> 815,196,742
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<ACCUMULATED-NET-GAINS> (119,978,389)
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<NET-ASSETS> 12,313,299
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 67,635,006
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<EXPENSES-NET> 7,473,887
<NET-INVESTMENT-INCOME> 60,161,119
<REALIZED-GAINS-CURRENT> (29,734,372)
<APPREC-INCREASE-CURRENT> 34,845,517
<NET-CHANGE-FROM-OPS> 65,272,264
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 680,325
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 861,864
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<SHARES-REINVESTED> 46,761
<NET-CHANGE-IN-ASSETS> 129,788,557
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (92,390,989)
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,884,636
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,473,887
<AVERAGE-NET-ASSETS> 10,116,920
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<PER-SHARE-NII> 0.622
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.050
<EXPENSE-RATIO> 1.810
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 023
<NAME> LIMITED-TERM GOVERNMENT FUND C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 690,495,474
<INVESTMENTS-AT-VALUE> 697,717,835
<RECEIVABLES> 9,353,646
<ASSETS-OTHER> 0
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<TOTAL-ASSETS> 707,558,863
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,302,136
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<SENIOR-EQUITY> 816,013
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<EXPENSES-NET> 7,473,887
<NET-INVESTMENT-INCOME> 60,161,119
<REALIZED-GAINS-CURRENT> (29,734,372)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 164
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,670
<NUMBER-OF-SHARES-REDEEMED> 72
<SHARES-REINVESTED> 18
<NET-CHANGE-IN-ASSETS> 129,788,557
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (92,390,989)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,884,636
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,473,887
<AVERAGE-NET-ASSETS> 15,794
<PER-SHARE-NAV-BEGIN> 9.010
<PER-SHARE-NII> 0.051
<PER-SHARE-GAIN-APPREC> 0.040
<PER-SHARE-DIVIDEND> 0.051
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.050
<EXPENSE-RATIO> 1.810
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 024
<NAME> LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 690,495,474
<INVESTMENTS-AT-VALUE> 697,717,835
<RECEIVABLES> 9,353,646
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 487,382
<TOTAL-ASSETS> 707,558,863
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,302,136
<TOTAL-LIABILITIES> 4,302,136
<SENIOR-EQUITY> 816,013
<PAID-IN-CAPITAL-COMMON> 815,196,742
<SHARES-COMMON-STOCK> 4,140,745
<SHARES-COMMON-PRIOR> 4,140,598
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (119,978,389)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,222,361
<NET-ASSETS> 37,459,750
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 67,635,006
<OTHER-INCOME> 0
<EXPENSES-NET> 7,473,887
<NET-INVESTMENT-INCOME> 60,161,119
<REALIZED-GAINS-CURRENT> (29,734,372)
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<NET-CHANGE-FROM-OPS> 65,272,264
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,903,493
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<NUMBER-OF-SHARES-SOLD> 1,090,957
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<SHARES-REINVESTED> 319,328
<NET-CHANGE-IN-ASSETS> 129,788,557
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (92,390,989)
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,884,636
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,473,887
<AVERAGE-NET-ASSETS> 36,945,499
<PER-SHARE-NAV-BEGIN> 8.990
<PER-SHARE-NII> 0.712
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<PER-SHARE-DIVIDEND> 0.712
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.050
<EXPENSE-RATIO> 0.810
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
