<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
File No. 2-75526
File No. 811-3363
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.
------
Post-Effective Amendment No. 44 [X]
------
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 44
------
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 28, 1997
-----------------
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
---------
X on February 28, 1997 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, 1997.
<PAGE> 2
--- C O N T E N T S ---
This Post-Effective Amendment No. 44 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> 3
CROSS-REFERENCE SHEET*
PART A
<TABLE>
<CAPTION>
Item No. Description Location in Prospectuses
- -------- ----------- ------------------------
Limited-Term Government Fund
<S> <C> <C> <C>
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
Policies; and Policies;
Shares; Shares;
Additional Additional
Information on Information Policies
and on Policies
Risk Factors and Risk
Factors
5 Management of the Fund . . . . . . . . . . . . . . . . . . . . . Management Management
of the Fund of the Fund
6 Capital Stock and Other Securities . . . . . . . . . . . . . . . Delaware Dividends
Difference; and
Dividends and Distribu-
Distributions; tions;
Taxes; Shares Taxes;
Shares
7 Purchase of Securities Being Offered . . . . . . . . . . . . . . . Cover; How to Cover; How
Buy Shares; to Buy
Calculation of Shares;
Offering Price Calculation
and Net Asset of Net Asset Value
Per Share; Value Per
Management of Share;
the Fund Management
of the Fund
8 Redemption or Repurchase . . . . . . . . . . . . . . . . . . . . . How to Buy How to Buy
Shares; Shares;
Redemption Redemption
and Exchange and
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 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> 4
CROSS-REFERENCE SHEET
PART A
(Continued)
<TABLE>
<CAPTION>
Item No. Description Location in Prospectus
- -------- ----------- ----------------------
U.S. Government Money Fund
A Class/Consultant Class
<S> <C> <C>
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 istributions;
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> 5
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 Plan Under for the U.S.
12b-1 for the Fund Government Fund
Classes (under Consultant Class
Purchasing Shares); (under Purchasing
Investment Shares); Investment
Management Agreement; Officers
Agreement; Officers and Directors; General
and Directors; General Information; Financial
Information; Financial Statements
Statements
17 Brokerage Allocation . . . . . . . . . . . . . . . . . . . . . . . . Trading Practices Trading Practices
and Brokerage
Practices
18 Capital Stock and Other Securities . . . . . . . . . . . . . . . . . Capitalization and Capitalization and
and Noncumulative Noncumulative
Voting (under Voting (Under
General Information) General Information)
</TABLE>
<PAGE> 6
CROSS-REFERENCE SHEET
PART B
(Continued)
<TABLE>
<CAPTION>
Location in Statements
Item No. Description of Additional Information
- -------- ----------- -------------------------
Limited-Term U.S. Government
Government Fund Money Series
<S> <C> <C> <C>
19 Purchase, Redemption and Pricing of
Securities Being Offered . . . . . . . . . . . . . . . . . Purchasing Shares; Purchasing Shares;
Determining Offering Price;
Offering Price Redemption; Exchange
and Net Asset Privilege
Value; Redemption
and Repurchase;
Exchange Privilege
20 Tax Status . . . . . . . . . . . . . . . . . . . . . . . . Taxes Taxes
21 Underwriters . . . . . . . . . . . . . . . . . . . . . . . Purchasing Shares Purchasing Shares
22 Calculation of Performance Data . . . . . . . . . . . . . Performance Performance
Information Information
23 Financial Statements . . . . . . . . . . . . . . . . . . . Financial Statements Financial Statements
</TABLE>
<PAGE> 7
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> 8
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND) FEBRUARY 28, 1997
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
REPRESENTATIVES OF FINANCIAL INSTITUTIONS:
NATIONWIDE 800-659-2259
This Prospectus describes the shares of the Limited-Term Government
Fund series (the "Fund") of Delaware Group Limited-Term Government Funds, Inc.
("Limited-Term Funds, Inc."), a professionally- managed mutual fund of the
series type. 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 Fund offers Limited-Term Government Fund A Class ("Class A
Shares"), Limited-Term Government Fund B Class ("Class B Shares") and
Limited-Term Government Fund C Class ("Class C Shares") (individually, a
"Class" and collectively, the "Classes").
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. The Fund's Statement of Additional Information
("Part B" of Limited-Term Funds, Inc.'s registration statement), dated February
28, 1997, 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 Limited-Term Government Fund Institutional Class.
That class is available for purchase only by certain investors. A prospectus
for 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.
-1-
<PAGE> 9
(LTGF-ABC)
TABLE OF CONTENTS
<TABLE>
<S> <C>
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
APPENDIX B - CLASSES OFFERED
</TABLE>
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> 10
(LTGF-ABC)
SYNOPSIS
INVESTMENT OBJECTIVE
The investment 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 and Additional Information on Investment Policies and
Risk Considerations.
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.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Limited-Term Funds, Inc.'s Board of Directors. The Manager also provides
investment management services to certain of 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, accounting services and transfer
agent for the Fund and for all of the other mutual funds in the Delaware Group.
See Summary of Expenses and Management of the Fund for further information
regarding the Manager and the fees payable under the Fund's Investment
Management Agreement.
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. For purchases
of $1,000,000 or more, the front-end sales charge is eliminated. Class A
Shares are subject to annual 12b-1 Plan expenses for the life of the
investment.
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 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.
-3-
<PAGE> 11
(LTGF-ABC)
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 are generally not subject to a CDSC. The
minimum and maximum purchase amounts for retirement plans may vary. See How to
Buy Shares.
REDEMPTION AND EXCHANGE
Class A Shares of each Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Funds 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 Funds
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.
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.
-4-
<PAGE> 12
(LTGF-ABC)
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, as applicable) . . . . . . . . . . . . . . . . . . . None* 2.00%* 1.00%*
Redemption Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None** None** None**
</TABLE>
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE CLASS A CLASS B CLASS C
DAILY NET ASSETS) SHARES SHARES SHARES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50% 0.50% 0.50%
12b-1 Expenses (including service fees) . . . . . . . . . . . . . . . . . 0.15%***/+ 1.00%+ 1.00%+
Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.28% 0.28% 0.28%
----- ----- -----
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . 0.93%*** 1.78% 1.78%
===== ===== =====
</TABLE>
*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> 13
(LTGF-ABC)
**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 vary because of the formula
adopted by the Board of Directors for use in calculating the 12b-1 Plan
expenses for this Class beginning June 1, 1992, but the 12b-1 Plan expenses
will not be more than 0.15% nor less than 0.10%.
+Class A Shares, Class B Shares and Class C Shares of the Fund 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 under Management of the Fund.
Unless waived, investors utilizing the Delaware Group Asset Planner
asset allocation service will incur an annual maintenance fee of $35 per
Strategy. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual IRA fee of $15 per Social Security number.
See How to Buy Shares--Delaware Group Asset Planner.
For expense information about 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 and no redemption at the end of each time period
and (3) for 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 $39(1) $59 $80 $141 $39 $59 $80 $141
CLASS B SHARES $38 $66 $96(2) $157(2) $18 $56 $96(2) $157(2)
CLASS C SHARES $28 $56 $96 $209 $18 $56 $96 $209
</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.
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.
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> 14
(LTGF-ABC)
- --------------------------------------------------------------------------------
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> 15
(LTGF-ABC)
LTGF-A-CHT
<TABLE>
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------
YEAR ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . $9.050 $8.990 $9.840 $10.000 $10.190
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . 0.600 0.699 0.667 0.681 0.740
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . (0.280) 0.060 (0.850) (0.160) (0.190)
------- ----- ------- ------- -------
Total From Investment Operations . . . . . . . . . . . . . 0.320 0.759 (0.183) 0.521 0.550
----- ----- ------- ----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.600) (0.699) (0.667) (0.681) (0.740)
Distributions (from capital gains) . . . . . . . . . . . . . . none none none none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . . . . . (0.600) (0.699) (0.667) (0.681) (0.740)
------- ------- ------- ------- -------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $8.770 $9.050 $8.990 $9.840 $10.000
====== ====== ====== ====== =======
- -----------------------------------------------------------------
TOTAL RETURN(1) . . . . . . . . . . . . . . . . . . . . . 3.69% 8.71% (1.88%) 5.31% 5.62%(1)
- ------------
- -----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $464,649 $653,451 $789,525 $1,126,031 $861,829
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 0.93% 0.96% 0.91% 0.88% 0.87%(2)
Ratio of Net Investment Income to Average Daily Net Assets . . 6.80% 7.71% 7.10% 6.77% 7.03%(3)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . 83% 73% 148% 171% 77%
<CAPTION>
CLASS A SHARES
-----------------------------------------------------------
YEAR ENDED
12/31/91 12/31/90 12/28/89 12/29/88 12/31/87
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . $9.770 $9.720 $9.700 $9.800 $9.980
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . 0.799 0.814 0.843 0.730 0.695
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . 0.420 0.050 0.020 (0.100) (0.180)
----- ----- ----- ------- -------
Total From Investment Operations . . . . . . . . . . . . . 1.219 0.864 0.863 0.630 0.515
----- ----- ----- ----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.799) (0.814) (0.843) (0.730) (0.695)
Distributions (from capital gains) . . . . . . . . . . . . . . none none none none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . . . . . (0.799) (0.814) (0.843) (0.730) (0.695)
------- ------- ------- ------- -------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $10.190 $9.770 $9.720 $9.700 $9.800
======= ====== ====== ====== ======
- -----------------------------------------------------------------
TOTAL RETURN(1) . . . . . . . . . . . . . . . . . . . . . 13.04%(1) 9.32% 9.28% 6.63% 5.46%
- ------------
- -----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $144,129 $107,739 $107,637 $132,859 $138,818
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 0.90%(2) 0.99% 0.97% 0.90% 1.06%
Ratio of Net Investment Income to Average Daily Net Assets . . 7.96%(3) 8.41% 8.72% 7.44% 6.86%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . 42% 175% 311% 146% 304%
</TABLE>
- ------------------------------
(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 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 and 0.99% for 1991 for 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 and 7.87% for 1991 for
Limited-Term Government Fund A Class.
-51-
<PAGE> 16
LTGF-B-CHT
<TABLE>
<CAPTION>
CLASS B SHARES
--------------------------------------------------------------
PERIOD
YEAR ENDED 5/2/94(1)
12/31/96 12/31/95 12/31/94
<S> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . $9.050 $8.990 $9.430
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . 0.524 0.622 0.399
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . (0.280) 0.060 (0.440)
------- ----- -------
Total From Investment Operations . . . . . . . . . . . . . 0.244 0.682 (0.041)
----- ----- -------
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.524) (0.622) (0.399)
Distributions (from capital gains) . . . . . . . . . . . . . . none none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none none
---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . . . . . (0.524) (0.622) (0.399)
------- ------- -------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $8.770 $9.050 $8.990
====== ====== ======
- -----------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 2.81%(2) 7.60%(2) (0.44%)(2)
- ------------
- -----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $12,959 $12,313 $6,282
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 1.78% 1.81% 1.76%
Ratio of Net Investment Income to Average Daily Net Assets . . 5.91% 6.86% 6.25%
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . 83% 73% 148%
<CAPTION>
CLASS C SHARES
------------------------------------------
PERIOD
YEAR 11/29/95(3)
ENDED THROUGH
12/31/96 12/31/95
<S> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . . . . . $9.050 $9.010
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . 0.524 0.051
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . (0.280) 0.040
------- -----
Total From Investment Operations . . . . . . . . . . . . . 0.244 0.091
----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.524) (0.051)
Distributions (from capital gains) . . . . . . . . . . . . . . none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none
----- ----
Total Distributions . . . . . . . . . . . . . . . . . . . . (0.524) (0.051)
------- -------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $8.770 $9.050
====== ======
- -----------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 2.81% (2) (2)(3)
- ------------
- -----------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $3,090 $33
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 1.78% (3)
Ratio of Net Investment Income to Average Daily Net Assets . . 5.78% (3)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . . . . 83% (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) Does not include any CDSC which varies from 1% - 2%, depending upon
the holding period for Limited-Term Government Fund B Class and 1%
for Limited-Term Government Fund C Class for 12 months from the date
of purchase.
(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> 17
(LTGF-ABC)
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.
Although the Fund will constantly strive to attain its objective,
there can be no assurance that it will be obtained. The objective of the Fund
cannot be changed without shareholder approval.
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.
-8-
<PAGE> 18
(LTGF-ABC)
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.
<TABLE>
<CAPTION>
YIELD CURVE
12/29/95 12/31/96
Average Portfolio Maturity
<S> <C> <C>
3 Month 5.072 5.186
6 Month 5.147 5.297
1 Year 5.132 5.488
2 Year 5.150 5.868
3 Year 5.208 6.010
5 Year 5.374 6.206
10 Year 5.570 6.418
30 Year 5.949 6.641
</TABLE>
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 29, 1995. The purple line represents the
yield curve as of December 31, 1996. The data was obtained from Bloomberg.
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)
-9-
<PAGE> 19
(LTGF-ABC)
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) securities which are
backed by assets such as receivables on home equity and credit loans,
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or financial receivables
currently available or which may be developed in the future. 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).
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
plans and leases or other loans or financial receivables currently available or
which may be developed in the future. 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.
-10-
<PAGE> 20
(LTGF-ABC)
* * *
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.
-11-
<PAGE> 21
(LTGF-ABC)
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 at any time for
current performance information. Current yield and total return information
may also be included in advertisements and information given to shareholders.
Yields are computed on an annualized basis over a 30-day period.
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.
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
-12-
<PAGE> 22
(LTGF-ABC)
dividends. 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 to you information
on the tax status of your dividends and distributions.
DIVIDEND PAYMENTS
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 Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.
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. See
Dividends and Distributions. 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. See Systematic Withdrawal
Plans under Redemption and Exchange. 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 the name and address on your
designated bank account are not identical to the name and address on your Fund
account, you must have your signature guaranteed. This service is not
available for certain retirement plans.
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 of the Fund 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.
-13-
<PAGE> 23
(LTGF-ABC)
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.
EXCHANGE PRIVILEGE
The Exchange Privilege permits you to exchange all or part of
your shares into shares of 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 invest in the Fund through regular liquidations
of shares in your accounts 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 Fund shares. See Additional
Methods of Adding to Your Investment - Wealth Builder Option and Investing by
Exchange under How to Buy Shares, and Redemption and Exchange.
DELAWARE GROUP ASSET PLANNER
Delaware Group Asset Planner is an asset allocation service that
gives you, when 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, you may also tailor an
allocation strategy that meets your personal needs and goals. See How to Buy
Shares.
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.
-14-
<PAGE> 24
(LTGF-ABC)
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 shares of
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. 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")
New SAR/SEP plans may not be established after December 31, 1996.
Employers must have no more than 25 employees to maintain an existing 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.
-15-
<PAGE> 25
(LTGF-ABC)
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.
ALLIED PLANS
Class A Shares are available for purchase by participants in
certain 401(k) Defined Contribution Plans ("Allied Plans") which are made
available under a joint venture agreement between the Distributor and another
institution through which mutual funds are marketed and which allow investments
in Class A Shares of designated Delaware 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.
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.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware 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
Limited CDSC will be paid by the financial adviser or selling dealer. See
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
-16-
<PAGE> 26
(LTGF-ABC)
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, which 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 0.30% (currently, no more than 0.15% pursuant to Board action)
of average daily net assets of such shares. Certain purchases of Class A
Shares qualify for reduced front-end sales charges. 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.
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 contingent deferred
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%
(0.25% of which are service fees to be paid to the Distributor, dealers or
others for providing personal service and/or maintaining shareholder accounts)
of average daily net assets of 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 automatically be converted into Class A Shares,
and therefore, for the remainder of the life of the investment, the annual
12b-1 Plan fee of up to 0.30% (currently no more than 0.15% pursuant to Board
action) for the Class A Shares will apply. 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 contingent deferred
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% (0.25% of
which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of 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. 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, and the effect of
-17-
<PAGE> 27
(LTGF-ABC)
earning a return on such additional money will diminish over time. In
comparing Class B Shares to Class C Shares, investors should also consider the
desirability of an automatic conversion feature, which is available only for
Class B Shares.
Prospective investors should refer to Appendix A - Investment
Illustrations in 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. Financial advisers 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
Distribution (12b-1) and Service under Management Fund.
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 Rules of Fair Practice, as amended, relating
to investment company sales charges. Limited-Term Funds, Inc. and the
Distributor intend to operate in compliance with these rules.
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<PAGE> 28
(LTGF-ABC)
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.
LIMITED-TERM GOVERNMENT FUND A CLASS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
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 2.51 2.00
$250,000 but under $500,000 2.00 2.06 1.60
$500,000 but under $1,000,000* 1.50 1.50 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 0.15% 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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<PAGE> 29
(LTGF-ABC)
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 made in accordance with the following schedule:
<TABLE>
<CAPTION>
DEALER'S
COMMISSION
----------
(as a percent-
age of amount
AMOUNT OF PURCHASE purchased)
------------------ ----------
<S> <C>
Up to $3 million 0.60%
Next $2 million up to $5 million 0.40
Amount over $5 million 0.20
</TABLE>
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.
-20-
<PAGE> 30
(LTGF-ABC)
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.
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 also be made by clients of
registered representatives of an authorized investment dealer at net asset
value within 12 months after the registered representative changes employment,
if the purchase is funded by proceeds from an investment where a front-end
sales charge, contingent deferred sales charge or other sales charge has been
assessed. Purchases of Class A Shares may also be made at net asset value by
bank employees who provide services in connection with agreements between the
bank and unaffiliated brokers or dealers concerning sales of shares of Delaware
Group funds. In addition, purchases of Class A Shares may be made by financial
institutions investing for the account of their trust customers when they are
not eligible to purchase shares of the Fund's institutional class. 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 15, 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.
Employees participating in such Group
-21-
<PAGE> 31
(LTGF-ABC)
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. In addition, from time to time, upon written
notice to all of its dealers, the Distributor may hold special promotions for
specified periods during which the Distributor may pay additional compensation
to dealers or brokers for selling Class B Shares at the time of purchase. As
discussed below, however, Class B Shares are subject to annual 12b-1 Plan
expenses and, if redeemed within three years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to
the Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class
B Shares. Payments to the Distributor and others under the Class B 12b-1 Plan
may be in an amount equal to no more than 1% annually. The combination of the
CDSC and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to
sell Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege
described below will continue to be subject to the CDSC schedule for Class B
Shares as described in this 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.
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<PAGE> 32
(LTGF-ABC)
Class B Shares of a fund acquired through a reinvestment of
dividends will convert to the corresponding Class A Shares of that fund (or, in
the case of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve
Consultant Class) pro-rata with Class B Shares of that fund not acquired
through dividend reinvestment.
All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.
-23-
<PAGE> 33
(LTGF-ABC)
LEVEL SALES CHARGE ALTERNATIVE - CLASS C SHARES
Class C Shares may be purchased at net asset value without a
front-end sales charge and, as a result, the full amount of the investor's
purchase payment will be invested in Fund shares. The Distributor currently
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:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR AFTER PURCHASE MADE SUBJECT TO CHARGE)
------------------------ ------------------
<S> <C>
0-2 2%
3 1%
4 and thereafter None
</TABLE>
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
0.30% (currently, no more than 0.15% pursuant to Board action) of average daily
net assets of such shares.
-24-
<PAGE> 34
(LTGF-ABC)
In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than three years are
redeemed first, followed by shares acquired through the reinvestment of
dividends or distributions, and finally by shares held longest during the
three-year period. With respect to Class C Shares, it will be assumed that
shares held for more than 12 months are redeemed first, followed by shares
acquired through the reinvestment of dividends or distributions, and finally by
shares held for 12 months or less.
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.
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 0.25% of the dollar amount of such sales. The
Distributor may also provide additional promotional incentives or payments to
dealers that sell shares of the Delaware 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.
LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL CLASS
In addition to offering Class A, Class B and Class C Shares, the
Fund also offers 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
Limited-Term Government Fund Institutional Class, contact the Distributor by
writing to the address or by calling the telephone number listed on the back of
this Prospectus.
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<PAGE> 35
(LTGF-ABC)
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. For purchases under the Uniform Gifts to Minors Act or
Uniform Transfers to Minors Act or through an Automatic Investing Plan, there
is 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, the Delaware Group 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 to Delaware Group 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 1412893401
(include your name(s) and your account number for the Fund and 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,
to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.
-26-
<PAGE> 36
(LTGF-ABC)
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.
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. See Redemption and Exchange for more complete
information concerning your exchange privilege.
Holders of Class A Shares of the Fund may exchange all or part of
their shares for certain of the shares of other funds in the Delaware 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. See Appendix B -- Classes Offered for a
list of Delaware Group funds and the classes they offer. Class B Shares of the
Fund and Class C Shares of the Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of the Fund acquired by exchange will be added to that of the shares
that were exchanged for purposes of determining the time of the automatic
conversion into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be
made without a front-end sales charge, except for exchanges of shares that were
not previously subject to a front-end sales charge (unless such shares were
acquired through the reinvestment of dividends). Permissible exchanges into
Class B Shares or Class C Shares of the Fund will be made without the
imposition of a CDSC by the fund from which the exchange is being made at the
time of the exchange.
See Allied Plans under 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.
-27-
<PAGE> 37
(LTGF-ABC)
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 through an automatic investing plan or by
direct deposit 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 our Wealth Builder Option to invest in the Fund
through regular liquidations of shares in your accounts in other funds in the
Delaware Group. You may also elect to invest in other mutual funds in the
Delaware Group through the Wealth Builder Option through regular liquidations
of shares in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account
in one or more funds in the Delaware Group and invested automatically into any
other account in a Delaware Group mutual fund that you may specify. If in
connection with the election of the Wealth Builder Option, you wish to open a
new account to receive the automatic investment, such new account must meet the
minimum initial purchase requirements described in the prospectus of the fund
that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation in Wealth Builder at any
time by giving written notice to the fund from which the exchanges are made.
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.
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(LTGF-ABC)
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. 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. See Appendix B --Classes
Offered for a list of the funds offering those classes of shares. For more
information about reinvestments, call the Shareholder Service Center.
Distributions for capital gains and/or dividends for participants
in the following retirement plans are automatically reinvested into the same
Delaware Group fund: SAR/SEP, SEP/IRA, Profit Sharing, Money Purchase Pension,
401(k), 403(b)(7), or 457 Plans.
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 under The Delaware
Difference, the Delaware Group Asset Planner service offers a choice of four
predesigned asset allocation strategies (each with a different 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. Exchanges from
existing Delaware Group accounts into the Asset Planner service may be made at
net asset value under the circumstances described under Investing by Exchange,
above. The minimum initial investment per Strategy is $2,000; subsequent
investments must be at least $100. Individual fund minimums do not apply to
investments made using the Asset Planner service. Class A, Class B and Class C
Shares are available through the Asset Planner service. Generally, only shares
within the same class may be used within the same Strategy. However, Class A
Shares of the Fund and of other funds in the Delaware Group may be used in the
same Strategy with consultant class shares that are offered by certain other
Delaware Group funds. See Appendix B--Classes Offered for the funds in the
Delaware Group that offer consultant class shares.
An annual maintenance fee, currently $35 per Strategy, is
typically 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. However, effective November 1, 1996, the annual
fee is waived until further notice. Investors who utilize the Asset Planner
for an IRA will continue to pay an annual IRA fee of $15 per Social Security
number. 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.
PURCHASE PRICE AND EFFECTIVE DATE
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(LTGF-ABC)
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.
The Fund also reserves the right, following shareholder
notification, to charge a service fee on non- retirement accounts that, as a
result of a redemption, have remained below the minimum stated account balance
for a period of three or more consecutive months. Holders of such accounts may
be notified of their insufficient account balance and advised that they have
until the end of the current calendar quarter to raise their balance to the
stated minimum. If the account has not reached the minimum balance requirement
by that time, the Fund will charge a $9 fee for that quarter and each
subsequent calendar quarter until the account is brought up to the minimum
balance. The service fee will be deducted from the account during the first
week of each calendar quarter for the previous quarter, and will be used to
help defray the cost of maintaining low-balance accounts. No fees will be
charged without proper notice, and no CDSC will apply to such assessments.
The Fund also reserves the right, upon 60 days' written notice,
to involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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(LTGF-ABC)
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. For example, redemption or exchange requests received in good order
after the time the offering price and net asset value of shares are determined
will be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. A shareholder submitting a redemption request may
indicate that he or she wishes to receive redemption proceeds of a specific
dollar amount. In the case of such a request, and in the case of certain
redemptions from retirement plan accounts, the Fund will redeem the number of
shares necessary to deduct the applicable CDSC in the case of Class B and Class
C Shares and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
Except as noted below, for a redemption request to be in "good
order," you must provide your account number, account registration, and the
total number of shares or dollar amount of the transaction. For exchange
requests, you must also provide the name of the fund 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.
Each Fund will process written and telephone redemption requests
to the extent that the purchase orders for the shares being redeemed have
already settled. Each Fund will honor redemption requests as to shares for
which a check was tendered as payment, but a Fund will not mail or wire the
proceeds until it is reasonably satisfied that the purchase check has cleared,
which may take up to 15 days from the purchase date. You can avoid this
potential delay if you purchase shares by wiring Federal Funds. The Fund
reserves the right to reject a written or telephone redemption request or delay
payment of redemption proceeds if there has been a recent change to the
shareholder's address of record.
There is no front-end sales charge or fee for exchanges made
between shares of funds which both carry a front-end sales charge. Any
applicable front-end sales charge will apply to exchanges from shares of funds
not subject to a front-end sales charge, except for exchanges involving assets
that were previously invested in a fund with a front-end sales charge and/or
exchanges involving the reinvestment of dividends.
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(LTGF-ABC)
Holders of Class B Shares or Class C Shares that exchange their
shares ("Original Shares") for shares of other funds in the Delaware Group (in
each case, "New Shares") in a permitted exchanged, will not be subject to a
CDSC that might otherwise be due upon redemption of the Original Shares.
However, such shareholders will continue to be subject to the CDSC and, in the
case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Prospectus and any CDSC assessed upon redemption
will be charged by the fund from which the Original Shares were exchanged. For
purposes of computing the CDSC that may be payable upon a disposition of the
New Shares, the period of time that an investor held the Original Shares is
added to the period of time that an investor held the New Shares.
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 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.
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.
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(LTGF-ABC)
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, after receipt of the redemption request. This service
is only available to individual, joint and individual fiduciary-type accounts.
TELEPHONE REDEMPTION - PROCEEDS TO YOUR BANK
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
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 after receipt of your redemption request to your predesignated
bank account. There are no separate fees for this redemption method, but the
mail time may delay getting funds into your bank account. Simply call the
Shareholder Service Center prior to the time the offering price and net asset
value are determined, as noted above.
TELEPHONE EXCHANGE
The Telephone Exchange feature is a convenient and efficient way
to adjust your investment holdings as your liquidity requirements and
investment objectives change. You or your investment dealer of record can
exchange your shares into other funds in 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.
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(LTGF-ABC)
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. Your funds will normally be credited to
your bank account two business days after the payment date. There are no
separate 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. The MoneyLine Direct Deposit Service described
above is not available for certain retirement plans.
* * *
Shareholders should not purchase additional shares while
participating in a Systematic Withdrawal Plan.
Redemptions of Class A Shares via 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.
The applicable CDSC for Class B Shares and Class C Shares
redeemed via a Systematic Withdrawal Plan will be waived if, on the date that
the Plan is established, the annual amount selected to be withdrawn is less
than 12% of the account balance. If the annual amount selected to be withdrawn
exceeds 12% of the account balance on the date that the Systematic Withdrawal
Plan is established, all redemptions under the Plan will be subject to the
applicable CDSC. Whether a waiver of the CDSC is available or not, the first
shares to be redeemed for each Systematic Withdrawal Plan payment will be those
not subject to a CDSC because they have either satisfied the required holding
period or were acquired through the reinvestment of distributions. The 12%
annual limit will be reset on the date that any Systematic Withdrawal Plan is
modified (for example, a change in the amount selected to be withdrawn or the
frequency or date of withdrawals), based on the balance in the account on that
date. See Waiver of Contingent Deferred Sales 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.
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(LTGF-ABC)
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) 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 is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from
the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) returns of excess contributions to an IRA 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 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
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(LTGF-ABC)
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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(LTGF-ABC)
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 Class of the Fund 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, if any, are automatically
reinvested in your account at net asset value unless you elect otherwise. 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 your 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 choose the MoneyLine
Direct Deposit Service to have your payments transferred from your Fund account
to your predesignated bank account. This service is not available for certain
retirement plains. See MoneyLine Direct Deposit Service under The Delaware
Difference for more information about this service.
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(LTGF-ABC)
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 those investors who
are subject to income taxes 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 by-product 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 on a specified date in one of
those months 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 the Fund and any other fund in the Delaware Group. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares. All or a portion of the sales
charge incurred in acquiring the Fund's 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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<PAGE> 48
(LTGF-ABC)
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.
Limited-Term Funds, Inc. 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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<PAGE> 49
(LTGF-ABC)
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE
The net asset value ("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 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 that Limited-Term Government Fund Institutional Class will not
incur any of the expenses under Limited-Term Funds, Inc.'s 12b-1 Plans and the
Class A, Class B and Class C Shares of the Fund 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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<PAGE> 50
(LTGF-ABC)
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, 1996, the Manager and its
affiliates within the Delaware Group, including Delaware International Advisers
Ltd., were managing in the aggregate more than $32 billion in assets in the
various institutional or separately managed (approximately $20,047,798,000) and
investment company (approximately $11,881,459,000) 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 indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management. 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 the Fund's proportionate share of all
directors' fees paid to the unaffiliated directors by Limited-Term Funds, Inc.
Investment management fees paid by the Fund were 0.50% of average daily net
assets for the fiscal year ended December 31, 1996.
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 Delaware
Group's Chief Investment Officer for fixed-income. He is a CFA charterholder
and 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 where he served as Executive Vice
President and Director of Fixed Income. Mr. Reed holds an AB in Economics from
the University of Chicago and an MA in Economics from Columbia University. He
began his career in 1978 with the Equitable Life Assurance Company in New York
City, where he specialized in credit analysis. Prior to joining the Delaware
Group in 1989, Mr. Reed was Vice President and Manager of the fixed-income
department at Irving Trust Company in New York. He joined the Delaware Group
in 1989 as a vice president for fixed-income.
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<PAGE> 51
(LTGF-ABC)
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.
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, 1995 and
1996, the Fund's portfolio turnover rates were 73% and 83%, 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 or life-of-fund 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 that includes
the 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.
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<PAGE> 52
(LTGF-ABC)
DISTRIBUTION (12b-1) AND SERVICE
The Distributor, Delaware Distributors, L.P., serves as the
national distributor of the Fund's shares under a Distribution Agreement with
Limited-Term Funds, Inc. 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 the Class A Shares, Class B Shares and Class C
Shares of the Fund (the "Plans"). Each Plan permit the Fund to pay the
Distributor from the assets of the respective Classes a monthly fee for the
Distributor's services and expenses in distributing and promoting sales of
shares.
These expenses include, among other things, preparing and
distributing advertisements, sales literature, and prospectuses and reports
used for sales purposes, compensating sales and marketing personnel, holding
special promotions for specified periods of time, and paying distribution and
maintenance fees to brokers, dealers and others. In connection with the
promotion of the classes, 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 a Class and increase
sales of the Class. In addition, the Fund may make payments from the 12b-1
Plan fees of its respective Classes 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 of the Fund 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
(i) 0.30% of the Class A Shares' average daily net assets in any year, and (ii)
1% (0.25% 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. The Fund's 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.
On May 21, 1987, the Board of Directors set the fee for Class A
Shares, at 0.15% of average daily net assets.
While payments pursuant to the Plans may not exceed 0.30%
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 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 Distributor may, however, incur such additional
expenses and make additional payments to dealers from its own resources to
promote the distribution of shares of the Classes. 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 Plans do not apply to 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.
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<PAGE> 53
(LTGF-ABC)
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 Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. The directors of Limited-Terms Funds, Inc. 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. For the fiscal year
ended December 31, 1996, the ratios of expenses to the average daily net assets
for the Class A Shares, Class B Shares and Class C Shares were 0.93%, 1.78% and
1.78%, respectively. The ratio of each Class reflects the impact of its 12b-1
Plan.
SHARES
Limited-Term Funds, Inc., is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by the 1940
Act. 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 offers two series of
shares -- the Limited-Term Government Fund series and U.S. Government Money
Series.
Fund shares have a $.001 par value per share, equal voting
rights, except as noted below, and are equal in all other respects. The Fund
votes separately on any matter that affects only the Limited-Term Government
Fund series. Shares of the Fund will have a priority over shares of any other
fund of Limited-Term Funds, Inc. in the assets and income of the Fund.
Limited-Term Funds, Inc. 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 outstanding shares
may request that a special meeting be called to consider the removal of a
director.
In addition to Class A Shares, Class B Shares and Class C Shares,
the Fund also offers 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 Limited-Term Government
Fund Institutional Class may not vote on matters affecting the Distribution
Plans under Rule 12b-1 relating to the Class A, Class B and Class C Shares.
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 12b-1 Plan relating to Class A Shares.
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<PAGE> 54
(LTGF-ABC)
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.
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<PAGE> 55
(LTGF-ABC)
A purchase of a futures contract means the acquisition of a contractual right
to obtain delivery to the Fund of the securities called for by the contract at
a specified price during a specified future month. The Fund will not enter
into futures contracts to the extent that more than 5% of the Fund's assets are
required as futures contract margin deposits and will not engage in such
transactions to the extent that obligations relating to such transactions
exceed 20% of the Fund's assets.
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.
MORTGAGE-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 invest in securities which are backed by assets such
as receivables on home equity and credit loans, receivables regarding
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
plans and leases or other loans or financial receivables currently available or
which may be developed in the future.
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an
income stream consisting of both principal and interest payments in respect of
the receivables in the underlying pool. Pay-through asset-backed securities
are debt obligations issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the payments on the
underlying receivables provide the funds to pay the debt service on the debt
obligations issued.
The rate of principal payment on asset-backed securities
generally depends on the rate of principal payments received on the underlying
assets. Such rate of payments may be affected by economic and various other
factors such as changes in interest rates or the concentration of collateral in
a particular geographic area. Therefore,
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<PAGE> 56
(LTGF-ABC)
the yield may be difficult to predict and actual yield to maturity may be more
or less than the anticipated yield to maturity. Due to the shorter maturity of
the collateral backing such securities, there tends to be less of a risk of
substantial prepayment than with mortgage-backed securities but the risk of
such a prepayment does exist. Such asset-backed securities do, however,
involve certain risks not associated with mortgage-backed securities, including
the risk that security interests cannot be adequately or in many cases ever
established, and other risks which may be peculiar to particular classes of
collateral. For example, with respect to credit card receivables, a number of
state and federal consumer credit laws give debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the outstanding
balance. In the case of automobile receivables, there is a risk that the
holders may not have either a proper or first security interest in all of the
obligations backing such receivables due to the large number of vehicles
involved in a typical issuance and technical requirements under state laws.
Therefore recoveries on repossessed collateral may not always be available to
support payments on the securities. 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).
* * *
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<PAGE> 57
(LTGF-ABC)
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.
* * *
Part B provides more information on the Fund's investment
restrictions and policies.
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<PAGE> 58
LTGF-APP-CHT
APPENDIX A - INVESTMENT ILLUSTRATIONS
ILLUSTRATIONS OF HYPOTHETICAL RETURNS ON INVESTMENTS BASED ON PURCHASE OPTION
$10,000 PURCHASE
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
------------------ ---------------------------- ---------------------------- -----------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 9,700 10,000 10,000 9,700 10,000 10,000 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+ 10,185 10,415 10,415 10,185 10,415 10,415
2 10,694 10,847 10,847 10,694 10,847 10,847 10,694 11,847 10,847
3 11,229 11,297 11,297 11,229 11,197 11,297+ 11,229 11,297 11,297
4 11,790+ 11,766 11,766 11,790+ 11,766 11,766
5 12,380 12,255 12,255 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>
*This assumes that Class B Shares were converted to Class A Shares at the end
of the fifth year.
$250,000 PURCHASE
<TABLE>
<CAPTION>
Scenario 1 Scenario 2 Scenario 3 Scenario 4
No Redemption Redeem 1st Year Redeem 3rd Year Redeem 5th Year
------------------ ---------------------------- ------------------------------ -----------------------------
Year Class A Class B Class C Class A Class B Class C Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0 245,000 250,000 250,000 245,000 250,000 250,000 245,000 250,000 250,000 245,000 250,000 250,000
1 257,250 260,375 260,375 257,250 255,375 257,875+ 257,250 260,375 260,375 257,250 260,375 260,375
2 270,113 271,181 271,181 270,113 271,181 271,181 270,113 271,181 271,181
3 283,618+ 282,435 282,435 283,618+ 279,935 282,435 283,618+ 282,435 282,435
4 297,799 294,156 294,156 297,799 294,156 294,156
5 312,689 306,363 306,363 312,689 306,363 306,363
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>
*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> 59
(LTGF-ABC)
APPENDIX B--CLASSES OFFERED
<TABLE>
<CAPTION>
GROWTH OF CAPITAL A CLASS B CLASS C CLASS CONSULTANT CLASS
<S> <C> <C> <C> <C>
Trend Fund x x x -
Enterprise Fund x x x -
DelCap Fund x x x -
Value Fund x x x -
U.S. Growth Fund x x x -
Quantum Fund
TOTAL RETURN
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -
Blue Chip Fund
INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund x x x -
New Pacific Fund x x x -
International Equity Fund x x x -
World Growth Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -
CURRENT INCOME
Delchester Fund x x x -
Strategic Income Fund x x x -
Corporate Income Fund x x x -
Federal Bond Fund x x x -
U.S. Government Fund x x x -
Limited-Term Government Fund x x x -
TAX-FREE CURRENT INCOME
Tax-Free Pennsylvania Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -
MONEY MARKET FUNDS
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
</TABLE>
-49-
<PAGE> 60
(LTGF-ABC)
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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza New York, NY 10006
- ---------------------------------------------
LIMITED-TERM GOVERNMENT FUND
- ---------------------------------------------
A CLASS
- ---------------------------------------------
B CLASS
- ---------------------------------------------
C CLASS
- ---------------------------------------------
P R O S P E C T U S
- ---------------------------------------------
FEBRUARY 28, 1997
DELAWARE
GROUP
------
<PAGE> 61
(LTGF-IC)
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
(FORMERLY TREASURY RESERVES INTERMEDIATE FUND) FEBRUARY 28, 1997
INSTITUTIONAL CLASS SHARES
--------------------------------------------------------
1818 MARKET STREET, PHILADELPHIA, PA 19103
FOR MORE INFORMATION ABOUT THE LIMITED-TERM
GOVERNMENT FUND INSTITUTIONAL
CLASS CALL DELAWARE GROUP AT
800-828-5052.
This Prospectus describes shares of the Limited-Term Government Fund
series (the "Fund"), of Delaware Group Limited-Term Government Funds, Inc.
("Limited-Term Funds, Inc."), a professionally- managed mutual fund of the
series type. 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 Fund offers Limited-Term Government Fund Institutional Class (the
"Class").
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. The Fund's Statement of Additional Information ("Part B" of
Limited-Term Government Funds, Inc.'s registration statement), dated February
28, 1997, 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 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> 62
(LTGF-IC)
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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 PER SHARE
SUITABILITY MANAGEMENT OF THE FUND
INVESTMENT STRATEGY AND RISK FACTORS ADDITIONAL INFORMATION ON INVESTMENT POLICIES
CLASSES OF SHARES AND RISK CONSIDERATIONS
</TABLE>
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> 63
(LTGF-IC)
SYNOPSIS
INVESTMENT OBJECTIVE
The investment 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 and Additional Information on Investment Policies and
Risk Considerations.
RISK FACTORS AND SPECIAL CONSIDERATIONS
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.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Limited-Term Funds, Inc.'s Board of Directors. The Manager also provides
investment management services to certain 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, accounting services and transfer agent for the Fund and
for all of the other mutual funds in the Delaware Group. See Summary of
Expenses and Management of the Fund for further information regarding the
Manager and the fees payable under the Fund's Investment Management Agreement.
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.
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.
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> 64
(LTGF-IC)
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
LIMITED-TERM
GOVERNMENT FUND
SHAREHOLDER TRANSACTION EXPENSES INSTITUTIONAL 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
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None*
</TABLE>
<TABLE>
<CAPTION>
LIMITED-TERM
ANNUAL OPERATING EXPENSES GOVERNMENT FUND
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) INSTITUTIONAL CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Other Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.28%
-----
Total Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.78%
=====
</TABLE>
*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, Limited-Term Government Funds, Inc. charges no redemption fees.
<TABLE>
<CAPTION>
LIMITED-TERM GOVERNMENT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
FUND INSTITUTIONAL CLASS $8 $25 $43 $97
</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.
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> 65
(LTGF-IC)
- --------------------------------------------------------------------------------
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> 66
(LTGF-IC)
LTGF-IC-CHT
<TABLE>
<CAPTION>
YEAR ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92(1)(3) 12/31/91(1)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period . . . . . . . . . $9.050 $8.990 $9.840 $10.000 $10.190 $9.770
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . 0.613 0.712 0.681 0.696 0.754 0.816
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . (0.280) 0.060 (0.850) (0.160) (0.190) 0.420
------- ----- ------- ------- ------- -----
Total From Investment Operations . . . . . . . . . 0.333 0.772 (0.169) 0.536 0.564 1.236
----- ----- ------- ----- ----- -----
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . (0.613) (0.712) (0.681) (0.696) (0.754) (0.816)
Distributions (from capital gains) . . . . . . . . . . none none none none none none
Returns of Capital . . . . . . . . . . . . . . . . . none none none none none none
---- ---- ---- ---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . (0.613) (0.712) (0.681) (0.696) (0.754) (0.816)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period . . . . . . . . . . . . $8.770 $9.050 $8.990 $9.840 $10.000 $10.190
====== ====== ====== ====== ======= =======
- --------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . 3.84% 8.87% (1.74%) 5.44% 5.77%(4) 13.21%(4)
- ------------
- --------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . $30,349 $37,460 $37,238 $47,700 $52,403 $146,598
Ratio of Expenses to Average Daily Net Assets . . . . . 0.78% 0.81% 0.76% 0.74% 0.75%(5) 0.75%(5)
Ratio of Net Investment Income to Average Daily
Net Assets . . . . . . . . . . . . . . . . . . . . . 6.92% 7.86% 7.25% 6.91% 7.58%(6) 8.11%(6)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . 83% 73% 148% 171% 77% 42%
<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>
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>
- ------------------------------
(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 in to 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 in formation.
(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.
-28-
<PAGE> 67
(LTGF-IC)
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.
Although the Fund will constantly strive to attain its objective,
there can be no assurance that it will be obtained. The objective of the Fund
cannot be changed without shareholder approval.
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.
-6-
<PAGE> 68
(LTGF-IC)
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
<TABLE>
<CAPTION>
12/29/95 12/31/96
Average Portfolio Maturity
<S> <C> <C>
3 Month 5.072 5.186
6 Month 5.147 5.297
1 Year 5.132 5.488
2 Year 5.150 5.868
3 Year 5.208 6.010
5 Year 5.374 6.206
10 Year 5.570 6.418
30 Year 5.949 6.641
</TABLE>
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 29, 1995. The purple line represents the
yield curve as of December 31, 1996. The data was obtained from Bloomberg.
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)
-7-
<PAGE> 69
(LTGF-IC)
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) securities which are
backed by assets such as receivables on home equity and credit loans,
receivables regarding automobile, mobile home and recreational vehicle loans,
wholesale dealer floor plans and leases or other loans or financial receivables
currently available or which may be developed in the future. 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).
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
plans and leases or other loans or financial receivables currently available or
which may be developed in the future. 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.
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* * *
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.
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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) a bank, trust company and similar financial institution
investing for its own account or for the account of its trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class, except where the investment is part of a
program that requires payment to the financial institution of a Rule 12b-1 Plan
fee; and (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. 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 Distributor. The Limited-Term
Government Fund A Class carries a front-end sales charge and has annual 12b-1
expenses equal to a maximum of 0.30%. 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.
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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 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 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 Fund and 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 1818 Market Street, Philadelphia, PA 19103.
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 Fund shares through most investment
dealers who, as part of the service they provide, must transmit orders promptly
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.
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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.
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.
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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. For example, redemption and exchange requests received in good order
after the time the net asset value of shares is determined 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. With
regard to exchanges, you must also provide the name of the fund you want to
receive the proceeds. Exchange instructions and redemption requests must be
signed by the record owner(s) exactly as the shares are registered. You may
request a redemption or an exchange by calling the Fund at 800-828-5052.
Redemption proceeds will be distributed promptly, as described below, but not
later than seven days after receipt of a redemption request.
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 process written and telephone redemption requests
to the extent that the purchase orders for the shares being redeemed have
already settled. The Fund will honor written redemption requests as to shares
for which a check was tendered as payment, but will not mail or wire the
proceeds until it is reasonably satisfied that the check has cleared, which may
take up to 15 days from the purchase date. You can avoid this potential delay
if you purchase shares by wiring Federal Funds. The Fund reserves the right to
reject a written or telephone redemption request or delay payment of redemption
proceeds if there has been a recent change to the shareholder's address of
record.
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 although, in the case of an exchange, a sales charge may apply. 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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CHECKWRITING FEATURE
YOU CAN REQUEST SPECIAL CHECKS BY MARKING THE BOX ON THE
INVESTMENT APPLICATION.
The checks must be drawn for $500 or more and, unless otherwise
indicated on the Investment Application or your checkwriting authorization
form, must be signed by all owners of the account.
Because the value of shares fluctuates, you cannot use checks to
close your account. The Checkwriting Feature is not available for retirement
plans. See Part B for additional information.
WRITTEN REDEMPTION AND EXCHANGE
You can write to the Fund at 1818 Market Street, Philadelphia, PA
19103 to redeem some or all of your Class shares or to request an exchange of
any or all of your shares into another mutual fund in the Delaware Group,
subject to the same conditions and limitations as other exchanges noted above.
The request must be signed by all owners of the account or your investment
dealer of record.
For redemptions of more than $50,000, or when the proceeds are
not sent to the shareholder(s) at the address of record, the Fund requires a
signature by all owners of the account and may require a signature guarantee.
Each signature guarantee must be supplied by an eligible guarantor institution.
The Fund reserves the right to reject a signature guarantee supplied by an
eligible institution based on its creditworthiness. The Fund may require
further documentation from corporations, executors, retirement plans,
administrators, trustees or guardians.
The redemption request is effective at the net asset value next
determined after it is received in good order. Payment is normally mailed the
next business day, but no later than seven days, after receipt of your
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 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. 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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(LTGF-IC)
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 after receipt of the redemption 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, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
If you ask for a check, it will normally be mailed the next business day after
receipt of your redemption request to your predesignated bank account. There
are no 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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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 those investors who
are subject to income taxes 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
by-product 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 the Fund and any other fund in the Delaware Group. Any loss incurred
on a sale or exchange of Fund shares that had been held for six months or less
will be treated as a long-term capital loss to the extent of capital gain
dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to
state and local taxes on distributions. Distributions of interest income and
capital gains realized from certain types of U.S. government securities may be
exempt from state personal income taxes. Shares of the 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.
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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 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 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 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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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, 1996 the Manager and its
affiliate, Delaware International Advisers Ltd., were supervising in the
aggregate more than $32 billion in assets in the various institutional or
separately managed (approximately $20,047,798,000) and investment company
(approximately $11,881,459,000) 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 indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management. 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, 1996.
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 Delaware
Group's Chief Investment Officer for fixed-income. He is a CFA charterholder
and 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 where he served as Executive Vice
President and Director of Fixed Income. Mr. Reed holds an AB in Economics from
the University of Chicago and an MA in Economics from Columbia University. He
began his career in 1978 with the Equitable Life Assurance Company in New York
City, where he specialized in credit analysis. Prior to joining the Delaware
Group in 1989, Mr. Reed was Vice President and Manager of the fixed-income
department at Irving Trust Company in New York. He joined the Delaware Group
in 1989 as a vice president for fixed-income.
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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.
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, 1995 and 1996, the
Fund's portfolio turnover rates were 73% and 83%, 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 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.
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DISTRIBUTION AND SERVICE
The Distributor, Delaware Distributors, L.P. serves as the
national distributor of Fund shares under a Distribution Agreement with
Limited-Term Funds, Inc. 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 Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. The directors annually review service fees paid to the
Transfer Agent. Certain recordkeeping and other shareholder services that
otherwise would be performed by the Transfer Agent may be performed by certain
other entities and the Transfer Agent may elect to enter into an agreement to
pay such other entities for those services. In addition, participant account
maintenance fees may be assessed for certain recordkeeping services provided as
part of retirement plan and administration service packages. These fees are
based on the number of participants in the plan and the various services
selected. 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 0.78% for the fiscal
year ended December 31, 1996.
SHARES
Limited-Term Funds, Inc. is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by the 1940
Act. 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 offers two series of
shares - the Limited-Term Government Fund series and U.S. Government Money
Series. Fund shares have a $.001 par value per share, equal voting rights,
except as noted below, and are equal in all other respects. The Fund and will
vote separately on any matter that affects only the Limited-Term Government
Fund series. Shares of the Fund will have a priority over shares of any other
funds of Limited-Term Funds, Inc.
Limited-Term Funds, Inc.'s 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
outstanding shares may request that a special meeting be called to consider the
removal of a director.
In addition to the Class, the Fund also offers Limited-Term
Government Fund A Class, Limited-Term Government Fund B Class and Limited-Term
Government Fund C Class. Shares of each Class represent 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.
-22-
<PAGE> 84
(LTGF-IC)
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.
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<PAGE> 85
(LTGF-IC)
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 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.
MORTGAGE-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 invest in securities which are backed by assets such
as receivables on home equity and credit card loans, receivables regarding
automobile, mobile home and recreational vehicle loans, wholesale dealer floor
plans and leases or other loans or financial receivables currently available or
which may be developed in the future.
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an
income stream consisting of both principal and interest payments in respect of
the receivables in the underlying pool. Pay-through asset-backed securities
are debt obligations issued usually by a special purpose entity, which are
collateralized by the various receivables and in which the payments on the
underlying receivables provide the funds to pay the debt service on the debt
obligations issued.
The rate of principal payment on asset-backed securities
generally depends on the rate of principal payments received on the underlying
assets. Such rate of payments may be affected by economic and various other
factors such as changes in interest rates or the concentration of collateral in
a particular geographic area. Therefore, the
-24-
<PAGE> 86
(LTGF-IC)
yield may be difficult to predict and actual yield to maturity may be more or
less than the anticipated yield to maturity. Due to the shorter maturity of
the collateral backing such securities, there tends to be less of a risk of
substantial prepayment than with mortgage-backed securities but the risk of
such a prepayment does exist. Such asset-backed securities do, however,
involve certain risks not associated with mortgage-backed securities, including
the risk that security interests cannot be adequately or in many cases ever
established, and other risks which my be peculiar to particular classes of
collateral. For example, with respect to credit card receivables, a number of
state and federal consumer credit laws give debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the outstanding
balance. In the case of automobile receivables, there is a risk that the
holders may not have either a proper or first security interest in all of the
obligations backing such receivables due to the large number of vehicles
involved in a typical issuance and technical requirements under state laws.
Therefore, recoveries on repossessed collateral may not always be available to
support payments on the securities. 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.
* * *
Part B provides more information on each Fund's investment
restrictions and policies.
-25-
<PAGE> 87
(LTGF-IC)
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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
- -------------------------------------------------------
LIMITED-TERM GOVERNMENT
FUND INSTITUTIONAL
- -------------------------------------------------------
P R O S P E C T U S
- -------------------------------------------------------
FEBRUARY 28, 1997
DELAWARE
GROUP
--------------
<PAGE> 88
(GMF-AC)
U.S. GOVERNMENT MONEY FUND
A CLASS PROSPECTUS
CONSULTANT CLASS FEBRUARY 28, 1997
--------------------------------------------------
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
("Class A Shares") and the U.S. Government Money Fund Consultant Class
("Consultant Class Shares") (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. Class A Shares are not subject to
12b-1 distribution expenses. Consultant Class Shares are offered for sale
through broker/dealers, financial institutions and other entities that 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 Consultant
Class Shares are subject to a 12b-1 distribution plan, at the present time
12b-1 distribution fees are not being charged to the Fund nor paid to financial
professionals. WHILE THE FUND WILL MAKE EVERY EFFORT TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 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.
This Prospectus relates only to the Classes and sets forth information
that you should read and consider before you invest. Please retain it for
future reference. The Fund's Statement of Additional Information ("Part B" of
Limited-Term Funds, Inc.'s registration statement), dated February 28, 1997, 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> 89
(GMF-AC)
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> 90
(GMF-AC)
SYNOPSIS
INVESTMENT OBJECTIVE
The investment 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.
INVESTMENT MANAGER, DISTRIBUTOR AND SERVICE AGENT
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Limited-Term Funds, Inc.'s Board of Directors. The Manager also provides
investment management services to certain of 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, accounting services and transfer
agent for the Fund and for all of the other mutual funds in the Delaware Group.
See Summary of Expenses and Management of the Fund for further
information regarding the Manager and the fees payable under the Fund's
Investment Management Agreement.
PURCHASE PRICE
The Class A Shares 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.
The Consultant Class Shares 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, although 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 generally is $1,000.
Subsequent investments generally must be at least $100. The minimum and
maximum purchase amounts for retirement plans may vary.
See Buying Shares.
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.
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<PAGE> 91
(GMF-AC)
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")
and Rule 2a-7 under the 1940 Act.
See Shares under Management of the Fund.
-4-
<PAGE> 92
(GMF-AC)
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
MONEY FUND MONEY FUND
SHAREHOLDER TRANSACTION EXPENSES A CLASS CONSULTANT CLASS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) . . . . . . . . . . . None None
Maximum Sales Charge Imposed on Reinvested
Dividends
(as a percentage of offering price) . . . . . . . . . . . None None
Redemption Fees . . . . . . . . . . . . . . . . . . . . . None* None*
Exchange Fees . . . . . . . . . . . . . . . . . . . . . . None** None**
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
ANNUAL OPERATING EXPENSES MONEY FUND MONEY FUND
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS) A CLASS CONSULTANT CLASS
--------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management Fees (after voluntary waiver) . . . . . . . . 0.00%*** 0.00%***
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . None None****
Other Operating Expenses (after reimbursements) . . . . 0.70% 0.70%
----- -----
Total Operating Expenses
(after voluntary waiver and reimbursements) . . 0.70%*** 0.70%***
===== =====
</TABLE>
*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 the Consultant Class Shares, 12b-1
fees) through July 31, 1997. 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, 1996 were 1.22%, reflecting Management Fees of 0.49%.
The Total Operating Expenses for each Class will be lower to the amounts noted
in the charts as a result of the voluntary waiver.
****Consultant Class Shares are subject to a Rule 12b-1 distribution plan;
however, the Board of Directors of the Fund suspended 12b-1 plan payments from
the Class effective June 1, 1990. See Distribution (12b-1) and Service under
Management of the Fund.
Unless waived, investors utilizing the Delaware Group Asset Planner
asset allocation service will incur an annual maintenance fee of $35 per
Strategy. Investors who utilize the Asset Planner for an Individual Retirement
Account ("IRA") will pay an annual IRA fee of $15 per Social Security number.
See How to Buy Shares--Delaware Group Asset Planner.
-5-
<PAGE> 93
(GMF-AC)
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. The following example
assumes the voluntary waiver of the management fee by the Manager.
<TABLE>
<CAPTION>
U.S. GOVERNMENT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
MONEY FUND A CLASS $7 $22 $39 $87
U.S. GOVERNMENT MONEY FUND 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
CONSULTANT CLASS $7 $22 $39 $87
</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.
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> 94
(GMF-AC)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
-7-
<PAGE> 95
GMF-CHT
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY FUND A CLASS
----------------------------------------------------------------
YEAR ENDED
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<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 . . . . . . . . . . . . . . . . . . . . . 0.0466 0.0448 0.0289 0.0200 0.0308
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total From Investment Operations . . . . . . . . . . . . 0.0466 0.0448 0.0289 0.0200 0.0308
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.0466) (0.0448) (0.0289) (0.0200) (0.0308)
Distributions (from capital gains) . . . . . . . . . . . . . . none none none none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . . . . (0.0466) (0.0448) (0.0289) (0.0200) (0.0308)
-------- -------- -------- -------- --------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
- ----------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 4.76%(2) 4.57% 2.93% 2.01% 3.13%
- ------------
- --------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $15,082 $13,787 $17,119 $20,919 $41,049
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 0.74%(3) 1.39% 1.26% 1.04% 0.91%
Ratio of Net Investment Income to Average Daily Net Assets . . 4.66%(4) 4.45% 2.91% 2.06% 3.11%
<CAPTION>
U.S. GOVERNMENT MONEY FUND A CLASS
---------------------------------------------------------------------------
YEAR ENDED
12/31/91 12/31/90 12/28/89 12/29/88 12/31/87
<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 . . . . . . . . . . . . . . . . . . . . . 0.0519 0.0711 0.0768 0.0608 0.0525
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total From Investment Operations . . . . . . . . . . . . 0.0519 0.0711 0.0768 0.0608 0.0525
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.0519) (0.0711) (0.0768) (0.0608) (0.0525)
Distributions (from capital gains) . . . . . . . . . . . . . . none none none none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . . . . (0.0519) (0.0711) (0.0768) (0.0608) (0.0525)
-------- -------- -------- -------- --------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
- ----------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 5.32% 7.35% 7.96% 6.26% 5.38%
- ------------
- --------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $45,933 $49,907 $34,572 $35,013 $34,292
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 0.85% 0.82% 1.21% 1.20% 1.21%
Ratio of Net Investment Income to Average Daily Net Assets . . 5.23% 7.11% 7.69% 6.11% 5.25%
</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.
(2) Total return reflects the voluntary expense waiver noted under Summary of
Expenses.
(3) Ratio of expenses to average net assets prior to expense limitation was
1.22% for the fiscal year ended December 31, 1996.
(4) Ratio of net investment income to average net assets prior to expense
limitation was 4.18% for the fiscal year ended December 31, 1996.
GMF-CHT
-31-
<PAGE> 96
GMF-CHT
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY FUND CONSULTANT CLASS
----------------------------------------------------------------
YEAR ENDED
12/31/96 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 $1.0000
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income . . . . . . . . . . . . . . . . . . . . . 0.0466 0.0448 0.0289 0.0200 0.0308
Net Gains or Losses on Securities
(both realized and unrealized) . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total From Investment Operations . . . . . . . . . . . . 0.0466 0.0448 0.0289 0.0200 0.0308
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------
Dividends (from net investment income) . . . . . . . . . . . . (0.0466) (0.0448) (0.0289) (0.0200) (0.0308)
Distributions (from capital gains) . . . . . . . . . . . . . . none none none none none
Returns of Capital . . . . . . . . . . . . . . . . . . . . . none none none none none
---- ---- ---- ---- ----
Total Distributions . . . . . . . . . . . . . . . . . . . (0.0466) (0.0448) (0.0289) (0.0200) (0.0308)
-------- -------- -------- -------- --------
Net Asset Value, End of Period . . . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======= ======= ======= ======= =======
- ----------------------------------------------------------------
TOTAL RETURN . . . . . . . . . . . . . . . . . . . . . 4.76%(3) 4.57% 2.93% 2.01% 3.13%
- ------------
- --------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period (000's omitted) . . . . . . . . . . . $431 $329 $1,077 $555 $747
Ratio of Expenses to Average Daily Net Assets . . . . . . . . . 0.74%(4) 1.39% 1.26% 1.04% 0.91%
Ratio of Net Investment Income to Average Daily Net Assets . . 4.66%(5) 4.45% 2.91% 2.06% 3.11%
<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.
(3) Total return reflects the voluntary expense waiver noted under Summary of
Expenses.
(4) Ratio of expenses to average net assets prior to expense limitation was
1.22% for the fiscal year ended December 31, 1996.
(5) Ratio of net investment income to average net assets prior to expense
limitation was 4.18% for the fiscal year ended December 31, 1996.
-32-
<PAGE> 97
(GMF-AC)
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.
Consultant Class Shares of the Fund are available through brokers,
financial planners, financial institutions and other entities to investors who
desire the investment and administrative services provided by such financial
professionals.
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.
-8-
<PAGE> 98
(GMF-AC)
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.
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.
-9-
<PAGE> 99
(GMF-AC)
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 AND TELEPHONE EXCHANGES
DELAPHONE
800-362-FUND
(800-362-3863)
PERFORMANCE INFORMATION
You can call the Investor Information Center at any time 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,
other than a reinvestment of dividends, 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.
-10-
<PAGE> 100
(GMF-AC)
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 to you information on
the tax status of your dividends and distributions.
DIVIDEND PAYMENTS
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 Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under Buying Shares or call the
Shareholder Service Center.
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. See Dividends and
Distributions. 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. See Systematic Withdrawal Plans under Redemption
and Exchange. 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 the name and address on your designated bank
account are not identical to the name and address on your Fund account, you
must have your signature guaranteed. This service is not available for certain
retirement plans.
EXCHANGE PRIVILEGE
The Exchange Privilege permits you to exchange all or part of your
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 invest in the Fund through regular liquidations of
shares in your accounts 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 Fund shares. See Additional
Methods of Adding to Your Investment - Wealth Builder Option and Investing by
Exchange under Buying Shares, and Redemption and Exchange.
DELAWARE GROUP ASSET PLANNER
Delaware Group Asset Planner is an asset allocation service that gives
you, when 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, you may also tailor an
allocation strategy that meets your personal needs and goals. See Buying
Shares.
-11-
<PAGE> 101
(GMF-AC)
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.
-12-
<PAGE> 102
(GMF-AC)
RETIREMENT PLANNING
An investment in the Fund 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
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. 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. 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")
New SAR/SEP plans may not be established after December 31, 1996.
Employers must have no more than 25 employees to maintain an existing 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.
-13-
<PAGE> 103
(GMF-AC)
BUYING SHARES
Shares of the Fund 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's Distributor or a service
agreement with the Fund. Investors who do not wish to receive the additional
services that are typically offered by such financial professionals may also
purchase Class A Shares directly by contacting the Fund or the Distributor.
PURCHASE AMOUNTS
Generally, the minimum initial investment for each Class is $1,000.
Subsequent investments must generally be at least $100. For purchases under a
Uniform Gifts to Minors Act or Uniform Transfers to Minors Act or through an
Automatic Investment Plan, there is 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, the Delaware Group 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 U.S. Government Money Fund A Class or U.S.
Government Money Fund Consultant 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 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 1412893401
(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
your investment may be delayed. In addition, you must promptly send your
Investment Application or, in the case of a retirement plan account, an
appropriate retirement plan application to U.S. Government Money Fund A Class
or U.S. Government Money Fund Consultant Class, at P.O. Box 7977,
Philadelphia, PA 19101.
-14-
<PAGE> 104
(GMF-AC)
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.
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. 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. All exchanges are subject to the eligibility and minimum purchase
requirements set forth in each fund's prospectus. See Redemption and
Exchange for more complete information concerning your exchange privilege.
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 through an Automatic Investing Plan or by direct
deposit be reclaimed or returned for some reason, Limited-Term Funds, Inc. has
the right to liquidate your shares to reimburse the government or transmitting
bank. If there are insufficient funds in your account, you are obligated to
reimburse the Fund.
-15-
<PAGE> 105
(GMF-AC)
3. Wealth Builder Option
You can use our 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 also elect to invest in other mutual funds in the Delaware
Group through the Wealth Builder Option through regular liquidations of shares
in your Fund account.
Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account
in one or more funds in the Delaware Group and invested automatically into any
other account in a Delaware Group mutual fund that you specify. If in
connection with the election of the Wealth Builder Option, you wish to open a
new account to receive the automatic investment, such new account must meet the
minimum initial purchase requirements described in the prospectus of the fund
that you select. All investments under this option are exchanges and are
therefore subject to the same conditions and limitations as other exchanges
noted above. You can terminate your participation at any time in Wealth Builder
by giving written notice to the fund from which the exchanges are made. 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 (dividend income or other
distributions) 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 or 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.
Distributions for capital gains and/or dividends for participants in
the following retirement plans are automatically reinvested into the same
Delaware Group fund: SAR/SEP, SEP/IRA, Profit Sharing, Money Purchase Pension,
401(k), 403(b)(7), or 457 Plans.
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 different 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. Exchanges from existing
Delaware Group accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange in the
funds' prospectuses. 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. Each Class is
available through the Asset Planner service. Generally, only shares within the
same class may be used within the same Strategy. However, either Class A
Shares or Consultant Class Shares of the Fund may be used in the same strategy
with Class A shares or consultant class shares of other Delaware Group funds.
-16-
<PAGE> 106
(GMF-AC)
An annual maintenance fee, currently $35 per Strategy, is typically
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. However, effective November 1, 1996, the annual fee is
waived until further notice. Investors who utilize the Asset Planner for an
IRA will continue to pay an annual IRA fee of $15 per Social Security number.
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.
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, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified
of their insufficient account balance and advised that they have until the end
of the current calendar quarter to raise their balance to the stated minimum.
If the account has not reached the minimum balance requirement by that time,
the Fund will charge a $9 fee for that quarter and each subsequent 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.
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 if he or she redeems any
portion of his or her account.
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(GMF-AC)
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, more
aggressive bond funds or other money market funds. Exchanges are subject to
the requirements of each fund and all exchanges of shares 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 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.
For example, redemption or exchange requests received in good order after the
time the offering price of shares is determined 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 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. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.
The Fund will process written and telephone redemption requests to
the extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a
check was tendered as payment, but the Fund will not mail or wire the proceeds
until it is reasonably satisfied that the purchase check has cleared, which may
take up to 15 days from the purchase date. You can avoid this potential delay
if you purchase shares by wiring Federal Funds. 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.
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(GMF-AC)
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.
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 Fund 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 this Fund.
Shareholders will be given credit for the period during which the Fund 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.)
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(GMF-AC)
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.
The redemption request is effective when it is received in good
order. Payment is normally mailed the next business day after receipt of the
redemption request. If your shares are in certificate form, the certificate
must accompany your request and also be in good order. Certificates are issued
for shares only if a shareholder submits a specific request.
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 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 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 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 shares are being exchanged.
TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO REDEEM
SHARES. You or your investment dealer of record can have redemption proceeds
of $50,000 or less mailed to you at your record address. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.
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(GMF-AC)
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 after receipt of your redemption 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.
You or your investment dealer of record can exchange your shares into
any other funds in the Delaware Group under the same registration, 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. Your funds will normally be credited to
your bank account two business days after the payment date. There are no
separate fees for this redemption method. 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. The MoneyLine Direct Deposit Service is not
available for certain retirement plans.
For more information on both of these plans, please call the
Shareholder Service Center.
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(GMF-AC)
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 Class A Shares will
not incur any distribution fee under the 12b-1 Plan for the Consultant Class
Shares. No distribution fee under the 12b-1 Plan for the Consultant Class
Shares is currently being paid.
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, if any, 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 your 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 choose the MoneyLine Direct Deposit Service
and have such payments transferred from your Fund account to your predesignated
bank account. This service is not available for certain retirement plans. See
MoneyLine Direct Deposit Service under The Delaware Difference for more
information about this service.
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(GMF-AC)
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 to 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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(GMF-AC)
NET ASSET VALUE PER SHARE
The purchase and redemption price of the shares of each Class is
equal to the Class' 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 net asset value 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 $10.00 per share. The Fund reduced the net asset value per
share from $10.00 to $1.00 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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(GMF-AC)
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, 1996, the Manager and its
affiliates within the Delaware Group, including Delaware International Advisers
Ltd., were managing in the aggregate more than $32 billion in assets in the
various institutional or separately managed (approximately $20,047,798,000) and
investment company (approximately $11,881,459,000) 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 indirect, wholly owned
subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management. 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 earned by the Fund for the fiscal year ended
December 31, 1996 were 0.49% of average daily net assets and no fees were paid
by the Fund as a result of the voluntary waiver of fees by the Manager as
described under Summary of Expenses.
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.
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(GMF-AC)
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 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 Consultant Class Shares, which permits the Fund to pay the
Distributor from the assets of this Class a monthly fee for its services and
expenses in distributing and promoting sales of Consultant Class Shares. 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 Consultant Class Shares. In connection with the promotion
of 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 Consultant Class
Shares and increase sales of shares of this Class. In addition, the Fund may
make payments from Consultant Class Shares assets directly to others, such as
banks, who aid in the distribution of Class shares or provide services to the
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 0.25% continuing trail fee by the Distributor from 12b-1 Plan payments
of Consultant Class Shares for assets maintained in the 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 Consultant Class Shares
assets to the Distributor and others under the Plan may not exceed 0.30% of the
Class' average daily net assets in any year. The Class will not incur any
distribution expenses beyond this limit, which may not be increased without
shareholder approval. While Plan payments may not exceed 0.30% 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 Distributor may incur such
additional expenses and make additional payments to dealers from its own
resources to promote the distribution of Consultant Class Shares. The monthly
fee paid to the Distributor under the Plan 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. Prior to June 1, 1990, the Board of Directors
had set the fee
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(GMF-AC)
for Consultant Class Shares at 0.25% of average daily net assets. However, the
Board of Directors suspended 12b- 1 Plan payments from the Consultant Class
Shares to the Distributor effective June 1, 1990. Such payments may be
reinstituted in the future with prior approval of the Board of Directors.
The Plan does not apply to the Class A 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 Class A Shares.
The National Association of Securities Dealers, Inc. has adopted
Rules of Fair Practice, as amended, relating to investment company sales
charges. The Fund 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 Transfer Agent also provides
accounting services to the Fund pursuant to the terms of a separate Fund
Accounting Agreement. 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,
1996 was 0.74%, after voluntary fee waivers and expense reimbursements by the
Manager.
SHARES
Limited-Term Funds, Inc. is an open-end management investment
company. The Fund's portfolio of assets is diversified as defined by the 1940
Act. 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 offers two series of
shares - U.S. Government Money Series and Limited-Term Government Fund series.
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
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.
Limited-Term Funds, Inc. 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 outstanding shares
may request that a special meeting be called to consider the removal of a
director.
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(GMF-AC)
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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(GMF-AC)
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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
- -------------------------------
U.S. GOVERNMENT MONEY FUND
- -------------------------------
A CLASS
- -------------------------------
CONSULTANT CLASS
- -------------------------------
NO SALES CHARGE
P R O S P E C T U S
- -------------------------------
FEBRUARY 28, 1997
DELAWARE
GROUP
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(SAI-LTGF/PART B)
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PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1997
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DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
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1818 MARKET STREET
PHILADELPHIA, PA 19103
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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 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 LIMITED-TERM GOVERNMENT FUND C CLASS:
(SHAREHOLDERS ONLY) NATIONWIDE 800-523-1918
DEALER SERVICES:
(BROKER/DEALERS ONLY) NATIONWIDE 800-362-7500
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TABLE OF CONTENTS
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COVER PAGE 1
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INVESTMENT OBJECTIVE AND POLICIES 3
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ACCOUNTING AND TAX ISSUES
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PERFORMANCE INFORMATION
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TRADING PRACTICES AND BROKERAGE
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PURCHASING SHARES
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INVESTMENT PLANS
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
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REDEMPTION AND REPURCHASE
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INCOME DIVIDENDS AND REALIZED SECURITIES
PROFITS DISTRIBUTIONS
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INVESTMENT MANAGEMENT AGREEMENT
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OFFICERS AND DIRECTORS
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EXCHANGE PRIVILEGE
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GENERAL INFORMATION
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APPENDIX A - IRA INFORMATION
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FINANCIAL STATEMENTS
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(SAI-LTGF/PART B)
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") is a professionally- managed mutual fund of the series type
presently offering two series of portfolios: 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 the 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") (Class A
Shares, Class B Shares and Class C Shares together referred to as 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 of the
Fund 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 0.30% (currently, 0.15% 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.
This Part B supplements the information contained in the current
Prospectus for the Fund Classes dated February 28, 1997, and the current
Prospectus for the Institutional Class dated February 28, 1997, as they may be
amended from time to time. Part B should be read in conjunction with the
respective Class' Prospectus. Part B is not itself a prospectus but is, in its
entirety, incorporated by reference into each Class' Prospectus. A prospectus
relating to the Fund Classes and a prospectus relating to the Institutional
Class may be obtained by writing or calling your investment dealer or by
contacting the Fund's national distributor, Delaware Distributors, L.P. (the
"Distributor"), 1818 Market Street, Philadelphia, PA 19103.
All references to "shares" in this Part B refer to all Classes of
shares of the Fund, except where noted.
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(SAI-LTGF/PART B)
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.
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<PAGE> 122
(SAI-LTGF/PART B)
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 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.
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<PAGE> 123
(SAI-LTGF/PART B)
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 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.
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<PAGE> 124
(SAI-LTGF/PART B)
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 or the concentration of
collateral in a particular geographic area. Therefore, the yield may be
difficult to predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. The credit quality of most asset-backed
securities depends primarily on the credit quality of the assets underlying
such securities, how well the entities issuing the securities are insulated
from the credit risk of the originator or affiliated entities, and the amount
of credit support provided to the securities.
Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches. The Fund will not pay
any additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on,
or the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.
OPTIONS--The Fund may purchase call options, write call options on a
covered basis, write secured put options and purchase put options on a covered
basis only, and will not engage in option writing strategies for speculative
purposes.
The Fund may invest in options that are either Exchange listed or
traded over-the-counter. Certain over-the- counter options may be illiquid.
Thus, it may not be possible to close option positions and this may have an
adverse impact on the Fund's ability to effectively hedge its securities. The
Fund will not, however, invest more than 10% of its assets in illiquid
securities.
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(SAI-LTGF/PART B)
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 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
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(SAI-LTGF/PART B)
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
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.
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(SAI-LTGF/PART B)
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
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
-9-
<PAGE> 128
(SAI-LTGF/PART B)
as high grade obligations, and in the majority of instances differ from AAA
issues only in a small degree; A--strong ability to pay interest and repay
principal although more susceptible to changes in circumstances.
COMMERCIAL PAPER--The Fund may invest in short-term promissory notes
issued by corporations which at the time of purchase are rated P-1 and/or A-1.
Commercial paper ratings P-1 by Moody's and A-1 by S&P are the highest
investment grade category.
BANK OBLIGATIONS--The Fund may invest in certificates of deposit,
bankers' acceptances and other short-term obligations of U.S. commercial banks
and their overseas branches and foreign banks of comparable quality, provided
each such bank combined with its branches has total assets of at least one
billion dollars. Any obligations of foreign banks shall be denominated in U.S.
dollars. Obligations of foreign banks and obligations of overseas branches of
U.S. banks are subject to somewhat different regulations and risks than those
of U.S. domestic banks. In particular, a foreign country could impose exchange
controls which might delay the release of proceeds from that country. Such
deposits are not covered by the Federal Deposit Insurance Corporation. Because
of conflicting laws and regulations, an issuing bank could maintain that
liability for an investment is solely that of the overseas branch which could
expose the Fund to a greater risk of loss. The Fund will only buy short-term
instruments in nations where these risks are minimal. The Fund will consider
these factors along with other appropriate factors in making an investment
decision to acquire such obligations and will only acquire those which, in the
opinion of management, are of an investment quality comparable to other debt
securities bought by the Fund.
PORTFOLIO LOAN TRANSACTIONS
The Fund may loan up to 25% of its assets to qualified
broker/dealers or institutional investors for their use relating to short sales
or other security transactions.
It is the understanding of the Manager that the staff of the
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> 129
(SAI-LTGF/PART B)
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
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.
-11-
<PAGE> 130
(SAI-LTGF/PART B)
PERFORMANCE INFORMATION
From time to time, the Fund may state total return for each Class in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life of fund, if applicable) periods. The
Fund may also advertise aggregate and average compounded return information of
each Class over additional periods of time.
In presenting performance information for Class A Shares, the
Limited CDSC, applicable only to certain redemptions of those shares, will not
be deducted from any computations of total return. See the Prospectus for the
Fund Classes for a description of the Limited CDSC and the limited instances in
which it applies. All references to a CDSC in this Performance Information
section will apply to Class B Shares or Class C Shares.
Total return performance of each Class will reflect the appreciation
or depreciation of principal, reinvestment of income and any capital gains
distributions paid during any indicated period, and the impact of the maximum
front-end sales charge or CDSC, if any, paid on the illustrated investment
amount, annualized. The results will not reflect any income taxes, if
applicable, payable by shareholders on the reinvested distributions included in
the calculations. As securities prices fluctuate, an illustration of past
performance should not be considered as representative of future results.
The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase
order of $1,000 from which, in
the case of only Class A
Shares, the maximum front-end
sales charge is deducted;
T = average annual total return;
n = number of years;
ERV = redeemable value of the
hypothetical $1,000 purchase at
the end of the period after the
deduction of the applicable
CDSC, if any, with respect to
Class B Shares and Class C
Shares.
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the
maximum front-end sales charge, if any, is deducted from the initial $1,000
investment at the time it is made with respect to Class A Shares and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, the Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.
The performance of Class A Shares and the Institutional Class of the
Fund, as shown below, is the average annual total return quotations through
December 31, 1996, computed as described above.
The average annual total return for Class A Shares at offer reflects
the maximum front-end sales charge of 3.00% paid on the purchase of shares.
The average annual total return for Class A Shares at net asset value (NAV)
does not reflect the payment of any front-end sales charge.
-12-
<PAGE> 131
(SAI-LTGF/PART B)
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.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
CLASS A CLASS A
SHARES SHARES INSTITUTIONAL
(AT OFFER)(1) (AT NAV)(1) CLASS(1)(2)
<S> <C> <C> <C>
1 year ended
12/31/96 0.58% 3.69% 3.84%
3 years ended
12/31/96 2.34% 3.42% 3.57%
5 years ended
12/31/96 3.59% 4.23% 4.38%
10 years ended
12/31/96 6.12% 6.45% 6.59%
Period 11/24/85(3)
to 12/31/96 6.32% 6.61% 6.73%
</TABLE>
(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 0.75% (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.
-13-
<PAGE> 132
(SAI-LTGF/PART B)
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, 1996. The average annual total
return for Class B Shares excluding deferred sales charge assumes the shares
were not redeemed on December 31, 1996 and therefore does not reflect the
deduction of a CDSC.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED SALES DEFERRED SALES
CHARGE) CHARGE)
<S> <C> <C>
1 year ended
12/31/96 0.87% 2.81%
Period 5/2/94(1)
through 12/31/96 3.43% 3.75%
</TABLE>
(1) Date of initial public offering of Class B Shares.
The performance shown below for Class C Shares is average annual total
return through December 31, 1996. The average annual 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, 1996. The
average annual total return for Class C Shares excluding deferred sales charge
assumes the shares were not redeemed on December 31, 1996 and therefore does
not reflect the deduction of a CDSC.
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN
CLASS C SHARES CLASS C SHARES
(INCLUDING (EXCLUDING
DEFERRED SALES DEFERRED SALES
CHARGE) CHARGE)
<S> <C> <C>
1 year ended
12/31/96 1.84% 2.81%
Period 11/29/95(1)
through 12/31/96 3.52% 3.52%
</TABLE>
(1) Date of initial public offering of Class C Shares.
-14-
<PAGE> 133
(SAI-LTGF/PART B)
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:
a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends;
d = the maximum offering price per share on the last
day of the period.
The above formula will be used in calculating quotations of yield of
each Class, based on specified 30-day periods identified in advertising by the
Fund. The yields as of December 31, 1996 using this formula were 5.90%, 5.20%,
5.20% and 6.24% 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, 1996, the average effective weighted average portfolio
maturity was 15 years for the Fund.
From time to time, the Fund may also quote its Classes' 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.
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 activity and performance of the Fund and in
illustrating general financial planning principles. From time to time, certain
mutual fund performance ranking information, calculated and provided by these
-15-
<PAGE> 134
(SAI-LTGF/PART B)
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. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative performances. Generally, the
indices selected will be representative of the types of securities in which the
Funds may invest and the assumptions that were used in calculating the blended
performance will be described.
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, 1996. For
these purposes, the calculations assume the reinvestment of any realized
securities profits distributions and income dividends paid during the indicated
periods. In addition, these calculations, as shown below, reflect maximum
sales charges, if any, paid on the purchase or redemption of shares, as
applicable, but not any income taxes payable by shareholders on the reinvested
distributions included in the calculations. The performance of Class A Shares
may also be shown without reflecting the impact of any front-end sales charge.
The performance of Class B Shares and Class C Shares is calculated both with
the applicable CDSC included and excluded. Pursuant to applicable regulation,
total return shown for the Institutional Class for the periods prior to the
commencement of operations of such Class is calculated by taking the
performance of Class A Shares and adjusting it to reflect the elimination of
all sales charges. However, for those periods, no adjustment has been made to
eliminate the impact of 12b-1 payments, and performance may have been affected
had such an adjustment been made.
-16-
<PAGE> 135
(SAI-LTGF/PART B)
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.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
CLASS A INSTITU-
SHARES(1) TIONAL
(AT OFFER) CLASS(1)(2)
<S> <C> <C>
3 months ended
12/31/96 (1.34%) 1.74%
6 months ended
12/31/96 (0.01%)(4) 3.14%
9 months ended
12/31/96 0.36% 3.63%
1 year ended
12/31/96 0.58% 3.84%
3 years ended
12/31/96 7.34% 11.10%
5 years ended
12/31/96 19.28% 23.92%
10 years ended
12/31/96 81.18% 89.24%
Period
11/24/85(3)
through
12/31/96 97.40% 106.15%
</TABLE>
(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.
(4) For the six months ended December 31, 1996, cumulative total return for
Class A Shares at net asset value was 3.06%.
-17-
<PAGE> 136
(SAI-LTGF/PART B)
<TABLE>
<CAPTION>
CLASS B SHARES CLASS B SHARES
(INCLUDING (EXCLUDING
DEFERRED SALES DEFERRED SAlES
CHARGE) CHARGE)
<S> <C> <C>
3 months ended
12/31/96 (0.52%) 1.48%
6 months ended
12/31/96 0.63% 2.62%
9 months ended
12/31/96 0.89% 2.86%
1 year ended
12/31/96 0.87% 2.81%
Period 5/2/94(1)
through 12/31/96 9.41% 10.34%
</TABLE>
(1) Date of initial public offering of Class B Shares.
<TABLE>
<CAPTION>
CLASS C SHARES CLASS C SHARES
(INCLUDING (EXCLUDING
DEFERRED SALES DEFERRED SAlES
CHARGE) CHARGE)
<S> <C> <C>
3 months ended
12/31/96 0.48% 1.48%
6 months ended
12/31/96 1.62% 2.62%
9 months ended
12/31/96 1.87% 2.86%
1 year ended
12/31/96 1.84% 2.81%
Period 11/29/95(1)
through 12/31/96 3.85% 3.85%
</TABLE>
(1) Date of initial public offering of Class C Shares.
-18-
<PAGE> 137
(SAI-LTGF/PART B)
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
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 Investment Plans
for a complete description of these services including restrictions or
limitations.
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
<TABLE>
<CAPTION>
NUMBER
INVESTMENT PRICE PER OF SHARES
AMOUNT SHARE PURCHASED
---------- --------- ---------
<S> <C> <C> <C>
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
</TABLE>
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.
-19-
<PAGE> 138
(SAI-LTGF/PART B)
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 at various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:
<TABLE>
<CAPTION>
7% 8% 9%
Rate of Rate of Rate of
Return Return Return
------- ------- -------
<S> <C> <C> <C>
1 year $10,723 $10,830 $10,938
2 years $11,498 $11,729 $11,964
3 years $12,330 $12,702 $13,086
4 years $13,221 $13,757 $14,314
5 years $14,177 $14,898 $15,657
6 years $15,201 $16,135 $17,126
7 years $16,300 $17,474 $18,732
8 years $17,479 $18,924 $20,489
9 years $18,743 $20,495 $22,411
10 years $20,098 $22,196 $24,514
</TABLE>
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.
-20-
<PAGE> 139
(SAI-LTGF/PART B)
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 Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, Limited-Term Funds, Inc. 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.
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
-21-
<PAGE> 140
(SAI-LTGF/PART B)
that, in some cases, the joint execution of orders could adversely affect the
price or volume of the security that a particular account or fund may obtain,
it is the opinion of the Manager and Limited-Term Funds, Inc.'s 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 Fund shares 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, 1995 and 1996,
the Fund's portfolio turnover rates were 73% and 83%, respectively.
-22-
<PAGE> 141
(SAI-LTGF/PART B)
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 the Distributor.
The minimum initial investment generally is $1,000 for Class A
Shares, Class B Shares and Class C Shares. Subsequent purchases of such
classes generally must be at least $100. The initial and subsequent 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
purchase order 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, and that Class A Shares are
subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and generally are not subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Limited-Term Funds, 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, as amended, 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 the Class B
Shares for approximately five years after purchase. See Automatic Conversion
of Class B Shares under Class of Shares in the Fund Classes' Prospectus.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
-23-
<PAGE> 142
(SAI-LTGF/PART B)
Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value
and Plans Under Rule 12b-1 for the Fund Classes in this Part B.
Class A Shares, Class B Shares, Class C Shares and Institutional
Class shares represent a proportionate interest in the Fund's assets and will
receive a proportionate interest in the Fund's income, before application, as
to Class A, Class B and Class C Shares, of any expenses under the Fund's 12b-1
Plans.
Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the
case of Class B Shares or Class C Shares. 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 assessed by Limited-Term Funds, Inc.
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 their needs given the amount of
their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares
and incur a front-end sales charge and annual 12b-1 Plan expenses of up to a
maximum of 0.30% (currently, no more than 0.15% 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% (0.25%
of which are service fees to be paid to the Distributor, dealers or others for
providing personal service and/or maintaining shareholder accounts) of average
daily net assets of the respective Class. Class B Shares will automatically
convert to Class A Shares at the end of approximately five years after purchase
and, thereafter, be subject to annual 12b-1 Plan expenses of up to a maximum of
0.30% (currently no more than 0.15% 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- LIMITED-TERM GOVERNMENT FUND
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.
-24-
<PAGE> 143
(SAI-LTGF/PART B)
<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 2.51 2.00
$250,000 but under $500,000 2.00 2.06 1.60
$500,000 but under $1,000,000* 1.50 1.50 1.20
</TABLE>
* 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.
- -------------------------------------------------------------------------------
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 0.15% of
the offering price in connection with sales of Class A Shares. Such dealers
must meet certain requirements in terms of organization and distribution
capabilities and their ability to increase sales. The Distributor should be
contacted for further information on these requirements as well as the basis
and circumstances upon which the additional commission will be paid.
Participating dealers may be deemed to have additional responsibilities under
the securities laws.
-25-
<PAGE> 144
(SAI-LTGF/PART B)
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:
<TABLE>
<CAPTION>
DEALER'S COMMISSION
-------------------
(AS A PERCENTAGE OF
AMOUNT OF PURCHASE AMOUNT PURCHASED)
------------------
<S> <C>
Up to $3 million 0.60%
Next $2 million up to $5 million 0.40
Amount over $5 million 0.20
</TABLE>
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 Contingent Deferred Sales Charge for Certain
Redemption of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectus) 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:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS A
PERCENTAGE OF
DOLLAR AMOUNT
YEAR AFTER PURCHASE MADE SUBJECT TO CHARGE)
------------------------ ------------------
<S> <C>
0-2 2%
3 1%
4 and thereafter None
</TABLE>
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
-26-
<PAGE> 145
(SAI-LTGF/PART B)
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. 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 of shares to which the Plan applies. The Plans do
not apply to the Institutional Class of shares. Such shares are not included
in calculating the Plans' fees, and the Plans are not used to assist in the
distribution and marketing of shares of the Institutional Class. Shareholders
of the Institutional Class may not vote on matters affecting the Plans.
The Plans permit the Fund, pursuant to the Distribution Agreement, to
pay out of the assets of Class A Shares, Class B Shares 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 0.30% of Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class
B Shares' and the 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 0.15% 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 0.10% by
the average daily net assets represented by Class A Shares which were
originally purchased prior to June 1, 1992 in the Investors Series I class
(which was converted into what is now referred to as Class A Shares) on June 1,
1992 pursuant to a Plan of Recapitalization approved by shareholders of the
Investors Series I class), and (ii) the amount obtained by multiplying 0.15% by
the average daily net assets represented by all other Class A Shares. While
this is the method to be used to calculate the 12b-1 fees to be paid by Class A
Shares, the fee is a Class expense so that all shareholders regardless of
whether they originally purchased or received shares in the Investors Series I
class, or in one of the other classes that is now known as Class A Shares will
bear 12b-1 expenses at the same rate. While this describes the current formula
for calculating the fees which will be payable under the Class A Shares' Plan
beginning June 1, 1992, the Plan permits a full 0.30% 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 Fund 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.
-27-
<PAGE> 146
(SAI-LTGF/PART B)
From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plans and the Distribution Agreement, as amended, have been
approved by the Board of 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, 1996, payments from the Class A
Shares, Class B Shares and Class C Shares amounted to $818,441, $128,911 and
$13,901, respectively. Such amounts were used for the following purposes:
<TABLE>
<CAPTION>
Class A Shares Class B Shares Class C Shares
<S> <C> <C> <C>
Advertising --- --- ---
Annual/Semi-Annual Reports $11,056 --- ---
Broker Trails $730,959 $19,224 ---
Broker Sales Charges --- $70,077 $13,166
Dealer Service Expenses --- $1,494 $3
Interest on Broker Sales Charges --- $20,159 $732
Commissions to Wholesalers $23,526 $9,064 ---
Promotional-Broker Meetings $26,671 $1,009 ---
Promotional-Other $9,697 --- ---
Prospectus Printing $9,235 --- ---
Telephone $3,345 $444 ---
Wholesaler Expenses $3,952 $7,440 ---
Other --- --- ---
</TABLE>
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.
-28-
<PAGE> 147
(SAI-LTGF/PART B)
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 0.25% of the dollar amount of such sales. The Distributor may
also provide additional promotional incentives or payments to dealers that sell
shares of the Delaware 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.
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, the Manager's
affiliates, 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 other 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 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charges has been assessed.
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.
In addition, purchases of Class A Shares may be made by financial institutions
investing for the account of their trust customers when they are not eligible
to purchase shares of the Fund's Institutional Class. 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.
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.
Limited-Term Funds, Inc. must be notified in advance that the trade
qualifies for purchase 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
within a 13-month period pursuant to a written Letter of Intention provided by
the
-29-
<PAGE> 148
(SAI-LTGF/PART B)
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 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.
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 A Shares, Class B Shares and/or Class
C Shares of the Fund, as well as shares of any other class of any of the other
Delaware 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,
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(SAI-LTGF/PART B)
unless they were acquired through an exchange 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 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 of the Fund (and of Institutional Class
shares which were acquired through an exchange from 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 Shares 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 intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.
Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Fund's shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in 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.
THE INSTITUTIONAL CLASS
The Institutional Class of the Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt
employee benefit plans of the Manager or its affiliates and
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(SAI-LTGF/PART B)
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) a bank, trust
company or similar financial institution investing for its own account or for
the account of its trust customers for whom such financial institution is
exercising investment discretion in purchasing shares of the Class, except
where the investment is part of a program that requires payment to the
financial institution of a Rule 12b-1 Plan fee; and (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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(SAI-LTGF/PART B)
INVESTMENT PLANS
REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional
Class are reinvested in the accounts of the holders of such shares (based on
the net asset value in effect on the reinvestment date). Confirmations of any
distributions from realized securities profits will be mailed to shareholders
in the first quarter of each fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either
through their investment dealers or by sending a check or money order to the
Fund and Class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made for Class A Shares at the public offering price, and
for the Class B Shares and Class C Shares and the Institutional Classes at the
net asset value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect against
depreciation in a declining market.
REINVESTMENT OF DIVIDENDS IN OTHER DELAWARE 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 intended to be made before investing or
sending money. The prospectus contains more complete information about the
fund, including charges and expenses. See also Additional Methods of Adding to
Your Investment--Dividend Reinvestment Plan under How to Buy Shares 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
provided an account has been established. Dividends from Class A Shares may
not be directed to Class B Shares or Class C Shares. Dividends from Class B
Shares may only be directed to other Class B Shares and dividends from Class C
Shares may only be directed to other Class C Shares. See Appendix B --Classes
Offered 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.
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(SAI-LTGF/PART B)
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
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at
a specified date although no check is required to initiate the transaction. (2)
If the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, 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
Limited-Term Funds, Inc. for proper instructions.
WEALTH BUILDER OPTION
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other
mutual funds in the Delaware Group. Shareholders of the Fund Classes may elect
to invest in one or more of the other mutual funds in the Delaware Group
through the Wealth Builder Option. See Wealth Builder Option and Redemption
and Exchange in the Prospectus for the Fund Classes.
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. 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
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(SAI-LTGF/PART B)
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by giving
written notice to their 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 Classes.
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,
for which there is a minimum initial purchase of $250 and a minimum subsequent
purchase of $25 regardless of which class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about
fees is included in retirement plan materials. Fees are quoted upon request.
Annual maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide
services to such plans.
Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders.
Certain retirement plans may qualify to purchase shares of the Institutional
Class. See The 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.
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(SAI-LTGF/PART B)
PROTOTYPE PROFIT SHARING OR MONEY PURCHASE PENSION PLANS
Prototype plans are available for self-employed individuals,
partnerships and corporations. These plans can be maintained as Section
401(k), 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
and make contributions which may be tax- deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or, for years prior to
1997, elects to be treated as having no compensation for the year. Investments
in each of the Fund Classes are permissible.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers
adjusted gross income and whether the taxpayer or his or her spouse is an
active participant in an employer-sponsored retirement plan. Even if a
taxpayer (or his or her spouse) is an active participant in an
employer-sponsored retirement plan, the full $2,000 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 for years prior to 1997 with incomes between $40,000 and $50,000, and
for single individuals with incomes between $25,000 and $35,000. No deductions
are available 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 for years prior to 1997), 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.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
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
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 Alternative Purchase Arrangements -- Class B Shares and
Class C Shares under Classes of Shares, Contingent Deferred Sales Charge -
Class B Shares and Class C Shares under Classes of Shares, and Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Fund Classes' Prospectus concerning the applicability of a
CDSC upon redemption.
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(SAI-LTGF/PART B)
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
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")
New SAR/SEP plans may not be established after December 31, 1996. In
addition, employers must have 25 or fewer eligible employees to maintain an
existing SEP/IRA that permits salary deferral contributions. SAR/SEP plans may
only invest in Class A Shares and Class C Shares.
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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(SAI-LTGF/PART B)
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
Institutional Class shares are effected at the net asset value per share next
calculated by the Fund in which shares are being purchased after receipt of the
order by the Fund or its agent. Selling dealers are responsible for
transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value
per share plus any applicable front-end sales charges. Offering price and net
asset value are computed as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open. The New York Stock Exchange is scheduled to be open Monday through
Friday throughout the year except for 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 Limited-Term Fund's, Inc.'s 12b-1 Plans and the Class A, Class B and
Class C Shares alone will bear the 12b-1 Plan expenses payable under their
respective Plans. Due to the specific distribution expenses and other costs
that 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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(SAI-LTGF/PART B)
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--Class B Shares and Class C Shares 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, in the case of the Fund Classes, 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; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
The Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already been
settled. The Fund will honor the redemption requests as to shares for which a
check was tendered as payment, but the Fund will not mail or wire the proceeds
until it is reasonably satisfied that the check has cleared. This potential
delay can be avoided by making investments by wiring Federal Funds.
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(SAI-LTGF/PART B)
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 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
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(SAI-LTGF/PART B)
collection of the investment check. A hold period against a recent purchase
may be up to but not in excess of 15 days, depending upon the origin of the
investment check.
(4) If the amount of the check is greater than the value of the
shares held in the shareholder's account, the check will be returned and the
shareholder's bank may charge a fee.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of
shareholders who overdraw their accounts or if, in the opinion of management,
such revocation is 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.
As the Fund must redeem shares at their net asset value next determined
(subject, in the case of Class A Shares, to any Limited CDSC), it will not be
able to redeem all shares held in a shareholder's account by means of a check
presented directly to the bank. The Fund and the Transfer Agent will not be
responsible for the inadvertent processing of post-dated checks or checks more
than six months old.
Stop-Payment Requests--Investors may request a stop payment on checks
by providing the Fund with a written authorization to do so. Oral requests
will be accepted provided that the Fund promptly receives a written
authorization. Such requests will remain in effect for six months unless
renewed or canceled. The Fund will use its best efforts to effect stop-payment
instructions, but does not promise or guarantee that such instructions will be
effective.
* * *
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 address of record. 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 from Class A Shares, Class B Shares and Class
C Shares. If the proceeds are wired to the shareholder's account at a bank
which is not a member of the Federal Reserve System, there could be a delay in
the crediting of the funds to the shareholder's bank account.
2. PAYMENT BY CHECK: Request a check be mailed to the bank
account designated on the authorization form. Redemption proceeds will
normally be mailed the next business day, but no later than seven days, from
the date of the
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(SAI-LTGF/PART B)
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.
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 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 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,
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(SAI-LTGF/PART B)
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.
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(SAI-LTGF/PART B)
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 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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(SAI-LTGF/PART B)
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. On December 31, 1996, the Manager and its
affiliates within the Delaware Group, including Delaware International Advisers
Ltd., were managing in the aggregate more than $32 billion in assets in the
various institutional or separately managed (approximately $20,047,798,000) and
investment company (approximately $11,881,459,000) accounts.
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 renewed each year 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 of 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, 1996, the Fund's total net assets were $511,047,209. Investment management
fees paid by the Fund for the fiscal years ended December 31, 1994, 1995 and
1996 amounted to $5,023,989 , $3,875,637 and 2,987,753, 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, Class C Shares and the Institutional Class for the fiscal year
ended December 31, 1996 were 0.93%, 1.78%, 1.78% and 0.78%, respectively. The
ratios for Class A Shares, Class B Shares and Class C Shares reflect the impact
of their respective 12b-1 Plans.
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 the Fund on behalf of the
Class A Shares, Class B Shares and Class C Shares 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, 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.
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<PAGE> 164
(SAI-LTGF/PART B)
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 also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement. The Transfer Agent is also an
indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
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(SAI-LTGF/PART B)
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
February 6, 1997, Limited-Term Funds, Inc'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 February 6, 1997, management believes the following accounts
held 5% or more of the outstanding shares of, the Class A Shares, Class B
Shares, Class C Shares and the Institutional Class of the Fund:
<TABLE>
<CAPTION>
CLASS NAME AND ADDRESS OF ACCOUNT SHARE AMOUNT PERCENTAGE
<S> <C> <C> <C>
Limited-Term MLPF&S for the sole benefit of its
Government Fund Customers
A Class ATTN: Fund Administration
4800 Deer Lake Drive East, 3rd Fl.
Jacksonville FL 32246-6484 4,356,294 42.0%
401(k) Plan of Macmillan Bloedel
State Street B&T as Trustee for
P.O. Box 235016
4001 Carmichael Rd. Suite 300
Montgomery AL 36106-3603 773,597 7.47%
Limited-Term MLPF&S for the sole benefit of
Government Fund its Customers
B Class ATTN: Fund Administration
4800 Deer Lake Drive East, 3rd Fl.
Jacksonville FL 32246-6484 77,391 13.27%
NFSC FEBO # CL5-529621
W Parsons Todd Foundation
c/o Mortimer J. Propp
405 Park Ave. Rm 1103
New York NY 10022-4405 33,312 5.71%
Limited-Term NFSC FEBO #ARJ-514888
Government Fund Chattahoochee Valley Hspt Soct
C Class Attn: John H. Williams
4800 48th Street
Valley AL 36854-3666 89,543 24.11%
Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City NJ 07303-2052 87,748 23.62%
Cherie L. Leonard
24602 Tabuenca
Mission Vieja CA 92692-2337 29,463 7.93%
</TABLE>
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(SAI-LTGF/PART B)
<TABLE>
<S> <C> <C> <C>
NFSC FEBO # BRO-349526
Daniel Murray
27 Vroom Ave.
Spring Lake NJ 07762-1623 22,831 6.15%
Limited-Term RS 401(k) Plan
Government Fund Price Waterhouse LLP
Institutional Class Savings Plan
c/o Delpac 16th floor
1818 Market St.
Philadelphia PA 19103-3638 1,934,839 63.83%
Fleet Bank National Association
FBO ITO Pension Plan
2 Montgomery Ct. 2nd Floor
Jersey City NJ 07302-3802 204,112 6.73%
</TABLE>
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 Capital
Management 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. and the Manager on behalf of the Fund was executed
following shareholder approval. DMH and the Manager are now indirect, wholly
owned subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management.
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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(SAI-LTGF/PART B)
*WAYNE A. STORK (59)
Chairman, President, Chief Executive Officer, Director and/or Trustee
of Limited-Term Funds, Inc., 16 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
Distributors, Inc. and Delaware Capital Management, 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 Service Company,
Inc. and Delaware Investment & Retirement Services, Inc. During the
past five years, Mr. Stork has served in various executive capacities
at different times
within the Delaware organization.
WINTHROP S. JESSUP (51)
Executive Vice President of Limited-Term Funds, Inc. and 16 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 Capital Management, 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. (57)
Executive Vice President of Limited-Term Funds, Inc. and each of the
other 17 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc. and
Delaware Capital Management, 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.
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(SAI-LTGF/PART B)
PAUL E. SUCKOW (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Limited-Term Funds, Inc., each of the other 17 investment
companies in the Delaware Group and Delaware Management
Company, Inc.
Executive Vice President/Chief Investment Officer/Fixed Income and
Director of Founders Holdings, Inc. Senior Vice President/Chief
Investment Officer, Fixed Income of Delaware Management Holdings,
Inc. Director of Founders CBO Corporation. Senior Vice President of
Delaware Capital Management, Inc. Director, HYPPCO Finance Company
Ltd. 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.
WALTER P. BABICH (69)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 17 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 (58)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 17 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 (56)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 17 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 1992, she was Adjunct Professor of Columbia Business
School.
W. THACHER LONGSTRETH (76)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 17 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
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(SAI-LTGF/PART B)
CHARLES E. PECK (71)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the
other 17 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 (57)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Limited-Term Funds, Inc., each of the other 17
investment companies in the Delaware Group
Executive Vice President, Chief Operating Officer and Chief Financial
Officer of Delaware Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chairman and Director of Delaware Investment & Retirement Services,
Inc.
Executive Vice President/Chief Operating Officer/Chief Financial
Officer of Delaware Management Holdings, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial
Officer and Director of DMH Corp, Delaware Distributors, Inc.
and Founders Holdings, Inc.
Vice President/Chief Executive Officer/Chief Financial Officer and
Director of Delaware Service Company, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial
Officer and Director of Delaware International Holdings Ltd.
Executive Vice President/Chief Financial Officer/Chief Operating
Officer of Delaware Capital Management,
Inc.
Senior Vice President/Chief Administrative Officer/ Chief Financial
Officer of Delaware Distributors, L.P. 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. (50)
Senior Vice President and Secretary of Limited-Term Funds, Inc., each
of the other 17 investment companies in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Distributors,
L.P.
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.,
Founders Holdings, Inc., Delaware Investment & Retirement
Services, Inc. and Delaware Capital Management, 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.
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(SAI-LTGF/PART B)
ROGER A. EARLY (43)
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 (47)
Vice President/Corporate Controller of Limited-Term Funds, Inc., each
of the other 17 investment companies in the Delaware Group,
Delaware Distributors, L.P., Delaware Service Company, Inc.,
Delaware Capital Management, Inc. and Delaware International
Holdings Ltd.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Company, Inc., Delaware Management Holdings, Inc.
and DMH Corp.
Senior Vice President/Treasurer of Delaware Distributors, Inc.
Senior Vice President/Corporate Controller of Founders Holdings, Inc.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc. Executive Vice President/Chief Financial
Officer/Treasurer of Delaware Management Trust Company. Vice
President/Treasurer of Delaware Capital Management, Inc. 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 (34)
Senior Vice President/Treasurer of Limited-Term Funds, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Distributors, L.P. and Delaware Service Company,
Inc.
Senior Vice President of Delaware Management Company, Inc.
Senior Vice President/Treasurer of Delaware Distributors, Inc. and
Founders Holdings, Inc. Vice President/Manager of Investment
Accounting of Delaware International Holdings Ltd. Assistant
Treasurer of Founders CBO Corporation. 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.
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(SAI-LTGF/PART B)
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, 1996 and an estimate of
annual benefits to be received upon retirement under the Delaware Group
Retirement Plan for Directors/Trustees as of December 31, 1996.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS
AGGREGATE ACCRUED AS ESTIMATED TOTAL
COMPENSATION PART OF ANNUAL COMPENSATION
FROM LIMITED-TERM BENEFITS FROM ALL 18
LIMITED-TERM FUNDS, INC. UPON DELAWARE
Name FUNDS, INC. EXPENSES RETIREMENT* GROUP FUNDS
------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
W. Thacher Longstreth $1,687 None $30,000 $46,187
Ann R. Leven $1,954 None $30,000 $54,323
Walter P. Babich $1,915 None $30,000 $53,323
Anthony D. Knerr $1,915 None $30,000 $53,323
Charles E. Peck $1,760 None $30,000 $49,323
</TABLE>
* 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, 1996, he or she would
be entitled to annual payments totaling $30,000, 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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(SAI-LTGF/PART B)
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 Group funds from timing firms.
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(SAI-LTGF/PART B)
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
-55-
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(SAI-LTGF/PART B)
without undue risk to principal. Blue Chip Fund seeks to achieve long-term
capital appreciation. Current income is a secondary objective. It seeks to
achieve these objectives by investing primarily in equity securities and any
securities that are convertible into equity securities. Quantum Fund seeks to
achieve long-term capital appreciation. It seeks to achieve this objective by
investing primarily in equity securities of medium- to large-sized companies
expected to grow over time that meet the Fund's "Social Criteria" strategy.
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. STRATEGIC INCOME FUND seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities.
U.S. GOVERNMENT FUND seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.
U.S. GOVERNMENT MONEY FUND seeks maximum current income with
preservation of principal and maintenance of liquidity by investing only in
short-term securities issued or guaranteed as to principal and interest by the
U.S. government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities, while maintaining a stable net asset value.
DELAWARE CASH RESERVE seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.
TAX-FREE USA FUND seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers.
TAX-FREE INSURED FUND invests in these same types of securities but with an
emphasis on municipal bonds protected by insurance guaranteeing principal and
interest are paid when due. TAX-FREE USA INTERMEDIATE FUND seeks a high level
of current interest income exempt from federal income tax, consistent with the
preservation of capital by investing primarily in municipal bonds.
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. EMERGING MARKETS FUND
seeks long-term capital appreciation by investing primarily in equity
securities of issuers located or operating in emerging countries.
ENTERPRISE FUND seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S.
GROWTH FUND seeks to maximize capital appreciation by investing in companies of
all sizes which have low dividend yields, strong balance sheets and high
expected earnings growth rates relative to their industry. World Growth Fund
seeks to maximize total return (capital appreciation and income), principally
through investments in an internationally diversified portfolio of equity
securities. NEW PACIFIC FUND seeks long-term capital appreciation by investing
primarily in companies which are domiciled in or have their principal business
activities in the Pacific Basin. Federal Bond Fund
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(SAI-LTGF/PART B)
seeks to maximize current income consistent with preservation of capital. The
fund attempts to achieve this objective by investing primarily in securities
issued by the U.S. government, its agencies and instrumentalities. CORPORATE
INCOME FUND seeks to provide high current income consistent with preservation
of capital. The fund attempts to achieve this objective primarily by investing
in a diversified portfolio of investment grade fixed-income securities issued
by U.S. corporations.
DELAWARE GROUP PREMIUM FUND, INC. offers ten 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 marketplace and to have fundamental
characteristics to support growth. Income is not an objective. GLOBAL BOND
SERIES seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed- income securities that may
also provide the potential for capital appreciation.
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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(SAI-LTGF/PART B)
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds in the
Delaware 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.
The Manager, or its affiliate Delaware International Advisers Ltd.,
also manages the investment options for Delaware Medallion(sm) III Variable
Annuity. Medallion is issued by Allmerica Financial Life Insurance and Annuity
Company (First Allmerica Financial Life Insurance Company in New York and
Hawaii). Delaware Medallion offers ten different investment series ranging
from domestic equity funds, international equity and bond funds and domestic
fixed income funds. Each investment series available through Medallion
utilizes an investment strategy and discipline the same as or similar to one of
the Delaware Group mutual funds available outside the annuity. See Delaware
Group Premium Fund, Inc., above.
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.
The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to Class A Shares of each Fund as
follows:
<TABLE>
<CAPTION>
LIMITED CDSC PAYMENTS
FISCAL
YEAR LIMITED-TERM
ENDED GOVERNMENT FUND A CLASS
-------- -----------------------
<S> <C>
12/31/96 $3838
12/31/95 $9,568
12/31/94 $118,234
</TABLE>
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(SAI-LTGF/PART B)
The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to Class B Shares and Class C Shares as
follows:
<TABLE>
<CAPTION>
CDSC PAYMENTS
FISCAL
YEAR
ENDED LIMITED-TERM LIMITED-TERM
GOVERNMENT FUND B CLASS GOVERNMENT FUND C CLASS
---------- ----------------------- -----------------------
<S> <C> <C>
12/31/96 $32,704 $1,016
12/31/95 31,134 -0-
12/31/94 2,817 N/A
</TABLE>
*Date of initial public offering of Limited-Term Government Fund B Class was
May 2, 1994 and of Limited-Term Government Fund C Class was November 29, 1995.
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 Transfer
Agent also provides accounting services to the Fund. Those services include
performing all functions related to calculating the Fund's net asset value and
providing all financial reporting services, regulatory compliance testing and
the related accounting services. For its services, the Transfer Agent is paid
a fee based on total assets of all funds in the Delaware Group for which it
provides such accounting services. Such fee is equal to 0.25% multiplied by
the total amount of assets in the complex for which the Transfer Agent
furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed
$10 billion. The fees are charged to each fund, including the Fund, on an
aggregate pro-rata basis. The asset-based fee payable to the Transfer Agent is
subject to a minimum fee calculated by determining the total number of
investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of 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.
Bankers Trust Company ("Bankers Trust"), One Bankers Trust Plaza, New
York, NY 10006, is custodian of the Fund's securities and cash. As custodian
for the Fund, Bankers Trust 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.
CAPITALIZATION
As a result of a ten-to-one stock split of the U.S. Government Money
Series shares, effective January 1, 1991 the authorized capital of 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
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(SAI-LTGF/PART B)
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.
Each Class of the Fund represents a proportionate interest in the
assets of the Fund and each has the same voting and other rights and
preferences as the other classes except that shares of the Institutional Class
may not vote on matters affecting the Fund's Classes' Plans under Rule 12b-1.
Similarly, as a general matter, shareholders of Class A Shares, Class B Shares
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 Rule 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
LIMITED-TERM FUNDS, INC. 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.
-60-
<PAGE> 179
(SAI-LTGF/PART B)
APPENDIX A - IRA INFORMATION
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers
adjusted gross income and whether the taxpayer or his or her spouse is an
active participant in employer-sponsored retirement plan. Even if a taxpayer
(or his or her spouse) is covered by an employer-sponsored retirement plan, the
full $2,000 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. No deductions are available 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 for years prior to 1997), 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.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
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.
-61-
<PAGE> 180
(SAI-LTGF/PART B)
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,
such as 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
15% Tax Bracket Single - $0-$24,650
Joint - $0-$41,200
<TABLE>
<CAPTION>
END OF CUMULATIVE HOW MUCH YOU HOW MUCH YOU HAVE WITH FULL
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA IRA DEDUCTION
----- ----------------- ---------------- ---------------------------
<S> <C> <C> <C>
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 - $24,651-$59,750
Joint - $41,201-$99,600
<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%]
-62-
<PAGE> 181
(SAI-LTGF/PART B)
31% Tax Bracket Single - $59,751-$124,650
Joint - $99,601-$151,750
<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 $ 1,447 $ 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
</TABLE>
[Without IRA--investment of $1,380 ($2,000 less 31%) earning 4.83% (7% less
31%)]
[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 7%]
36% Tax Bracket* Single - $124,651-$271,050
Joint - $151,751-$271,050
<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%]
-63-
<PAGE> 182
(SAI-LTGF/PART B)
39.6% Tax Bracket* Single - over $271,050
Joint - over $271,050
<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 $271,050. The above tables do not reflect the
personal exemption phaseout nor the limitations of itemized deductions that
may apply.
-64-
<PAGE> 183
(SAI-LTGF/PART B)
$2,000 SINGLE INVESTMENT AT A RETURN OF 7% COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- -------------------------------------------------------------------------------------------------------
<S> <C> <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
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 7% COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 $263,750. The above tables do
not reflect the personal exemption phaseout nor the limitations of
itemized deductions that may apply.
-65-
<PAGE> 184
(SAI-LTGF/PART B)
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.
<TABLE>
<S> <C> <C>
After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295
</TABLE>
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!
<TABLE>
<CAPTION>
8% RETURN 10% RETURN
--------- ----------
<S> <C> <C>
10 years $31,291 $35,602
30 years $244,692 $361,887
</TABLE>
The statistical exhibits above are for illustration purposes only and
do not reflect the actual Fund performance either in the past or in the future.
-66-
<PAGE> 185
(SAI-LTGF/PART B)
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, 1996 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.
-67-
<PAGE> 186
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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
- -------------------------------------------------------------------------------
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 28, 1997
DELAWARE
GROUP
<PAGE> 187
(SAI-GMF/PART B)
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1997
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
-1-
<PAGE> 188
(SAI-GMF/PART B)
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") is a professionally-managed mutual fund of the series type
presently offering two series of portfolios: U.S. Government Money Series (the
"Fund") and Limited-Term Government Fund. This Statement of Additional
Information ("Part B" of Limited-Term Funds, Inc.'s registration statement)
describes the Fund.
The Fund offers two classes of shares--U.S. Government Money Fund A
Class ("Class A Shares") and U.S. Government Money Fund Consultant Class
("Consultant Class Shares") (individually, a "Class" and collectively, the
"Classes").
This Part B supplements the information contained in the current
Prospectus of the Classes dated February 28, 1997, as it may be amended from
time to time. Part B should be read in conjunction with the Classes'
Prospectus. 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.
All references to "shares" in this Part B refer to each Class of
shares of the Fund, except where noted.
-2-
<PAGE> 189
(SAI-GMF/PART B)
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;
-3-
<PAGE> 190
(SAI-GMF/PART B)
(4) defray normal administrative expenses; or
(5) maintain a constant net asset value per unit pursuant to, and in
compliance with, an order or rule of the United States Securities and Exchange
Commission.
While the 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:
-4-
<PAGE> 191
(SAI-GMF/PART B)
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 (the "1940 Act"), except for notes to banks. Any
outstanding borrowing shall be repaid before additional securities are
purchased.
3. Sell securities short or purchase securities on margin.
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers.
6. Purchase or sell commodities or commodity contracts.
7. Purchase or sell real estate, but this shall not prevent the 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> 192
(SAI-GMF/PART B)
PERFORMANCE INFORMATION
For the seven-day period ended December 31, 1996, the annualized current
yield of Class A Shares and Consultant Class Shares was 4.70% for each Class
and the compounded effective yield was 4.82% for each Class. These yields will
fluctuate daily as income earned fluctuates. On that date the weighted average
portfolio maturity was 44 days for both Classes. The current yield of Class A
Shares is expected to be slightly higher than that of Consultant Class Shares
during any period that the distribution fee under the Fund's 12b-1 Plan for
Consultant Class Shares is being paid. The Board of Directors of the Fund
suspended 12b-1 Plan payments from Consultant Class Shares 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.
-6-
<PAGE> 193
(SAI-GMF/PART B)
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, 1996:
<TABLE>
<CAPTION>
U.S. U.S. GOVERNMENT
GOVERNMENT MONEY FUND
MONEY FUND CONSULTANT
A CLASS CLASS
<S> <C> <C>
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 . . . . . . . . . . . . . . . . . . $1.00090225 $1.00090225
=========== ===========
Net change in account value . . . . . . . . . . . . . . . . . . .00090255* .00090255*
Base period return = net
change in account value
/ beginning account value . . . . . . . . . . . . . . . . . .00090255 .00090255
Current yield
[base period return x (365 / 7)] . . . . . . . . . . . . . . 4.70%** 4.70%**
===== =====
Effective yield
(1 + base period) 365/7 - 1 . . . . . . . . . . . . . . . . 4.82%*** 4.82%***
===== =====
</TABLE>
Weighted average life to maturity of the portfolio on December 31, 1996 was 44
days.
* This represents the net income per share for the seven calendar days ended
December 31, 1996.
** This represents the average of annualized net investment income per share
for the seven calendar days ended December 31, 1996.
*** This represents the current yield for the seven calendar days ended
December 31, 1996 compounded daily. The Manager has 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 0.70% (exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and, in the case of Consultant Class
Shares, 12b-1 fees) from January 26, 1996 through July 31, 1997. In the
absence of such voluntary waivers, performance would have been affected
negatively.
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.
-7-
<PAGE> 194
(SAI-GMF/PART B)
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.
The following table, for purposes of illustration only, reflects the
average annual total return performance of each Class through December 31,
1996, 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
Consultant Class Shares for the periods prior to the commencement of operations
of such Class is based on the performance of Class A Shares. For periods prior
to the commencement of operations of Consultant Class Shares, 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.
-8-
<PAGE> 195
(SAI-GMF/PART B)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
U.S.
U.S. GOVERNMENT
GOVERNMENT MONEY FUND
MONEY FUND CONSULTANT
A CLASS (1) CLASS (1)(2)
<S> <C> <C>
1 year
ended
12/31/96 4.76% 4.76%
3 years
ended
12/31/96 4.08% 4.08%
5 years
ended
12/31/96 3.47% 3.47%
10 years
ended
12/31/96 4.95% 4.89%
4/20/82(3)
through
12/31/96 5.98% 5.96%
</TABLE>
(1) The Manager has 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 0.70%
(exclusive of taxes, interest, brokerage commissions, extraordinary expenses
and in the case of Consultant Class Shares, 12b-1 fees) from January 26,
1996 through July 31, 1997. In the absence of such voluntary waivers,
performance would have been affected negatively.
(2) Commenced operations on March 29, 1988.
(3) Date of initial public offering of U.S. Government Money Series.
From time to time, the Fund may also quote current 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.
In addition, 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.
-9-
<PAGE> 196
(SAI-GMF/PART B)
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.
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. In addition, the
performance of multiple indices compiled and maintained by these firms
may be combined to create a blended performance result for comparative
performances. Generally, the indices selected will be representative of
the types of securities in which the Funds may invest and the
assumptions that were used in calculating the blended performance will
be described.
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.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for the each Class through December 31,
1996. Total return for Consultant Class Shares for the periods prior to
commencement of such Class is based on the performance of Class A Shares. For
periods prior to the commencement of operations of Consultant Class Shares, 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.
-10-
<PAGE> 197
(SAI-GMF/PART B)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
U.S. GOVERNMENT U.S. GOVERNMENT
MONEY FUND MONEY FUND
A CLASS (1) CONSULTANT CLASS (1)(2)
<S> <C> <C>
3 months
ended
12/31/96 1.18% 1.18%
6 months
ended
12/31/96 2.39% 2.39%
9 months
ended
12/31/96 3.58% 3.58%
1 year
ended
12/31/96 4.76% 4.76%
3 years
ended
12/31/96 12.76% 12.76%
5 years
ended
12/31/96 18.63% 18.63%
10 years
ended
12/31/96 62.13% 61.25%
4/20/82(3)
through
12/31/96 134.76% 134.23%
</TABLE>
(1) The Manager has 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 0.70% (exclusive of taxes, interest, brokerage
commissions, extraordinary expenses and in the case of Consultant
Class Shares, 12b-1 fees) from January 26, 1996 through July 31,
1997. In the absence of such voluntary waivers, performance would
have been affected negatively.
(2) Commenced operations on March 29, 1988.
(3) Date of initial public offering of U.S. Government Money Series.
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
-11-
<PAGE> 198
(SAI-GMF/PART B)
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 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
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 Investment Plans and Wealth Builder
Option under Investment Plans 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>
<CAPTION>
PRICE NUMBER OF
INVESTMENT PER SHARES
AMOUNT SHARE PURCHASED
<S> <C> <C> <C>
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
</TABLE>
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)
-12-
<PAGE> 199
(SAI-GMF/PART B)
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 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:
<TABLE>
<CAPTION>
4% 6% 8%
Rate of Rate of Rate of
Return Return Return
------ ------ ------
<S> <C> <C> <C>
1 year $10,407 $10,617 $10,830
2 years $10,831 $11,272 $11,729
3 years $11,273 $11,967 $12,702
4 years $11,732 $12,705 $13,757
5 years $12,210 $13,488 $14,898
6 years $12,707 $14,320 $16,135
7 years $13,225 $15,203 $17,474
8 years $13,764 $16,141 $18,924
9 years $14,325 $17,137 $20,495
10 years $14,908 $18,194 $22,196
</TABLE>
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.
-13-
<PAGE> 200
(SAI-GMF/PART B)
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.
-14-
<PAGE> 201
(SAI-GMF/PART B)
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. 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. 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 Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, Limited-Term Funds, Inc.
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.
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
-15-
<PAGE> 202
(SAI-GMF/PART B)
order may be allocated an average price obtained from the executing broker. It
is believed that the ability of the accounts to participate in volume
transactions will generally be beneficial to the accounts and funds. Although
it is recognized that, in some cases, the joint execution of orders could
adversely affect the price or volume of the security that a particular account
or fund may obtain, it is the opinion of the Manager and Limited-Term Funds,
Inc.'s 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 1940 Act, 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 Fund shares as a factor in the
selection of brokers and dealers to execute Fund portfolio transactions.
-16-
<PAGE> 203
(SAI-GMF/PART B)
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's two
Classes of shares--Class A Shares and Consultant Class Shares, and has agreed
to use its best efforts to sell shares of the Fund.
Shares of the Fund 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. Investors who do not wish to
receive the additional services that are typically offered by such financial
professionals may also purchase Class A Shares directly by contacting the Fund
or the Distributor. In some states, banks and/or other institutions effecting
transactions in Consultant Class Shares may be required to register as dealers
pursuant to state laws. Generally, the minimum initial investment is $1,000
for each Class. Subsequent purchases of such classes must generally be at
least $100. The minimum initial and subsequent investments with respect to the
Class A Shares will be waived for purchases by officers, directors and
employees of any Delaware Group fund, the Manager or any of the Manager's
affiliates if the purchases are made pursuant to a payroll deduction program.
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.
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 assessed by Limited-Term Funds, Inc.
for any certificate issued. Investors who hold certificates representing their
shares may only redeem these shares by written request. 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. 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 may make regular automatic
investments by authorizing, in advance, monthly payments directly from their
checking account for deposit into their Fund account. This type of investment
will be handled in either of the following ways. (1) If the shareholder's bank
is a member of the National Automated Clearing House Association ("NACHA"), the
amount of the investment will be electronically deducted from 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.
-17-
<PAGE> 204
(SAI-GMF/PART B)
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 service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a
reclamation, the Fund may liquidate sufficient shares from a shareholder's
account to reimburse the government or the private source. In the event there
are insufficient shares in the shareholder's account, the shareholder is
expected to reimburse the Fund.
DIRECT DEPOSIT PURCHASES BY MAIL
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund 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 Limited-Term Funds, Inc.
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
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 nonmember 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.
-18-
<PAGE> 205
(SAI-GMF/PART B)
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason,
the Fund will automatically redeem from the shareholder's account the amount
credited by the check plus any dividends earned thereon.
PLAN UNDER RULE 12B-1 FOR CONSULTANT CLASS SHARES
Pursuant to Rule 12b-1 under the 1940 Act, Limited-Term Funds, Inc. has
adopted a plan (the "Plan") for Consultant Class Shares which permits the Fund
to pay for certain distribution and promotional expenses related to marketing
shares of Consultant Class Shares.
The Plan does not apply to the Fund's Class A Shares. Such shares are
not included in calculating the Plan's fees, and the Plan is not used to assist
in the distribution and marketing of Class A Shares. Shareholders of Class A
Shares may not vote on matters affecting the Plan.
The Plan permits the Fund, pursuant to its Distribution Agreement, to
pay from the assets of Consultant Class Shares, 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, 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. 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 0.25% continuing trail fee by the Distributor from 12b-1
payments relating to Consultant Class Shares 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 Consultant
Class Shares 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 by the Fund under the Plan, and the
Fund's Distribution Agreement, is on an annual basis, up to 0.30% of Consultant
Class Shares' average daily net assets for the year. Limited-Term Funds,
Inc.'s Board of Directors may reduce these amounts at any time. Limited-Term
Funds, Inc.'s Board of Directors suspended 12b-1 Plan payments from the assets
of Consultant Class Shares to the Distributor effective June 1, 1990. Prior to
that time, the Board of Directors had set the fee for Consultant Class Shares
at 0.25% 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 Consultant
Class Shares will be borne by such persons without any reimbursement from that
Class. Subject to seeking best price and execution, the Fund may, from time to
time, buy or sell portfolio securities from or to firms which receive payments
on behalf of Consultant Class Shares 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 1940 Act) of Limited-Term
Funds, Inc. and who have no direct or indirect financial interest in the Plan,
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.
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(SAI-GMF/PART B)
Each year, the directors must determine whether continuation of the Plan
is in the best interest of shareholders of Consultant Class Shares and that
there is a reasonable likelihood of its providing a 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 Consultant Class Shares. 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 Consultant Class Shares, 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, 1996, there were no payments from
Consultant Class Shares pursuant to the Plan.
The NASD has adopted Rules of Fair Practice, as amended, 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 intended 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 initial purchase
requirements and the limitations set forth below, shareholders may
automatically reinvest dividends and/or distributions in any of the mutual
funds in the Delaware Group, including the Funds, in states where their shares
may be sold. Such investments will be at net asset value at the close of
business on the reinvestment date without any front-end sales charge or service
fee. The shareholder must notify the Transfer Agent in writing and must have
established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in which
the investor does not then have an account will be treated like all other
initial purchases of a fund's shares. Consequently, an investor should obtain
and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under Buying Shares in the Prospectus.
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 classes of
shares.
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(SAI-GMF/PART B)
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.
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 mutual funds
in the Delaware Group. Shareholders of the Fund may elect to invest in one or
more of the other mutual funds in the Delaware Group through the Wealth Builder
Option. See Wealth Builder Option and Redemption and Exchange in the
Prospectus for the Fund.
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's Prospectus. The investment will be made on the 20th day of each month
(or, if the fund selected is not open that day, the next business day) at the
public offering price or net asset value, as applicable, of the fund selected
on the date of investment. No investment will be made for any month if the
value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by
giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, 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 Classes.
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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(SAI-GMF/PART B)
RETIREMENT PLANS
An investment in the Fund may be suitable for tax-deferred retirement
plans.
Minimum investment limitations generally applicable to other investors
do not apply to retirement plans other than Individual Retirement Accounts for
which there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25 regardless of which Class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about
fees is included in retirement plan materials. Fees are quoted upon request.
Annual maintenance fees may be shared by Delaware Management Trust Company, the
Transfer Agent, other affiliates of the Manager and others that provide
services to such Plans.
Certain shareholder investment services available to non-retirement plan
shareholders may not be available to retirement plan shareholders. 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. These plans can be maintained as Section
401(k), profit sharing or money purchase pension plans.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
A document is available for an individual who wants to establish an IRA
and make contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or, for years prior to
1997, elects to be treated as having no compensation for the year.
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers
adjusted gross income and whether the taxpayer or his or her spouse is an
active participant in an employer-sponsored retirement plan. Even if a
taxpayer (or his or her spouse) is an active participant in an
employer-sponsored retirement plan, the full $2,000 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. No deductions are available 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 for years prior to 1997), 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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(SAI-GMF/PART B)
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
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 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.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks.
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")
New SAR/SEP plans may not be established after December 31, 1996. In
addition, employers must have 25 or fewer eligible employees to maintain an
existing SEP/IRA that permits 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.
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(SAI-GMF/PART B)
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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(SAI-GMF/PART B)
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, deducting any liabilities of
the Fund and dividing by the number of shares outstanding. Expenses and fees
are accrued daily. In determining the Fund's total net assets, portfolio
securities are valued 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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(SAI-GMF/PART B)
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; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.
The Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already been
settled. The Fund will honor the redemption requests as to shares for which a
check was tendered as payment, but the Fund will not mail or wire the proceeds
until it is reasonably satisfied that the check has cleared. This potential
delay can be avoided by making investments by wiring Federal Funds. 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
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.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason,
the Fund will automatically redeem from the shareholder's account the shares
purchased by the check plus any dividends earned thereon. Shareholders may be
responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result
of which disposal by the Fund of securities owned by it is not reasonably
practical or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the 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.
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
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(SAI-GMF/PART B)
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 shareholder. Any redemption in
an inactive account established with a minimum investment may trigger mandatory
redemption.
* * *
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.
EXPEDITED TELEPHONE REDEMPTIONS
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
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(SAI-GMF/PART B)
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 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's bank may charge a fee.
(5) Checks may not be used to close accounts.
The Fund reserves the right to revoke the Checkwriting Feature of
shareholders who overdraw their accounts or if, in the opinion of management,
such revocation is 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 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.
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
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(SAI-GMF/PART B)
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, 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.
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. Shareholders should
consult their financial advisers to determine whether a Systematic Withdrawal
Plan would be suitable for them.
-29-
<PAGE> 216
(SAI-GMF/PART B)
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,
Consultant Class Shares 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 Consultant Class Shares to the Distributor effective June 1,
1990. See Plan Under Rule 12b-1 for Consultant Class Shares.
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 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.
-30-
<PAGE> 217
(SAI-GMF/PART B)
TAXES
The Fund has qualified as a regulated investment company under
Subchapter M of the Code, 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.
-31-
<PAGE> 218
(SAI-GMF/PART B)
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. On December 31, 1996, the Manager and its affiliates
within the Delaware Group, including Delaware International Advisers Ltd., were
managing in the aggregate more than $32 billion in assets in the various
institutional or separately managed (approximately $20,047,798,000) and
investment company (approximately $11,881,459,000) accounts.
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 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 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 of 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 earned by the Fund for the fiscal year
ended December 31, 1996 were 0.49% of average daily net assets and no fees
were paid by the Fund as a result of the voluntary waiver of fees by the
Manager.
On December 31, 1996, the total net assets of the Fund were $15,512,837.
Investment management fees paid by the Fund during the past three fiscal years
were $94,711 for 1994, $70,149 for 1995 and $0 for 1996.
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 Consultant Class Shares, 12b-1 fees)
through July 31, 1997.
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, 1996 was 0.74% for each Class of shares,
after voluntary fee waivers and expense reimbursements by the Manager.
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
-32-
<PAGE> 219
(SAI-GMF/PART B)
promotion and distribution except for any payments which may be made under
Consultant Class Shares' 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 also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement. The Transfer Agent is also an
indirect, wholly owned subsidiary of Delaware Management Holdings, Inc.
-33-
<PAGE> 220
(SAI-GMF/PART B)
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
February 6, 1997, Limited-Term Funds, Inc.'s officers and directors, as a
group, owned less than 1% of the shares outstanding of Consultant Class Shares
of the Fund and approximately 1.10% of the outstanding shares of the Class A
Shares of the Fund.
As of February 6, 1997, management believes the following accounts held
5% or more of the Class A Shares and Consultant Class Shares of the Fund:
<TABLE>
<CAPTION>
CLASS NAME AND ADDRESS OF ACCOUNT SHARE AMOUNT PERCENTAGE
------ --------------------------- ------------ ----------
<S> <C> <C> <C>
U.S. Government Robert Schwarz
Money Fund 821 E. Gate Dr.
A Class Mt. Laurel NJ 08054-1208 703,511 8.73%
John B. Delander
P.O. Box 2873
Clearwater FL 34617-2873 642,770 7.98%
Delaware Management Trust Co.
1818 Market St.
Philadelphia PA 19103-3682 593,524 7.37%
Glenn E. Becker and Barbara Becker
713 Fox Hollow Road
P.O. Box 675
Gwynedd Valley PA 19437-0675 562,797 6.98%
RS DMC Employee Profit Sharing Plan
Delaware Management Co.
Employee Profit Sharing Trust
c/o Rick Seidel
1818 Market St.
Philadelphia PA 19103-3682 509,068 6.32%
U.S. Government Joanne L. Ferguson
Money Fund TRST Barbara C. Lowe Trust
Consultant Class DTD 10-2-82
11243 Topo Ln.
Lakeside CA 92040-5715 67,037 13.76%
DMTC C/F the 403(B)(7) Plan of
Gary Kronick
2210 Budd Ter.
Schenectady NY 12309-2602 48,627 9.98%
</TABLE>
-34-
<PAGE> 221
(SAI-GMF/PART B)
<TABLE>
<CAPTION>
CLASS NAME AND ADDRESS OF ACCOUNT SHARE AMOUNT PERCENTAGE
------ --------------------------- ------------ ----------
<S> <C> <C> <C>
U.S. Government Richard W. H. Keller and
Money Fund Hester O. Keller Trustee for
Consultant Class Keller Family Trust DTD 10-26-87
5446 Connecticut Ave.
La Mesa CA 91942-1214 45,510 9.34%
Louis C. Motzer
109 Fairborn Dr.
Hamilton OH 45013-3521 38,702 7.95%
Joshua Washuta and
Rosemary Washuta JT WROS
P.O. Box 146
Virginville PA 19564-0146 25,009 5.13%
</TABLE>
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 Capital
Management, 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. and the Manager on behalf of the Fund was executed
following shareholder approval. DMH and the Manager are now indirect, wholly
owned subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services
industry, including insurance and investment management.
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.
-35-
<PAGE> 222
(SAI-GMF/PART B)
*WAYNE A. STORK (59)
Chairman, President, Chief Executive Officer, Director and/or Trustee of
Limited-Term Funds, Inc., 16 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
Distributors, Inc. and Delaware Capital Management, 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 Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware organization.
WINTHROP S. JESSUP (51)
Executive Vice President of Limited-Term Funds, Inc. and 16 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 Capital Management, 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. (57)
Executive Vice President of Limited-Term Funds, Inc. and each of the
other 17 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, 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.
-36-
<PAGE> 223
(SAI-GMF/PART B)
PAUL E. SUCKOW (50)
Executive Vice President/Chief Investment Officer, Fixed Income of
Limited-Term Funds, Inc.., each of the other 17 investment
companies in the Delaware Group and Delaware Management
Company, Inc.
Executive Vice President/Chief Investment Officer/Fixed Income and
Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Holdings, Inc.
Director of Founders CBO Corporation.
Senior Vice President of Delaware Capital Management, Inc.
Director, HYPPCO Finance Company Ltd.
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.
WALTER P. BABICH (69)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the other
17 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 (58)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the other
17 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 (56)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the other
17 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 1992, she
was Adjunct Professor of Columbia Business School.
W. THACHER LONGSTRETH (76)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the other
17 investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
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<PAGE> 224
(SAI-GMF/PART B)
CHARLES E. PECK (71)
Director and/or Trustee of Limited-Term Funds, Inc. and each of the other
17 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 (57)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Limited-Term Funds, Inc., each of the other 17
investment companies in the Delaware Group
Executive Vice President, Chief Operating Officer and Chief Financial
Officer of Delaware Management Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chairman and Director of Delaware Investment & Retirement Services, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial Officer
of Delaware Management Holdings, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial Officer
and Director of DMH Corp,
Delaware Distributors, Inc. and Founders Holdings, Inc.
Vice President/Chief Executive Officer/Chief Financial Officer and
Director of Delaware Service Company, Inc.
Executive Vice President/Chief Operating Officer/Chief Financial Officer
and Director of Delaware International Holdings Ltd.
Executive Vice President/Chief Financial Officer/Chief Operating Officer
of Delaware Capital Management, Inc.
Senior Vice President/Chief Administrative Officer/ Chief Financial
Officer of Delaware Distributors, L.P.
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. (50)
Senior Vice President and Secretary of Limited-Term Funds, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Management Holdings, Inc. and Delaware Distributors,
L.P.
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., Founders Holdings, Inc.,
Delaware Investment & Retirement Services, Inc. and Delaware
Capital Management, 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.
-38-
<PAGE> 225
(SAI-GMF/PART B)
ROGER A. EARLY (43)
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 (47)
Vice President/Corporate Controller of Limited-Term Funds, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Distributors, L.P., Delaware Service Company, Inc.,
Delaware Capital Management, Inc. and Delaware International
Holdings Ltd.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Company, Inc., Delaware Management Holdings, Inc.
and DMH Corp.
Senior Vice President/ Treasurer of Delaware Distributors, Inc.
Senior Vice President/Corporate Controller of Founders Holdings, Inc.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Vice President/Treasurer of Delaware Capital Management, Inc.
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 (34)
Senior Vice President/Treasurer of Limited-Term Funds, Inc., each of the
other 17 investment companies in the Delaware Group, Delaware
Distributors, L.P. and Delaware Service Company, Inc.
Senior Vice President of Delaware Management Company, Inc.
Senior Vice President/Treasurer of Delaware Distributors, Inc. and
Founders Holdings, Inc.
Vice President/Manager of Investment Accounting of Delaware International
Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
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.
-39-
<PAGE> 226
(SAI-GMF/PART B)
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, 1996 and an estimate of annual benefits
to be received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of December 31, 1996.
<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 $1,687 None $30,000 $46,187
Ann R. Leven $1,954 None $30,000 $54,323
Walter P. Babich $1,915 None $30,000 $53,323
Anthony D. Knerr $1,915 None $30,000 $53,323
Charles E. Peck $1,760 None $30,000 $49,323
</TABLE>
* 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, 1996, he or she would
be entitled to annual payments totaling $30,000, 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.
-40-
<PAGE> 227
(SAI-GMF/PART B)
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.
-41-
<PAGE> 228
(SAI-GMF/PART B)
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 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 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.
-42-
<PAGE> 229
(SAI-GMF/PART B)
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. BLUE CHIP FUND seeks to achieve long-term capital appreciation.
Current income is a secondary objective. It seeks to achieve these objectives
by investing primarily in equity securities and any securities that are
convertible into equity securities. QUANTUM FUND seeks to achieve long-term
capital appreciation. It seeks to achieve this objective by investing
primarily in equity securities of medium- to large-sized companies expected to
grow over time that meet the Fund's "Social Criteria" strategy.
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. STRATEGIC INCOME FUND seeks to
provide investors with high current income and total return by using a
multi-sector investment approach, investing principally in three sectors of the
fixed-income securities markets: high yield, higher risk securities, investment
grade fixed-income securities and foreign government and other foreign
fixed-income securities.
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.
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. EMERGING MARKETS FUND
seeks long-term capital appreciation by investing primarily in equity
securities of issuers located or operating in emerging countries.
-43-
<PAGE> 230
(SAI-GMF/PART B)
ENTERPRISE FUND seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S.
GROWTH FUND seeks to maximize capital appreciation by investing in companies of
all sizes which have low dividend yields, strong balance sheets and high
expected earnings growth rates relative to their industry. WORLD GROWTH FUND
seeks to maximize total return (capital appreciation and income), principally
through investments in an internationally diversified portfolio of equity
securities. NEW PACIFIC FUND seeks long-term capital appreciation by investing
primarily in companies which are domiciled in or have their principal business
activities in the Pacific Basin. FEDERAL BOND FUND seeks to maximize current
income consistent with preservation of capital. The fund attempts to achieve
this objective by investing primarily in securities issued by the U.S.
government, its agencies and instrumentalities. CORPORATE INCOME FUND seeks to
provide high current income consistent with preservation of capital. The fund
attempts to achieve this objective primarily by investing in a diversified
portfolio of investment grade fixed-income securities issued by U.S.
corporations.
DELAWARE GROUP PREMIUM FUND, INC. offers ten 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 marketplace and to have fundamental
characteristics to support growth. Income is not an objective. GLOBAL BOND
SERIES seeks to achieve current income consistent with the preservation of
principal by investing primarily in global fixed-income securities that may
also provide the potential for capital appreciation.
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).
-44-
<PAGE> 231
(SAI-GMF/PART B)
GENERAL INFORMATION
The Manager is the investment manager of the Fund. The Manager also
provides investment management services to certain of the other funds in the
Delaware 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.
The Manager, or its affiliate Delaware International Advisers Ltd., also
manages the investment options for Delaware Medallion(sm) III Variable Annuity.
Medallion is issued by Allmerica Financial Life Insurance and Annuity Company
(First Allmerica Financial Life Insurance Company in New York and Hawaii).
Delaware Medallion offers ten different investment series ranging from domestic
equity funds, international equity and bond funds and domestic fixed income
funds. Each investment series available through Medallion utilizes an
investment strategy and discipline the same as or similar to one of the
Delaware Group mutual funds available outside the annuity. See Delaware Group
Premium Fund, Inc., above.
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 Transfer
Agent also provides accounting services to each Fund. Those services include
performing all functions related to calculating each Fund's net asset value and
providing all financial reporting services, regulatory compliance testing and
the related accounting services. For its services, the Transfer Agent is paid
a fee based on total assets of all funds in the Delaware Group for which it
provides such accounting services. Such fee is equal to 0.25% multiplied by
the total amount of assets in the complex for which the Transfer Agent
furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed
$10 billion. The fees are charged to each fund, including each Fund, on an
aggregate pro-rata basis. The asset-based fee payable to the Transfer Agent is
subject to a minimum fee calculated by determining the total number of
investment portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of 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.
-45-
<PAGE> 232
(SAI-GMF/PART B)
Bankers Trust Company ("Bankers Trust"), One Bankers Trust Plaza, New
York, NY 10006, is custodian of the Fund's securities and cash. As custodian
for the Fund, Bankers Trust 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 1940 Act, 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.
The classes offered by the Fund are Class A Shares and Consultant Class
Shares. 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 Consultant Class Shares 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 Class A Shares may not
vote on any matter affecting Consultant Class Shares' 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, Class A Shares were 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, U.S. Government Money
Fund Consultant Class Shares were 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
LIMITED-TERM FUND, INC.'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.
-46-
<PAGE> 233
(SAI-GMF/PART B)
APPENDIX A - IRA INFORMATION
An individual can contribute up to $2,000 to his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayers
adjusted gross income and whether the taxpayer or his or her spouse is an
active participant in an employer-sponsored retirement plan. Even if a
taxpayer (or his or her spouse) is an active participant in an
employer-sponsored retirement plan, the full $2,000 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. No deductions are available 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 for years prior to 1997), 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.
Effective for tax years beginning after 1996, one-income couples can
contribute up to $2,000 to each spouse's IRA provided the combined compensation
of both spouses is at least equal to the total contributions for both spouses.
If the working spouse is an active participant in an employer-sponsored
retirement plan and earns over $40,000, the maximum deduction limit is reduced
in the same way that the limit is reduced for contributions to a non-spousal
IRA.
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.
-47-
<PAGE> 234
(SAI-GMF/PART B)
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 such as
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-$24,650
Joint- $0-$41,200
<TABLE>
<CAPTION>
HOW MUCH YOU
END OF CUMULATIVE HOW MUCH YOU HAVE WITH FULL
YEAR INVESTMENT AMOUNT HAVE WITHOUT IRA IRA DEDUCTION
<S> <C> <C> <C>
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
</TABLE>
[Without IRA--investment of $1,700 ($2,000 less 15%) earning 5.10% (6% less
15%)]
28% Tax Bracket Single- $24,651-$59,750
Joint- $41,201-$99,600
<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 $ 1,502 $ 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
</TABLE>
[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%]
-48-
<PAGE> 235
(SAI-GMF/PART B)
31% Tax Bracket Single-$59,751-$124,650
Joint-$99,601-$151,750
<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 $ 1,437 $ 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
</TABLE>
[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-$124,651-$271,050
Joint-$151,751-$271,050
<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 $ 1,329 $ 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
</TABLE>
[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%]
-49-
<PAGE> 236
(SAI-GMF/PART B)
39.6% Tax Bracket* Single - over $271,050
Joint - over $271,050
<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 $ 1,252 $ 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
</TABLE>
[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 $271,050. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
-50-
<PAGE> 237
(SAI-GMF/PART B)
$2,000 SINGLE INVESTMENT AT A RETURN OF 6% COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
$2,000 INVESTED ANNUALLY AT A RETURN OF 6% COMPOUNDED MONTHLY
<TABLE>
<CAPTION>
TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAXABLE - TAX
YEARS 39.6%* 36%* 31% 28% 15% DEFERRED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
</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 $263,750. The above tables do not reflect the personal
exemption phaseout nor the limitations of itemized deductions that may apply.
-51-
<PAGE> 238
(SAI-GMF/PART B)
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!
<TABLE>
<CAPTION>
8% RETURN 10% RETURN
--------- ----------
<S> <C> <C>
10 years $31,726 $35,833
30 years $256,433 $390,389
</TABLE>
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.
-52-
<PAGE> 239
(SAI-GMF/PART B)
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, 1996 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.
-53-
<PAGE> 240
(SAI-GMF/PART B)
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,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103
INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103
CUSTODIAN
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
- -------------------------------------------------------------
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 28, 1997
DELAWARE
GROUP
--------
<PAGE> 241
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, 1996.
(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)
incorporated into this filing by reference to Post-
Effective Amendment No. 43 filed February 29, 1996.
(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.
(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) and
Article Second to Articles Supplementary (June 1,
1992 and April 29, 1994) incorporated into this
filing by reference to Post-Effective
<PAGE> 242
Amendment No. 42 filed November 22, 1995 and
Article Third of Articles Supplementary (November
28, 1995) incorporated into this filing by
reference to Post-Effective Amendment No. 43 filed
February 29, 1996.
(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 (April 3, 1995) between Delaware Management
Company, Inc. and the Registrant on behalf of each Series
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) between Delaware Distributors, L.P.
and the Registrant 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) between Delaware
Distributors, L.P. and the Registrant 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) between Delaware
Distributors, L.P. and the Registrant 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.
(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) (Module) incorporated into
this filing by reference to Post-Effective
Amendment No. 43 filed February 29, 1996.
<PAGE> 243
(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) (Module) incorporated into this
filing by reference to Post-Effective
Amendment No. 43 filed February 29, 1996
(8) Custodian Agreements.
(a) Form of Custodian Agreement between Bankers
Trust Company and the Registrant attached as
Exhibit.
(b) Form of Securities Lending Agreement between
Bankers Trust Company and the Registrant on
behalf of Limited-Term Government Fund
attached as Exhibit.
(9) Other Material Contracts.
(a) Executed Shareholders Services Agreement
(December 20, 1990) between Delaware Service
Company, Inc. and the Registrant (formerly
Delaware Group Treasury Reserves, Inc.)
relating to the Investors Series (now named
Limited-Term Government Fund) attached as
Exhibit.
(b) Executed Shareholders Services Agreement
(December 20, 1990) between Delaware Service
Company, Inc. and the Registrant (formerly
Delaware Group Treasury Reserves, Inc.)
relating to the Cashiers Series (now named
U.S. Government Money Series) attached as
Exhibit.
(10) Opinions of Counsel. To be filed with letter
relating to Rule 24f-2 on or about February 28,
1997.
(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.
* Relates only to Registrant's U.S. Government Money Series.
<PAGE> 244
(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.
**(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.
(a) Incorporated into this filing by reference to
Post-Effective Amendment No. 41 filed
February 28, 1995, Post-Effective No. 42
filed November 22, 1995 and Post-Effective
Amendment No. 43 filed February 29, 1996.
(b) Schedules of Computation for each Performance
Quotation for periods not previously
electronically filed for Limited-Term
Government Fund 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.
<PAGE> 245
Item 25. Persons Controlled by or under Common Control with Registrant. None.
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
(1) (2)
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Delaware Group Limited-Term Government
Funds, Inc.'s
Limited-Term Government Fund series:
Limited-Term Government Fund A Class
Common Stock Par Value
$.001 Per Share 22,609 Accounts as of January 31,
1997
Limited-Term Government Fund B Class
Common Stock Par Value
$.001 Per Share 719 Accounts as of January 31, 1997
Limited-Term Government Fund C Class
Common Stock Par Value
$.001 Per Share 94 Accounts as of January 31, 1997
Limited-Term Government Fund
Institutional Class
Common Stock Par Value
$.001 Per Share 36 Accounts as of January 31, 1997
Delaware Group Limited-Term Government
Funds, Inc.'s
U.S. Government Money Series:
U.S. Government Money Fund A Class
Common Stock Par Value
$.001 Per Share 984 Accounts as of January 31, 1997
U.S. Government Money Fund
Consultant Class
Common Stock Par Value
$.001 Per Share 69 Accounts as of January 31, 1997
</TABLE>
<PAGE> 246
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") also serves as investment
manager or sub-adviser to certain of the other funds in the Delaware Group
(Delaware Group Trend Fund, Inc., Delaware Equity Group Funds I, Inc., Delaware
Equity Group Funds II, Inc., Delaware Equity Group Funds IV, Inc., Delaware
Group Equity Group Funds V, Inc., Delaware Group Income Funds, 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 Group Adviser 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, and to certain other investment companies. 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, accounting servicing 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:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
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 Distributors, Inc. and Delaware Capital
Management, Inc.; Chairman, Chief Executive Officer and
Director of Delaware International Advisers Ltd.; and
Director of Delaware Service Company, Inc. and Delaware
Investment & Retirement Services, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 247
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
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 Capital Management,
Inc.
Board of Directors, Glen Lincoln Inc. since 1985, Frazer,
PA; Partner of Yellowstone Bluffs since 1995,
Livingstone, MT; Trustee of Hero Scholarship Fund since
1990, Philadelphia, PA
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 Delaware Capital
Management, 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, AAA Mid Atlantic, Inc. since 1989,
2040 Market Street, Philadelphia, PA; Board of
Directors, Metron, Inc. since 1995, 11911 Freedom Drive,
Reston, VA
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; Executive Vice President and Director of
Founders Holdings, Inc.; Senior Vice President/Chief
Investment Officer, Fixed Income of Delaware Management
Holdings, Inc.; Senior Vice President of Delaware
Capital Management, Inc.; and Director of Founders CBO
Corporation
Director of HYPPCO Finance Company, Ltd.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 248
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
David K. Downes Executive Vice President, Chief Operating Officer and
Chief Financial Officer of Delaware Management Company,
Inc.; Senior Vice President, Chief Administrative
Officer and Chief Financial Officer of the Registrant
and each of the other funds in the Delaware Group;
Chairman and Director of Delaware Management Trust
Company; Executive Vice President, Chief Operating
Officer and Chief Financial Officer of Delaware
Management Holdings, Inc.; Executive Vice President,
Chief Operating Officer, Chief Financial Officer and
Director of DMH Corp., Delaware Distributors, Inc. and
Founders Holdings, Inc.; President, Chief Executive
Officer, Chief Financial Officer and Director of
Delaware Service Company, Inc.; Executive Vice
President, Chief Operating Officer, Chief Financial
Officer and Director of Delaware International Holdings
Ltd.; Executive Vice President, Chief Financial Officer
and Chief Operating Officer of Delaware Capital
Management, Inc.; Chairman and Director of Delaware
Investment & Retirement Services, Inc.; Director of
Delaware International Advisers Ltd.; and Senior Vice
President, Chief Administrative Officer and Chief
Financial Officer of Delaware Distributors, L.P.
Chief Executive Officer and Director of Forewarn, Inc.
since 1993, 8 Clayton Place, Newtown Square, PA
George M. Senior Vice President, Secretary and Director of Delaware
Chamberlain, Jr. Management Company, Inc., DMH Corp., Delaware
Distributors, Inc., Delaware Service Company, Inc.,
Founders Holdings, Inc., Delaware Capital Management,
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. 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.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 249
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Richard J. Flannery Senior Vice President/Corporate & International Affairs
of Delaware Management Company, Inc., Delaware
Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc.,
Delaware Management Trust Company, Founders CBO
Corporation and Delaware Capital Management, Inc.; Vice
President of the Registrant and each of the other funds
in the Delaware Group; Senior Vice President/Corporate &
International Affairs and Director of Founders Holdings,
Inc. and Delaware International Holdings Ltd.; Managing
Director/Corporate & Tax Affairs of Delaware Service
Company, Inc. and Delaware Investment & Retirement
Services, Inc.; and Director of Delaware International
Advisers Ltd.
Director of HYPPCO Finance Company, Ltd.
Limited Partner of Stonewall Links, L.P. since 1991,
Bulltown Rd., Elverton, PA; Director and Member of
Executive Committee of Stonewall Links, Inc. since 1991,
Bulltown Rd., Elverton, PA
Michael P. Bishof(1) Senior Vice President of Delaware Management Company,
Inc.; Vice President and Treasurer of the Registrant,
each of the other funds in the Delaware Group, Delaware
Distributors, L.P. and Delaware Service Company, Inc.;
Senior Vice President/Treasurer of Delaware
Distributors, Inc. and Founders Holdings, Inc.;
Assistant Treasurer of Founders CBO Corporation; and
Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.
Joseph H. Hastings Senior Vice President/Corporate Controller and Treasurer
of Delaware Management Company, Inc., Delaware
Management Holdings, Inc. and DMH Corp.; Senior Vice
President/Corporate Controller of Founders Holdings,
Inc.; Senior Vice President/Treasurer of Delaware
Distributors, Inc.; Vice President/Corporate Controller
of the Registrant, each of the other funds in the
Delaware Group, Delaware Distributors, L.P., Delaware
Service Company, Inc. and Delaware International
Holdings Ltd.; Vice President/Treasurer of Delaware
Capital Management, Inc.; 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
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 250
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
Douglas L. Anderson Senior Vice President/Operations of Delaware Management
Company, Inc.; Vice President/Operations of Delaware
Investment & Retirement Services, Inc. and Delaware
Service Company, Inc.; and Vice President/Operations and
Director of Delaware Management Trust Company
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management Company,
Inc.
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 Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
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
Capital Management, Inc., Delaware Investment &
Retirement Services, Inc. and Founders Holdings, Inc.;
Secretary of Founders CBO Corporation; and Assistant
Secretary of Delaware International Holdings Ltd.
Partner of Tri-R Associates since 1989, 10001 Sandmeyer
Ln., Philadelphia, PA
Richard Salus(2) Vice President/Assistant Controller of Delaware
Management Company, Inc.; and Vice President of Delaware
Management Trust Company.
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.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 251
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
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, Delaware Capital
Management, Inc. and Delaware Investment & Retirement
Services, Inc.
Lisa O. Brinkley 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 Capital Management, 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.
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, Assistant
Secretary and Director of Founders CBO Corporation
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 Capital Management
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
Babak Zenouzi Vice President/Portfolio Manager of Fund, the
Registrant, each of the equity funds and the closed-end
funds in the Delaware Group
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 252
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ------------------ -----------------------------------------------
<S> <C>
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 and Delaware Capital Management, Inc.
Roger A. Early 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
Mitchell L. Conery(4) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and the
tax-exempt 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 and Delaware Capital Management, Inc.
Director of HR Easy since 1996, 6407 Idlewild Road,
Suite 100, Charlotte, NC
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 Capital Management, Inc.
David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and each of the equity funds in
the Delaware Group
Gerald S. Frey(5) 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. and Delaware Distributors, Inc.; Senior
Vice President/Human Resources of Delaware Distributors,
L.P.; and Vice President/Director of Human Resources of
Delaware Service Company, Inc.
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 253
(1) VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS,
Bankers Trust and VICE PRESIDENT, CS First Boston Investment Management
prior to June 1995.
(2) SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
(3) TAX MANAGER, Price Waterhouse prior to October 1995.
(4) INVESTMENT OFFICER, Travelers Insurance prior to January 1997 and
RESEARCH ANALYST, CS First Boston prior to March 1995.
(5) SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
(6) VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 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>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Delaware Distributors, Inc. General Partner None
Delaware Management
Management Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Winthrop S. Jessup Vice Chairman Executive Vice President
Bruce Barton 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
Thomas Sawyer Senior Vice President/ None
Western Sales Division
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 254
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
William F. Hostler Senior Vice President/ None
Marketing Services
Dana B. Hall Senior Vice President/ None
Key Accounts
J. Chris Meyer Senior Vice President/ None
Product Development
Richard J. Flannery Senior Vice President/ Vice President
Corporate & International
Affairs
Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
Michael P. Bishof Vice President/Treasurer Vice President/Treasurer
Steven T. Lampe Vice President/Taxation Vice President/Taxation
Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller
Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance
Rosemary E. Milner Vice President/Legal Vice President/Legal
Daniel H. Carlson Vice President/Marketing None
Diane M. Anderson Vice President/ None
Retirement Services
Joseph M. Barrett Vice President/ None
Media Relations
Denise F. Guerriere Vice President/ None
Client Services
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 255
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Julia R. Vander Els Vice President/ None
Client Services
Jerome J. Alrutz Vice President/ None
Client Services
Joanne A. Mettenheimer Vice President/ None
National Accounts
Gregory J. McMillan Vice President/ None
National Accounts
Christopher H. Price Vice President/Annuity None
Marketing & Administration
Stephen J. DeAngelis Vice President/Product None
Development
Susan T. Friestedt Vice President/Customer None
Service
Dinah J. Huntoon Vice President/Product None
Management
Soohee Lee Vice President/Fixed Income None
Project Management
Ellen M. Krott Vice President/ None
Communications
Holly W. Reimel Vice President/Telemarketing None
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
William L. Castetter Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE> 256
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Thomas P. Kennett 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
Laura E. Roman Vice President/Wholesaler None
Michael W. Rose Vice President/Wholesaler None
Thomas E. Sawyer Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Stephen H. Slack Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Faye P. Staples Vice President/ None
Human Resources
John Wells Vice President/Marketing None
Technology
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA, 19103.
(c) Not Applicable.
<PAGE> 257
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.
<PAGE> 258
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 26th day of February, 1997.
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 26, 1997
- -----------------------------------
Wayne A. Stork
Senior Vice President/Chief Financial
Officer/Chief Administrative Officer
(Principal Financial Officer and
/s/ David K. Downes Principal Accounting Officer) February 26, 1997
- -----------------------------------
David K. Downes
/s/Walter P. Babich * Director February 26, 1997
- -----------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director February 26, 1997
- -----------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director February 26, 1997
- -----------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director February 26, 1997
- -----------------------------------
W. Thacher Longstreth
/s/Charles E. Peck * Director February 26, 1997
- -----------------------------------
Charles E. Peck
*By /s/Wayne A. Stork
---------------------------
Wayne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE> 259
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE> 260
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B8A Form of Custodian Agreement
EX-99.B8B Form of Securities Lending Agreement for Limited-Term
Government Fund
EX-99.B9A Executed Shareholders Services Agreement for Limited-Term
Government Fund (December 20, 1990)
EX-99.B9B Executed Shareholders Services Agreement for U.S.
Government Money Series (December 20, 1990)
EX-99.B11 Consents of Auditors
EX-99.B16B Schedules of Computation for each Performance Quotation
for periods not previously electronically filed for
Limited-Term Government Fund
EX-27 Financial Data Schedules
</TABLE>
<PAGE> 1
Exhibit 99.B8A
Mutual Fund/Business Trust/Series
Form of Agreement
Subject to Board Approval
CUSTODIAN AGREEMENT
AGREEMENT dated as of _____________, 199_ between BANKERS TRUST COMPANY
(the "Custodian") and [name of customer] (the "Customer").
WHEREAS, the Customer may be organized with one or more series of
shares, each of which shall represent an interest in a separate portfolio of
Securities and Cash (each as hereinafter defined) (all such existing and
additional series now or hereafter listed on Exhibit A being hereafter referred
to individually as a "Portfolio" and collectively, as the "Portfolios"); and
WHEREAS, the Customer desires to appoint the Custodian as custodian on
behalf of the Portfolios under the terms and conditions set forth in this
Agreement, and the Custodian has agreed to so act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Employment of Custodian. The Customer hereby employs the Custodian
as custodian of all assets of each Portfolio which are delivered to and accepted
by the Custodian or any Subcustodian (as that term is defined in Section 4) (the
"Property") pursuant to the terms and conditions set forth herein. Without
limitation, such Property shall include stocks and other equity interests of
every type, evidences of indebtedness, other instruments representing same or
rights or obligations to receive, purchase, deliver or sell same and other
non-cash investment property of a Portfolio which is acceptable for deposit
("Securities") and cash from any source and in any currency ("Cash"). The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Customer or others and not delivered to the Custodian or any
Subcustodian.
2. Maintenance of Securities and Cash at Custodian and Subcustodian
Locations. Pursuant to Instructions, the Customer shall direct the Custodian to
(a) settle Securities transactions and maintain cash in the country or other
jurisdiction in which the principal trading market for such Securities is
located, where such Securities are to be presented for payment or where such
Securities are acquired and (b) maintain cash and cash equivalents in such
countries in amounts reasonably necessary to effect the Customer's transactions
in such Securities. Instructions to settle Securities transactions in any
country shall be deemed to authorize the holding of such Securities and Cash in
that country.
3. Custody Account. The Custodian agrees to establish and maintain one
or more custody accounts on its books each in the name of a Portfolio (each, an
"Account") for any and all Property from time to time received and accepted by
the Custodian or any Subcustodian for the
<PAGE> 2
account of such Portfolio. Upon delivery by the Customer to the Custodian of any
Property belonging to a Portfolio, the Customer shall, by Instructions (as
hereinafter defined in Section 14), specifically indicate which Portfolio such
Property belongs or if such Property belongs to more than one Portfolio shall
allocate such Property to the appropriate Portfolio. The Custodian shall
allocate such Property to the Accounts in accordance with the Instructions;
provided that the Custodian shall have the right, in its sole discretion, to
refuse to accept any Property that is not in proper form for deposit for any
reason. The Customer on behalf of each Portfolio, acknowledges its
responsibility as a principal for all of its obligations to the Custodian
arising under or in connection with this Agreement, warrants its authority to
deposit in the appropriate Account any Property received therefor by the
Custodian or a Subcustodian and to give, and authorize others to give,
instructions relative thereto. The Custodian may deliver securities of the same
class in place of those deposited in the Account.
The Custodian shall hold, keep safe and protect as custodian for each
Account, on behalf of the Customer, all Property in such Account. All
transactions, including, but not limited to, foreign exchange transactions,
involving the Property shall be executed or settled solely in accordance with
Instructions (which shall specifically reference the Account for which such
transaction is being settled), except that until the Custodian receives
Instructions to the contrary, the Custodian will:
(a) collect all interest and dividends and all other income and
payments, whether paid in cash or in kind, on the Property, as the same become
payable and credit the same to the appropriate Account;
(b) present for payment all Securities held in an Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Custodian or Subcustodian is actually aware of such opportunities and hold
the cash received in such Account pursuant to this Agreement;
(c) (i) exchange Securities where the exchange is purely ministerial
(including, without limitation, the exchange of temporary securities for those
in definitive form and the exchange of warrants, or other documents of
entitlement to securities, for the Securities themselves) and (ii) when
notification of a tender or exchange offer (other than ministerial exchanges
described in (i) above) is received for an Account, endeavor to receive
Instructions, provided that if such Instructions are not received in time for
the Custodian to take timely action, no action shall be taken with respect
thereto;
(d) whenever notification of a rights entitlement or a fractional
interest resulting from a rights issue, stock dividend or stock split is
received for an Account and such rights entitlement or fractional interest bears
an expiration date, if after endeavoring to obtain Instructions such
Instructions are not received in time for the Custodian to take timely action or
if actual notice of such actions was received too late to seek Instructions,
sell in the discretion of the Custodian (which sale the Customer hereby
authorizes the Custodian to make) such rights entitlement or fractional interest
and credit the Account with the net proceeds of such sale;
<PAGE> 3
(e) execute in the Customer's name for an Account, whenever the
Custodian deems it appropriate, such ownership and other certificates as may be
required to obtain the payment of income from the Property in such Account;
(f) pay for each Account, any and all taxes and levies in the nature of
taxes imposed on interest, dividends or other similar income on the Property in
such Account by any governmental authority. In the event there is insufficient
Cash available in such Account to pay such taxes and levies, the Custodian shall
notify the Customer of the amount of the shortfall and the Customer, at its
option, may deposit additional Cash in such Account or take steps to have
sufficient Cash available. The Customer agrees, when and if requested by the
Custodian and required in connection with the payment of any such taxes to
cooperate with the Custodian in furnishing information, executing documents or
otherwise; and
(g) appoint brokers and agents for any of the ministerial transactions
involving the Securities described in (a) - (f), including, without limitation,
affiliates of the Custodian or any Subcustodian.
4. Subcustodians and Securities Systems. The Customer authorizes and
instructs the Custodian to hold the Property in each Account in custody accounts
which have been established by the Custodian with (a) one of its U.S. branches
or another U.S. bank or trust company or branch thereof located in the U.S.
which is itself qualified under the Investment Company Act of 1940, as amended
("1940 Act"), to act as custodian (individually, a "U.S. Subcustodian"), or a
U.S. securities depository or clearing agency or system in which the Custodian
or a U.S. Subcustodian participates (individually, a "U.S. Securities System")
or (b) one of its non-U.S. branches or majority-owned non-U.S. subsidiaries, a
non-U.S. branch or majority-owned subsidiary of a U.S. bank or a non-U.S. bank
or trust company, acting as custodian (individually, a "non-U.S. Subcustodian";
U.S. Subcustodians and non-U.S. Subcustodians, collectively, "Subcustodians"),
or a non-U.S. depository or clearing agency or system in which the Custodian or
any Subcustodian participates (individually, a "non-U.S. Securities System";
U.S. Securities System and non-U.S. Securities System, collectively, Securities
System"), provided that in each case in which a U.S. Subcustodian or U.S.
Securities System is employed, each such Subcustodian or Securities System shall
have been approved by Instructions; provided further that in each case in which
a non-U.S. Subcustodian or non-U.S. Securities System is employed, (a) such
Subcustodian or Securities System either is (i) a "qualified U.S. bank" as
defined by Rule 17f-5 under the 1940 Act ("Rule 17f-5") or (ii) an "eligible
foreign custodian" within the meaning of Rule 17f-5 or such Subcustodian or
Securities System is the subject of an order granted by the U.S. Securities and
Exchange Commission ("SEC") exempting such agent or the subcustody arrangements
thereto from all or part of the provisions of Rule 17f-5 and (b) the agreement
between the Custodian and such non-U.S. Subcustodian has been approved by
Instructions; it being understood that the Custodian shall have no liability or
responsibility for determining whether the approval of any Subcustodian or
Securities System has been proper under the 1940 Act or any rule or regulation
thereunder.
Upon receipt of Instructions, the Custodian agrees to cease the
employment of any Subcustodian or Securities System with respect to the
Customer, and if desirable and practicable,
<PAGE> 4
appoint a replacement subcustodian or securities system in accordance with the
provisions of this Section. In addition, the Custodian may, at any time in its
discretion, upon written notification to the Customer, terminate the employment
of any Subcustodian or Securities System.
Upon request of the Customer, the Custodian shall deliver to the
Customer annually a certificate stating: (a) the identity of each non-U.S.
Subcustodian and non-U.S. Securities System then acting on behalf of the
Custodian and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such non-U.S Subcustodian and
non-U.S. Securities System; (b) the countries in which each non-U.S.
Subcustodian or non-U.S. Securities System is located; and (c) so long as Rule
17f-5 requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, such other information relating to such non-U.S.
Subcustodians and non-U.S. Securities Systems as may reasonably be requested by
the Customer to ensure compliance with Rule 17f-5. So long as Rule 17f-5
requires the Customer's Board of Trustees to directly approve its foreign
custody arrangements, the Custodian also shall furnish annually to the Customer
information concerning such non-U.S. Subcustodians and non-U.S. Securities
Systems similar in kind and scope as that furnished to the Customer in
connection with the initial approval of this Agreement. Custodian agrees to
promptly notify the Customer if, in the normal course of its custodial
activities, the Custodian has reason to believe that any non-U.S. Subcustodian
or non-U.S. Securities System has ceased to be a qualified U.S. bank or an
eligible foreign custodian each within the meaning of Rule 17f-5 or has ceased
to be subject to an exemptive order from the SEC.
5. Use of Subcustodian. With respect to Property in an Account which is
maintained by the Custodian in the custody of a Subcustodian employed pursuant
to Section 4:
(a) The Custodian will identify on its books as belonging to the
Customer on behalf of a Portfolio, any Property held by such Subcustodian.
(b) Any Property in the Account held by a Subcustodian will be subject
only to the instructions of the Custodian or its agents.
(c) Property deposited with a Subcustodian will be maintained in an
account holding only assets for customers of the Custodian.
(d) Any agreement the Custodian shall enter into with a non-U.S.
Subcustodian with respect to the holding of Property shall require that (i) the
Account will be adequately indemnified or its losses adequately insured; (ii)
the Securities are not subject to any right, charge, security interest, lien or
claim of any kind in favor of such Subcustodian or its creditors except a claim
for payment in accordance with such agreement for their safe custody or
administration and expenses related thereto, (iii) beneficial ownership of such
Securities be freely transferable without the payment of money or value other
than for safe custody or administration and expenses related thereto, (iv)
adequate records will be maintained identifying the Property held pursuant to
such Agreement as belonging to the Custodian, on behalf of its customers and (v)
to the extent permitted by applicable law, officers of or auditors employed by,
or other representatives of or designated by, the Custodian, including the
independent public accountants of or designated by,
<PAGE> 5
the Customer be given access to the books and records of such Subcustodian
relating to its actions under its agreement pertaining to any Property held by
it thereunder or confirmation of or pertinent information contained in such
books and records be furnished to such persons designated by the Custodian.
6. Use of Securities System. With respect to Property in the Account(s)
which are maintained by the Custodian or any Subcustodian in the custody of a
Securities System employed pursuant to Section 4:
(a) The Custodian shall, and the Subcustodian will be required by its
agreement with the Custodian to, identify on its books such Property as being
held for the account of the Custodian or Subcustodian for its customers.
(b) Any Property held in a Securities System for the account of the
Custodian or a Subcustodian will be subject only to the instructions of the
Custodian or such Subcustodian, as the case may be.
(c) Property deposited with a Securities System will be maintained in
an account holding only assets for customers of the Custodian or Subcustodian,
as the case may be, unless precluded by applicable law, rule, or regulation.
(d) The Custodian shall provide the Customer with any report obtained
by the Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
7. Agents. The Custodian may at any time or times in its sole
discretion appoint (or remove) any other U.S. bank or trust company which is
itself qualified under the 1940 Act to act as custodian, as its agent to carry
out such of the provisions of this Agreement as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities hereunder.
8. Records, Ownership of Property, Statements, Opinions of Independent
Certified Public Accountants.
(a) The ownership of the Property whether Securities, Cash and/or other
property, and whether held by the Custodian or a Subcustodian or in a Securities
System as authorized herein, shall be clearly recorded on the Custodian's books
as belonging to the appropriate Account and not for the Custodian's own
interest. The Custodian shall keep accurate and detailed accounts of all
investments, receipts, disbursements and other transactions for each Account.
All accounts, books and records of the Custodian relating thereto shall be open
to inspection and audit at all reasonable times during normal business hours by
any person designated by the Customer. All such accounts shall be maintained and
preserved in the form reasonably requested by the Customer. The Custodian will
supply to the Customer from time to time, as mutually agreed upon, a statement
in respect to any Property in an Account held by the Custodian or by a
Subcustodian. In the absence of the filing in writing with the Custodian by the
Customer of
<PAGE> 6
exceptions or objections to any such statement within sixty (60) days of the
mailing thereof, the Customer shall be deemed to have approved such statement
and in such case or upon written approval of the Customer of any such statement,
such statement shall be presumed to be for all purposes correct with respect to
all information set forth therein.
(b) The Custodian shall take all reasonable action as the Customer may
request to obtain from year to year favorable opinions from the Customer's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Customer's Form
N-1A and the Customer's Form N-SAR or other periodic reports to the SEC and with
respect to any other requirements of the SEC.
(c) At the request of the Customer, the Custodian shall deliver to the
Customer a written report prepared by the Custodian's independent certified
public accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding Cash and
Securities, including Cash and Securities deposited and/or maintained in a
securities system or with a Subcustodian. Such report shall be of sufficient
scope and in sufficient detail as may reasonably be required by the Customer and
as may reasonably be obtained by the Custodian.
(d) The Customer may elect to participate in any of the electronic
on-line service and communications systems offered by the Custodian which can
provide the Customer, on a daily basis, with the ability to view on-line or to
print on hard copy various reports of Account activity and of Securities and/or
Cash being held in any Account. To the extent that such service shall include
market values of Securities in an Account, the Customer hereby acknowledges that
the Custodian now obtains and may in the future obtain information on such
values from outside sources that the Custodian considers to be reliable and the
Customer agrees that the Custodian (i) does not verify or represent or warrant
either the reliability of such service nor the accuracy or completeness of any
such information furnished or obtained by or through such service and (ii) shall
be without liability in selecting and utilizing such service or furnishing any
information derived therefrom.
9. Holding of Securities, Nominees, etc. Securities in an Account which
are held by the Custodian or any Subcustodian may be held by such entity in the
name of the Customer, on behalf of a Portfolio, in the Custodian's or
Subcustodian's name, in the name of the Custodian's or Subcustodian's nominee,
or in bearer form. Securities that are held by a Subcustodian or which are
eligible for deposit in a Securities System as provided above may be maintained
with the Subcustodian or the Securities System in an account for the Custodian's
or Subcustodian's customers, unless prohibited by law, rule, or regulation. The
Custodian or Subcustodian, as the case may be, may combine certificates
representing Securities held in an Account with certificates of the same issue
held by it as fiduciary or as a custodian. In the event that any Securities in
the name of the Custodian or its nominee or held by a Subcustodian and
registered in the name of such Subcustodian or its nominee are called for
partial redemption by the issuer of such Security, the Custodian may, subject to
the rules or regulations pertaining to allocation of any Securities System in
which such Securities have been deposited, allot, or cause to be allotted, the
called
<PAGE> 7
portion of the respective beneficial holders of such class of security in any
manner the Custodian deems to be fair and equitable.
10. Proxies, etc. With respect to any proxies, notices, reports or
other communications relative to any of the Securities in any Account, the
Custodian shall perform such services and only such services relative thereto as
are (i) set forth in Section 3 of this Agreement, (ii) described in Exhibit B
attached hereto (as such service therein described may be in effect from time to
time) (the "Proxy Service") and (iii) as may otherwise be agreed upon between
the Custodian and the Customer. The liability and responsibility of the
Custodian in connection with the Proxy Service referred to in (ii) of the
immediately preceding sentence and in connection with any additional services
which the Custodian and the Customer may agree upon as provided in (iii) of the
immediately preceding sentence shall be as set forth in the description of the
Proxy Service and as may be agreed upon by the Custodian and the Customer in
connection with the furnishing of any such additional service and shall not be
affected by any other term of this Agreement. Neither the Custodian nor its
nominees or agents shall vote upon or in respect of any of the Securities in an
Account, execute any form of proxy to vote thereon, or give any consent or take
any action (except as provided in Section 3) with respect thereto except upon
the receipt of Instructions relative thereto.
11. Segregated Account. To assist the Customer in complying with the
requirements of the 1940 Act and the rules and regulations thereunder, the
Custodian shall, upon receipt of Instructions, establish and maintain a
segregated account or accounts on its books for and on behalf of a Portfolio.
12. Settlement Procedures. Securities will be transferred, exchanged or
delivered by the Custodian or a Subcustodian upon receipt by the Custodian of
Instructions which include all information required by the Custodian. Settlement
and payment for Securities received for an Account and delivery of Securities
out of such Account may be effected in accordance with the customary or
established securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs, including,
without limitation, delivering Securities to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) against a receipt
with the expectation of receiving later payment for such Securities from such
purchaser or dealer, as such practices and procedures may be modified or
supplemented in accordance with the standard operating procedures of the
Custodian in effect from time to time for that jurisdiction or market. The
Custodian shall not be liable for any loss which results from effecting
transactions in accordance with the customary or established securities trading
or securities processing practices and procedures in the applicable jurisdiction
or market.
Notwithstanding that the Custodian may settle purchases and sales
against, or credit income to, an Account, on a contractual basis, as outlined in
the Investment Manager User Guide provided to the Customer by the Custodian, the
Custodian may, at its sole option, reverse such credits or debits to the
appropriate Account in the event that the transaction does not settle, or the
income is not received in a timely manner, and the Customer agrees to hold the
Custodian harmless from any losses which may result therefrom.
<PAGE> 8
Except as otherwise may be agreed upon by the parties hereto, the
Custodian shall not be required to comply with Instructions to settle the
purchase of any Securities for an Account unless there is sufficient Cash in
such Account at the time or to settle the sale of any Securities in such Account
unless such Securities are in deliverable form. Notwithstanding the foregoing,
if the purchase price of such securities exceeds the amount of Cash in an
Account at the time of settlement of such purchase, the Custodian may, in its
sole discretion, but in no way shall have any obligation to, permit an overdraft
in such Account in the amount of the difference solely for the purpose of
facilitating the settlement of such purchase of securities for prompt delivery
for such Account. The Customer agrees to immediately repay the amount of any
such overdraft in the ordinary course of business and further agrees to
indemnify and hold the Custodian harmless from and against any and all losses,
costs, including, without limitation the cost of funds, and expenses incurred in
connection with such overdraft. The Customer agrees that it will not use the
Account to facilitate the purchase of securities without sufficient funds in the
Account (which funds shall not include the proceeds of the sale of the purchased
securities).
13. Permitted Transactions. The Customer agrees that it will cause
transactions to be made pursuant to this Agreement only upon Instructions in
accordance Section 14 and only for the purposes listed below.
(a) In connection with the purchase or sale of Securities at prices as
confirmed by Instructions.
(b) When Securities are called, redeemed or retired, or otherwise
become payable.
(c) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan or merger, consolidation,
reorganization, recapitalization or readjustment.
(d) Upon conversion of Securities pursuant to their terms into other
securities.
(e) Upon exercise of subscription, purchase or other similar rights
represented by Securities.
(f) For the payment of interest, taxes, management or supervisory fees,
distributions or operating expenses.
(g) In connection with any borrowings by the Customer requiring a
pledge of Securities, but only against receipt of amounts borrowed.
(h) In connection with any loans, but only against receipt of
collateral as specified in Instructions which shall reflect any restrictions
applicable to the Customer.
(i) For the purpose of redeeming shares of the capital stock of the
Customer against delivery of the shares to be redeemed to the Custodian, a
Subcustodian or the Customer's transfer agent.
<PAGE> 9
(j) For the purpose of redeeming in kind shares of the Customer against
delivery of the shares to be redeemed to the Custodian, a Subcustodian or the
Customer's transfer agent.
(k) For delivery in accordance with the provisions of any agreement
among the Customer, on behalf of a Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 and a member of the
National Association of Securities Dealers, Inc., relating to compliance with
the rules of The Options Clearing Corporation, the Commodities Futures Trading
Commission and of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Customer.
(l) For release of Securities to designated brokers under covered call
options, provided, however, that such Securities shall be released only upon
payment to the Custodian of monies for the premium due and a receipt for the
Securities which are to be held in escrow. Upon exercise of the option, or at
expiration, the Custodian will receive the Securities previously deposited from
broker. The Custodian will act strictly in accordance with Instructions in the
delivery of Securities to be held in escrow and will have no responsibility or
liability for any such Securities which are not returned promptly when due other
than to make proper request for such return.
(m) For spot or forward foreign exchange transactions to facilitate
security trading or receipt of income from Securities related transactions.
(n) Upon the termination of this Agreement as set forth in Section 20.
(o) For other proper purposes.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected.
14. Instructions. The term "Instructions" means instructions from the
Customer in respect of any of the Custodian's duties hereunder which have been
received by the Custodian at its address set forth in Section 21 below (i) in
writing (including, without limitation, facsimile transmission) or by tested
telex signed or given by such one or more person or persons as the Customer
shall have from time to time authorized in writing to give the particular class
of Instructions in question and whose name and (if applicable) signature and
office address have been filed with the Custodian, or (ii) which have been
transmitted electronically through an electronic on-line service and
communications system offered by the Custodian or other electronic instruction
system acceptable to the Custodian, or (iii) a telephonic or oral communication
by one or more persons as the Customer shall have from time to time authorized
to give the particular class of Instructions in question and whose name has been
filed with the Custodian; or (iv) upon receipt of such other form of
instructions as the Customer may from time to time authorize in writing and
which the Custodian has agreed in writing to accept. Instructions in the form of
oral communications shall be confirmed by the Customer by tested telex or
writing in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken
<PAGE> 10
by the Custodian in reliance upon such oral instructions prior to the
Custodian's receipt of such confirmation. Instructions may relate to specific
transactions or to types or classes of transactions, and may be in the form of
standing instructions.
The Custodian shall have the right to assume in the absence of notice
to the contrary from the Customer that any person whose name is on file with the
Custodian pursuant to this Section has been authorized by the Customer to give
the Instructions in question and that such authorization has not been revoked.
The Custodian may act upon and conclusively rely on, without any liability to
the Customer or any other person or entity for any losses resulting therefrom,
any Instructions reasonably believed by it to be furnished by the proper person
or persons as provided above.
15. Standard of Care. The Custodian shall be responsible for the
performance of only such duties as are set forth herein or contained in
Instructions given to the Custodian which are not contrary to the provisions of
this Agreement. The Custodian will use reasonable care with respect to the
safekeeping of Property in each Account and, except as otherwise expressly
provided herein, in carrying out its obligations under this Agreement. So long
as and to the extent that it has exercised reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any Property or
other property or evidence of title thereto received by it or delivered by it
pursuant to this Agreement and shall be held harmless in acting upon, and may
conclusively rely on, without liability for any loss resulting therefrom, any
notice, request, consent, certificate or other instrument reasonably believed by
it to be genuine and to be signed or furnished by the proper party or parties,
including, without limitation, Instructions, and shall be indemnified by the
Customer for any losses, damages, costs and expenses (including, without
limitation, the fees and expenses of counsel) incurred by the Custodian and
arising out of action taken or omitted with reasonable care by the Custodian
hereunder or under any Instructions. The Custodian shall be liable to the
Customer for any act or omission to act of any Subcustodian to the same extent
as if the Custodian committed such act itself. With respect to a Securities
System, the Custodian shall only be responsible or liable for losses arising
from employment of such Securities System caused by the Custodian's own failure
to exercise reasonable care. In the event of any loss to the Customer by reason
of the failure of the Custodian or a Subcustodian to utilize reasonable care,
the Custodian shall be liable to the Customer to the extent of the Customer's
actual damages at the time such loss was discovered without reference to any
special conditions or circumstances. In no event shall the Custodian be liable
for any consequential or special damages. The Custodian shall be entitled to
rely, and may act, on advice of counsel (who may be counsel for the Customer) on
all matters and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
In the event the Customer subscribes to an electronic on-line service
and communications system offered by the Custodian, the Customer shall be fully
responsible for the security of the Customer's connecting terminal, access
thereto and the proper and authorized use thereof and the initiation and
application of continuing effective safeguards with respect thereto and agree to
defend and indemnify the Custodian and hold the Custodian harmless from and
against any and all losses, damages, costs and expenses (including the fees and
expenses of counsel) incurred by the
<PAGE> 11
Custodian as a result of any improper or unauthorized use of such terminal by
the Customer or by any others.
All collections of funds or other property paid or distributed in
respect of Securities in an Account, including funds involved in third-party
foreign exchange transactions, shall be made at the risk of the Customer.
Subject to the exercise of reasonable care, the Custodian shall have no
liability for any loss occasioned by delay in the actual receipt of notice by
the Custodian or by a Subcustodian of any payment, redemption or other
transaction regarding Securities in each Account in respect of which the
Custodian has agreed to take action as provided in Section 3 hereof. The
Custodian shall not be liable for any loss resulting from, or caused by, or
resulting from acts of governmental authorities (whether de jure or de facto),
including, without limitation, nationalization, expropriation, and the
imposition of currency restrictions; devaluations of or fluctuations in the
value of currencies; changes in laws and regulations applicable to the banking
or securities industry; market conditions that prevent the orderly execution of
securities transactions or affect the value of Property; acts of war, terrorism,
insurrection or revolution; strikes or work stoppages; the inability of a local
clearing and settlement system to settle transactions for reasons beyond the
control of the Custodian; hurricane, cyclone, earthquake, volcanic eruption,
nuclear fusion, fission or radioactivity, or other acts of God.
The Custodian shall have no liability in respect of any loss, damage or
expense suffered by the Customer, insofar as such loss, damage or expense arises
from the performance of the Custodian's duties hereunder by reason of the
Custodian's reliance upon records that were maintained for the Customer by
entities other than the Custodian prior to the Custodian's employment under this
Agreement.
The provisions of this Section shall survive termination of this
Agreement.
16. Investment Limitations and Legal or Contractual Restrictions or
Regulations. The Custodian shall not be liable to the Customer and the Customer
agrees to indemnify the Custodian and its nominees, for any loss, damage or
expense suffered or incurred by the Custodian or its nominees arising out of any
violation of any investment restriction or other restriction or limitation
applicable to the Customer or any Portfolio pursuant to any contract or any law
or regulation. The provisions of this Section shall survive termination of this
Agreement.
17. Fees and Expenses. The Customer agrees to pay to the Custodian such
compensation for its services pursuant to this Agreement as may be mutually
agreed upon in writing from time to time and the Custodian's reasonable
out-of-pocket or incidental expenses in connection with the performance of this
Agreement, including (but without limitation) legal fees as described herein
and/or deemed necessary in the judgment of the Custodian to keep safe or protect
the Property in the Account. The initial fee schedule is attached hereto as
Exhibit C. The Customer hereby agrees to hold the Custodian harmless from any
liability or loss resulting from any taxes or other governmental charges, and
any expense related thereto, which may be imposed, or assessed with respect to
any Property in an Account and also agrees to hold the Custodian, its
<PAGE> 12
Subcustodians, and their respective nominees harmless from any liability as a
record holder of Property in such Account. The Custodian is authorized to charge
the applicable Account for such items and the Custodian shall have a lien on the
Property in the applicable Account for any amount payable to the Custodian under
this Agreement, including but not limited to amounts payable pursuant to the
last paragraph of Section 12 and pursuant to indemnities granted by the Customer
under this Agreement. The provisions of this Section shall survive the
termination of this Agreement.
18. Tax Reclaims. With respect to withholding taxes deducted and which
may be deducted from any income received from any Property in an Account, the
Custodian shall perform such services with respect thereto as are described in
Exhibit D attached hereto and shall in connection therewith be subject to the
standard of care set forth in such Exhibit D. Such standard of care shall not be
affected by any other term of this Agreement.
19. Amendment, Modifications, etc. No provision of this Agreement may
be amended, modified or waived except in a writing signed by the parties hereto.
No waiver of any provision hereto shall be deemed a continuing waiver unless it
is so designated. No failure or delay on the part of either party in exercising
any power or right under this Agreement operates as a waiver, nor does any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right.
20. Termination. (a) Termination of Entire Agreement. This Agreement
may be terminated by the Customer or the Custodian by ninety (90) days' written
notice to the other; provided that notice by the Customer shall specify the
names of the persons to whom the Custodian shall deliver the Securities in each
Account and to whom the Cash in such Account shall be paid. If notice of
termination is given by the Custodian, the Customer shall, within ninety (90)
days following the giving of such notice, deliver to the Custodian a written
notice specifying the names of the persons to whom the Custodian shall deliver
the Securities in each Account and to whom the Cash in such Account shall be
paid. In either case, the Custodian will deliver such Securities and Cash to the
persons so specified, after deducting therefrom any amounts which the Custodian
determines to be owed to it under Sections 12, 17, and 23. In addition, the
Custodian may in its discretion withhold from such delivery such Cash and
Securities as may be necessary to settle transactions pending at the time of
such delivery. The Customer grants to the Custodian a lien and right of setoff
against the Account and all Property held therein from time to time in the full
amount of the foregoing obligations. If within ninety (90) days following the
giving of a notice of termination by the Custodian, the Custodian does not
receive from the Customer a written notice specifying the names of the persons
to whom the Custodian shall deliver the Securities in each Account and to whom
the Cash in such Account shall be paid, the Custodian, at its election, may
deliver such Securities and pay such Cash to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or may continue to hold such Securities and Cash
until a written notice as aforesaid is delivered to the Custodian, provided that
the Custodian's obligations shall be limited to safekeeping.
<PAGE> 13
(b) Termination as to One or More Portfolios. This Agreement may be
terminated by the Customer or the Custodian as to one or more Portfolios (but
less than all of the Portfolios) by delivery of an amended Exhibit A deleting
such Portfolios, in which case termination as to such deleted Portfolios shall
take effect ninety (90) days after the date of such delivery, or such earlier
time as mutually agreed. The execution and delivery of an amended Exhibit A
which deletes one or more Portfolios shall constitute a termination of this
Agreement only with respect to such deleted Portfolio(s), shall be governed by
the preceding provisions of Section 20 as to the identification of a successor
custodian and the delivery of Cash and Securities of the Portfolio(s) so deleted
to such successor custodian, and shall not affect the obligations of the
Custodian and the Customer hereunder with respect to the other Portfolios set
forth in Exhibit A, as amended from time to time.
21. Notices. Except as otherwise provided in this Agreement, all
requests, demands or other communications between the parties or notices in
connection herewith (a) shall be in writing, hand delivered or sent by telex,
telegram, cable, facsimile or other means of electronic communication agreed
upon by the parties hereto addressed, if to the Customer, to:
if to the Custodian, to:
or in either case to such other address as shall have been furnished to the
receiving party pursuant to the provisions hereof and (b) shall be deemed
effective when received, or, in the case of a telex, when sent to the proper
number and acknowledged by a proper answerback.
22. Several Obligations of the Portfolios. With respect to any
obligations of the Customer on behalf of each Portfolio and each of its related
Accounts arising out of this Agreement, the Custodian shall look for payment or
satisfaction of any obligation solely to the assets and property of the
Portfolio and such Accounts to which such obligation relates as though the
Customer had separately contracted with the Custodian by separate written
instrument with respect to each Portfolio and its related Accounts.
23. Security for Payment. To secure payment of all obligations due
hereunder, the Customer hereby grants to Custodian a continuing security
interest in and right of setoff against each Account and all Property held
therein from time to time in the full amount of such obligations; provided that,
if there is more than one Account and the obligations secured pursuant to this
Section can be allocated to a specific Account or the Portfolio related to such
Account, such security interest and right of setoff will be limited to Property
held for that Account only and its related Portfolio. Should the Customer fail
to pay promptly any amounts owed hereunder, Custodian shall be entitled to use
available Cash in the Account or applicable Account, as the case
<PAGE> 14
may be, and to dispose of Securities in the Account or such applicable Account
as is necessary. In any such case and without limiting the foregoing, Custodian
shall be entitled to take such other action(s) or exercise such other options,
powers and rights as Custodian now or hereafter has as a secured creditor under
the New York Uniform Commercial Code or any other applicable law.
24. Representations and Warranties.
(a) The Customer hereby represents and warrants to the Custodian that:
(i) the employment of the Custodian and the allocation of
fees, expenses and other charges to any Account as herein provided, is not
prohibited by law or any governing documents or contracts to which the Customer
is subject;
(ii) the terms of this Agreement do not violate any obligation
by which the Customer is bound, whether arising by contract, operation of law or
otherwise;
(iii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Customer and
each Portfolio in accordance with its terms; and
(iv) the Customer will deliver to the Custodian such evidence
of such authorization as the Custodian may reasonably require, whether by way of
a certified resolution or otherwise.
(b) The Custodian hereby represents and warrants to the Customer that:
(i) the terms of this Agreement do not violate any obligation
by which the Custodian is bound, whether arising by contract, operation of law
or otherwise;
(ii) this Agreement has been duly authorized by appropriate
action and when executed and delivered will be binding upon the Custodian in
accordance with its terms;
(iii) the Custodian will deliver to the Customer such evidence
of such authorization as the Customer may reasonably require, whether by way of
a certified resolution or otherwise; and
(iv) Custodian is qualified as a custodian under Section 26(a)
of the 1940 Act and warrants that it will remain so qualified or upon ceasing to
be so qualified shall promptly notify the Customer in writing.
25. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Custodian.
<PAGE> 15
26. Publicity. Customer shall furnish to Custodian at its office
referred to in Section 21 above, prior to any distribution thereof, copies of
any material prepared for distribution to any persons who are not parties hereto
that refer in any way to the Custodian. Customer shall not distribute or permit
the distribution of such materials if Custodian reasonably objects in writing
within ten (10) business days of receipt thereof (or such other time as may be
mutually agreed) after receipt thereof. The provisions of this Section shall
survive the termination of this Agreement.
27. Representative Capacity and Binding Obligation. A copy of the
[DECLARATION OF TRUST/TRUST INSTRUMENT] of the Customer is on file with The
Secretary of the [COMMONWEALTH OF MASSACHUSETTS/ STATE OF DELAWARE], and notice
is hereby given that this Agreement is not executed on behalf of the Trustees of
the Customer as individuals, and the obligations of this Agreement are not
binding upon any of the Trustees, officers or shareholders of the Customer
individually but are binding only upon the assets and property of the
Portfolios.
The Custodian agrees that no shareholder, trustee or officer of the
Customer may be held personally liable or responsible for any obligations of the
Customer arising out of this Agreement.
28. Submission to Jurisdiction. Any suit, action or proceeding arising
out of this Agreement may be instituted in any State or Federal court sitting in
the City of New York, State of New York, United States of America, and the
Customer irrevocably submits to the non-exclusive jurisdiction of any such court
in any such suit, action or proceeding and waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any such suit, action or proceeding brought in such a court and any
claim that such suit, action or proceeding was brought in an inconvenient forum.
29. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This Agreement shall
become effective when one or more counterparts have been signed and delivered by
each of the parties hereto.
30. Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all information
provided by each party to the other regarding its business and operations. All
confidential information provided by a party hereto shall be used by any other
party hereto solely for the purpose of rendering services pursuant to this
Agreement and, except as may be required in carrying out this Agreement, shall
not be disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is publicly
available when provided or thereafter becomes publicly available other than
through a breach of this Agreement, or that is required or requested to be
disclosed by any bank or other regulatory examiner of the Custodian, Customer,
or any Subcustodian, any auditor of the parties hereto, by judicial or
administrative process or otherwise by applicable law or regulation.
31. Severability. If any provision of this Agreement is determined to
be invalid or unenforceable, such determination shall not affect the validity or
enforceability of any other provision of this Agreement.
<PAGE> 16
32. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
[NAME OF CUSTOMER]
By: __________________________
Name: _______________________
Title: _______________________
BANKERS TRUST COMPANY
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 17
EXHIBIT A
To Custodian Agreement dated as of ______________, 199_ between Bankers
Trust Company and ____________________.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first WHEREAS
clause of the above- referred to Custodian Agreement. Terms used herein as
defined terms unless otherwise defined shall have the meanings ascribed to them
in the above-referred to Custodian Agreement.
Dated as of: [NAME OF CUSTOMER]
By: __________________________
Name: ________________________
Title: _______________________
BANKERS TRUST COMPANY
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 18
EXHIBIT B
To Custodian Agreement dated as of _____________, 199_ between Bankers
Trust Company and ___________________.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referred to Custodian Agreement. Terms used herein as
defined terms shall have the meanings ascribed to them therein unless otherwise
defined below.
The Custodian provides a service, described below, for the transmission
of corporate communications in connection with shareholder meetings relating to
Securities held in Argentina, Australia, Austria, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Indonesia, Ireland, Italy, Japan, Korea,
Malaysia, Mexico, Netherlands, New Zealand, Pakistan, Poland, Singapore, South
Africa, Spain, Sri Lanka, Sweden, United Kingdom, United States, and Venezuela.
For the United States and Canada, the term "corporate communications" means the
proxy statements or meeting agenda, proxy cards, annual reports and any other
meeting materials received by the Custodian. For countries other than the United
States and Canada, the term "corporate communications" means the meeting agenda
only and does not include any meeting circulars, proxy statements or any other
corporate communications furnished by the issuer in connection with such
meeting. Non-meeting related corporate communications are not included in the
transmission service to be provided by the Custodian except upon request as
provided below.
The Custodian's process for transmitting and translating meeting
agendas will be as follows:
1) If the meeting agenda is not provided by the issuer in the English
language, and if the language of such agenda is in the official language of the
country in which the related security is held, the Custodian will as soon as
practicable after receipt of the original meeting agenda by a Subcustodian
provide an English translation prepared by that Subcustodian.
2) If an English translation of the meeting agenda is furnished, the
local language agenda will not be furnished unless requested.
Translations will be free translations and neither the Custodian nor
any Subcustodian will be liable or held responsible for the accuracy thereof or
any direct or indirect consequences arising therefrom, including without
limitation arising out of any action taken or omitted to be taken based thereon.
<PAGE> 19
- 2 -
If requested, the Custodian will, on a reasonable efforts basis,
endeavor to obtain any additional corporate communication such as annual or
interim reports, proxy statements, meeting circulars, or local language agendas,
and provide them in the form obtained.
Timing in the voting process is important and, in that regard, upon
receipt by the Custodian of notice from a Subcustodian, the Custodian will
provide a notice to the Customer indicating the deadline for receipt of its
instructions to enable the voting process to take place effectively and
efficiently. As voting procedures will vary from market to market, attention to
any required procedures will be very important. Upon timely receipt of voting
instructions, the Custodian will promptly forward such instructions to the
applicable Subcustodian. If voting instructions are not timely received, the
Custodian shall have no liability or obligation to take any action.
For Securities held in markets other than those set forth in the first
paragraph, the Custodian will not furnish the material described above or seek
voting instructions. However, if requested to exercise voting rights at a
specific meeting, the Custodian will endeavor to do so on a reasonable efforts
basis without any assurance that such rights will be so exercised at such
meeting.
If the Custodian or any Subcustodian incurs extraordinary expenses in
exercising voting rights related to any Securities pursuant to appropriate
instructions or direction (e.g., by way of illustration only and not by way of
limitation, physical presence is required at a meeting and/or travel expenses
are incurred), such expenses will be reimbursed out of the Account containing
such Securities unless other arrangements have been made for such reimbursement.
It is the intent of the Custodian to expand the Proxy Service to
include jurisdictions which are not currently included as set forth in the
second paragraph hereof. The Custodian will notify the Customer as to the
inclusion of additional countries or deletion of existing countries after their
inclusion or deletion and this Exhibit B will be deemed to be automatically
amended to include or delete such countries as the case may be.
Dated as of: [NAME OF CUSTOMER]
By: __________________________
Name: ________________________
Title: _______________________
BANKERS TRUST COMPANY
<PAGE> 20
- 3 -
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 21
EXHIBIT C
To Custodian Agreement dated as of ______________, 199_ between Bankers
Trust Company and ____________________.
CUSTODY FEE SCHEDULE
<PAGE> 22
This Exhibit C shall be amended upon delivery by the Custodian of a new Exhibit
C to the Customer and acceptance thereof by the Customer and shall be effective
as of the date of acceptance by the Customer or a date agreed upon between the
Custodian and the Customer.
<PAGE> 23
EXHIBIT D
To Custodian Agreement dated as of ______________, 199_ between Bankers
Trust Company and ____________________.
TAX RECLAIMS
Pursuant to Section 18 of the above referred to Custodian Agreement,
the Custodian shall perform the following services with respect to withholding
taxes imposed or which may be imposed on income from Property in any Account.
Terms used herein as defined terms shall unless otherwise defined have the
meanings ascribed to them in the above referred to Custodian Agreement.
When withholding tax has been deducted with respect to income from any
Property in an Account, the Custodian will actively pursue on a reasonable
efforts basis the reclaim process, provided that the Custodian shall not be
required to institute any legal or administrative proceeding against any
Subcustodian or other person. The Custodian will provide fully detailed
advices/vouchers to support reclaims submitted to the local authorities by the
Custodian or its designee. In all cases of withholding, the Custodian will
provide full details to the Customer. If exemption from withholding at the
source can be obtained in the future, the Custodian will notify the Customer and
advise what documentation, if any, is required to obtain the exemption. Upon
receipt of such documentation from the Customer, the Custodian will file for
exemption on the Customer's behalf and notify the Customer when it has been
obtained.
In connection with providing the foregoing service, the Custodian shall
be entitled to apply categorical treatment of the Customer according to the
Customer's nationality, the particulars of its organization and other relevant
details that shall be supplied by the Customer. It shall be the duty of the
Customer to inform the Custodian of any change in the organization, domicile or
other relevant fact concerning tax treatment of the Customer and further to
inform the Custodian if the Customer is or becomes the beneficiary of any
special ruling or treatment not applicable to the general nationality and
category or entity of which the Customer is a part under general laws and treaty
provisions. The Custodian may rely on any such information provided by the
Customer.
In connection with providing the foregoing service, the Custodian may
also rely on professional tax services published by a major international
accounting firm and/or advice received from a Subcustodian in the jurisdictions
in question. In addition, the Custodian may seek the
<PAGE> 24
advice of counsel or other professional tax advisers in such jurisdictions. The
Custodian is entitled to rely, and may act, on information set forth in such
services and on advice received from a Subcustodian, counsel or other
professional tax advisers and shall be without liability to the Customer for any
action reasonably taken or omitted pursuant to information contained in such
services or such advice.
<PAGE> 25
Dated as of: [NAME OF CUSTOMER]
By: __________________________
Name: ________________________
Title: _______________________
BANKERS TRUST COMPANY
By: __________________________
Name: ________________________
Title: _______________________
<PAGE> 1
EX- 99.B8B
Form of Agreement
Subject to Board Approval
___________, 1996
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006
USA
RE: Securities Lending Agreement
Dear Sirs:
This letter will confirm our agreement, as set forth below, pursuant to
which Bankers Trust Company ("BTC") will be authorized to lend on our behalf
certain securities held by BTC as trustee and/or custodian:
1. Appointment of Agent
(a) Until this Agreement is terminated pursuant to Section 11, BTC is
authorized as our agent to lend on a disclosed basis our securities held in
custody by BTC to such borrowers as appear on your approved list of borrowers, a
copy of which you may obtain at any time upon request, at the time of any loan
and on such terms as BTC shall in its sole discretion decide. Such borrowers may
include Bankers Trust International PLC, an affiliate of BTC, if we provide BTC
with our authorization in the form attached as Exhibit A hereto, and certain
United Kingdom entities, if we provide BTC with our authorization in the form
attached hereto as Exhibit B. BTC shall further be authorized as our agent to
sign agreements with borrowers, ownership or other certificates as may be
required by the Internal Revenue Service or any other tax authorities, and to
take any other actions necessary to effect such loans.
(b) We acknowledge that BTC acts as agent for other securities lending
clients who may hold some of the same securities as we may hold and,
accordingly, that any given loan to a borrower may be allocated among several of
BTC's clients. We agree that BTC shall have full discretion to allocate such
loans among BTC's clients as it deems appropriate and shall have no obligation
to include us in any such allocation.
(c) We represent that:(i) [COMPANY] is a ________________ established
pursuant to _____________________; (ii) we have and
<PAGE> 2
will have the right to lend the securities subject to loans hereunder; (iii) the
assets subject to this Agreement [do / do not] consist of assets which are
deemed to be plan assets under the Employee Retirement Income Security Act of
1974, or the Internal Revenue Code of 1986, each as amended; (iv) the execution,
delivery and performance of this Agreement are within our powers, have been and
remain duly authorized by all necessary action and will not violate or
constitute a default under any applicable law or regulation or of any decree,
order, judgment, agreement or instrument binding on us; (v) no consent
(including, but not limited to, exchange control consents) of any applicable
governmental authority or body is necessary, except for such consents as have
been obtained and are in full force and effect, and all conditions of which have
been duly complied with; and (vi) this Agreement constitutes a legal, valid and
binding obligation enforceable against us in accordance with its terms.
2. Remuneration
Unless otherwise agreed, BTC shall pay us a fee for each loan equal to
an agreed percentage of (a) in the case of loans not collateralized by cash, the
fee paid by the borrower to BTC with respect to each loan, and (b) in the case
of loans collateralized by cash, the difference between (i) the net realized
income derived from approved investments of the cash collateral, minus (ii) the
borrower's rebate. BTC shall receive any fee paid by the borrower and, provided
that BTC shall have actually received payment of such fees from the borrower,
credit our portion of such fees to our account monthly.
3. Statements of Loan Activity and Fees
BTC shall promptly advise us by written or electronic means of any loan
entered into by BTC on our behalf. In addition, BTC shall send us a monthly
statement summarizing securities lending activity (including revenues therefrom)
for the previous month effected by BTC on our behalf.
4. Distributions on Loaned Securities and Collateral
All borrowers shall be required to pay or otherwise deliver to BTC all
substitute payments in respect of interest payments, dividends, or other
distributions made on the loaned securities. Such payments shall be credited by
BTC to our account upon receipt by BTC of such payments from the borrower,
unless otherwise agreed upon by the parties. We authorize BTC to pay, provided
that the borrower is not in default under its agreement with BTC, to the
borrower all interest payments received by BTC on Government Securities (as
defined in Section 6(a)) held by BTC as collateral for our loans.
<PAGE> 3
5. Recalls of Securities
(a) Unless otherwise agreed by us, we may instruct BTC to terminate any
loan in whole or in part by giving BTC written notice thereof (a "Recall
Notice"). BTC shall thereupon promptly recall the securities from the borrower,
within the recall period specified by BTC's agreement with the borrower, which
shall not be later than the fifth business day (but, in the case of U.S. equity
securities, the third business day, and, in the case of Government Securities,
the first business day) following the business day on which BTC gives a notice
recalling the securities to the borrower (the "Recall Period"). If, on the day
BTC receives the Recall Notice, (i) the borrower is closed for business or (ii)
the principal market for the loaned securities is closed for trading, the Recall
Period will commence on the next business day on which both the borrower and the
principal trading market are open.
(b) If any loaned security is not returned by a borrower by the
expiration of the applicable recall period, BTC shall notify us of such fact.
BTC shall take all steps which BTC deems appropriate to secure the prompt return
of the securities pursuant to BTC's agreement with the borrower (which may
include the liquidation of collateral and the purchase of replacement
securities).
6. Collateral
(a) Unless otherwise indicated to us by BTC, prior to or simultaneously
with the delivery of our securities to a borrower, BTC shall obtain and hold on
our behalf collateral having a value not less than the value (the "Margin
Requirement") specified in Exhibit C hereto. The collateral shall consist of (i)
cash, (ii) securities issued or guaranteed by the United States Government or
its agencies ("Government Securities"), or (iii) letters of credit issued by
banks as may be acceptable to BTC.
(b) BTC will mark to market loaned securities and collateral (if the
collateral is represented by Government Securities) on a daily basis, and if on
any day, the aggregate market value of the collateral held by BTC for loans made
to any one borrower is less than the Margin Requirement, BTC shall obtain from
such borrower pursuant to BTC's agreement with the borrower such additional
collateral so that the aggregate market value of the collateral is not less than
the Margin Requirement. We understand that BTC may be obligated to release
collateral in
4
<PAGE> 4
excess of the Margin Requirement to the borrower when so required by BTC's
agreement with the borrower.
(c) We authorize BTC to invest, on our behalf and for our account, any
cash collateral received from a borrower in any of the instruments described in
Exhibit C hereto, including any such instrument issued by, purchased through or
entered into with BTC or its affiliates. We acknowledge that such cash
collateral is invested at our risk, and if, upon termination of any loan, the
cash collateral held by BTC for our account is less than the amount required to
be returned to the borrower under BTC's agreement with the borrower, we will
provide BTC with cash in the amount of any such deficiency.
7. Indemnification
(a) In the event that any loan is terminated and the loaned Securities
or any portion thereof shall not have been returned to BTC by or on behalf of
Borrower within the time specified by BTC's agreement with the borrower, BTC
shall at its expense (i) within one (1) business day after the expiration of the
Recall Period, replace the loaned Securities (or any portion thereof not so
returned) with a like amount of the loaned securities of the same issuer, class
and denomination, and hold us harmless from any brokerage commission, fees, and
New York State or City transfer taxes incurred by BTC in the purchase of such
replacement securities or (ii) if BTC is unable to purchase such securities on
the open market, credit our account with an amount of cash in U.S. dollars equal
to the Market Value (as defined below) of such unreturned loaned Securities
determined at the close of business as of the date on which the loaned
Securities should have been returned plus, until such time as the events in (i)
or (ii) are consummated, all financial benefits derived from the beneficial
ownership of the loaned Securities which have accrued on the loaned Securities
whether or not received from Borrower. The Market Value of any securities listed
on a national securities exchange will be the last sales price on the principal
exchange on which trading occurred on the date the Market Value is determined
or, if there was no sale on any such exchange on such date, the last bid price
quoted. The Market Value of
5
<PAGE> 5
securities traded in the over-the-counter market will be the last quoted bid
price in the over-the-counter market as reported by the National Quotation
Bureau Incorporated or any successor organization. The Market Value of
Government Securities shall be the price as quoted by a generally recognized
pricing service for the business day preceding the date of determination (or, if
not so quoted on such day, the next preceding day on which they were so quoted).
The Market Value of securities the principal trading market for which is outside
the United States will be the last sale price on the principal exchange on which
they are traded, or if there was no sale on that date, the last sale price on
the next preceding day on which there was such a sale on such exchange, all as
quoted in the DataSheet Service of the Interactive Data Corporation, or, if not
therein quoted, then as quoted by any such exchange; the foreign exchange rate
used to calculate the Market Value of foreign securities not denominated in U.S.
dollars shall be the foreign exchange rate quoted by Bankers Trust Company at
the close of business in New York on the preceding day. The Market Value of
securities for which market quotations are not readily available over a
reasonable period of time, will be the average of values quoted by three major
investment banking firms which are mutually agreeable to BTC and us.
(b) In the event that BTC shall be required to make any payment to us
or shall incur any loss or expense pursuant to (a) above, it shall, to the
extent of such payment or loss or expense, be subrogated to, and succeed to, all
of our rights against the borrower and to the collateral involved; to the extent
the collateral consists of cash or Government Securities, we shall
contemporaneously with any such payment to us by BTC surrender same to BTC for
its sole disposition.
(c) Except as provided in this Section 7, BTC shall have no liability
to us for any failure of a borrower to return loaned securities.
8. BTC's Relationship with a Borrower.
We acknowledge that BTC and/or its affiliates may be a creditor of, for
its own account or in a fiduciary capacity, or generally engage in any kind of
commercial or investment banking business with, a borrower to whom BTC has lent
our securities. Without limiting the generality of the foregoing, BTC shall not
be required to disclose to us any financial information about a borrower
obtained in the course of its relationship with such borrower.
9. Notices
All notices under this Agreement, including Recall Notices, shall be in
writing and sent by mail or facsimile, addressed as follows:
If to BTC:
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<PAGE> 6
Bankers Trust Company
c/o BTNY Services, Inc.
34 Exchange Place
Jersey City, NJ 07302
U.S.A.
Attention: Securities Lending Unit
Facsimile No.: (201) 860-2587
If to us:
[CLIENT NAME]
[ADDRESS]
ATTENTION:
FACSIMILE NO.:
Notices shall be effective upon receipt. The address indicated above
for either party may be changed by prior written notice to the other party.
10. Indemnification and Reimbursement of Agent, etc.
(a) We agree to indemnify BTC and to hold BTC harmless from any
liabilities, losses, costs or expenses (including reasonable attorneys' fees)
which BTC may incur in connection with this Agreement or the transactions
contemplated hereby; provided that such indemnification shall not extend to
liabilities, losses, costs or expenses to the extent that such liabilities,
losses, costs or expenses (i) are found by a final judgment of a court of
competent jurisdiction to have resulted from BTC's own willful misconduct or
gross negligence or (ii) result from BTC's indemnity provided in Section 7.
(b) We agree that BTC's duties and responsibilities shall only be those
expressly set forth herein and that BTC may consult with counsel and be fully
protected with respect to any action taken or omitted to be taken in good faith
upon advice of such counsel.
(c) We agree that BTC may rely on any certificate, statement, request,
consent, agreement or other instrument which it believes to be genuine and to
have been signed or presented by a proper person or persons.
11. Termination
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<PAGE> 7
Either party may terminate this Agreement by giving not less than five
business days written notice to the other party. Such termination shall be
effective on the date specified therein, provided that such termination notice
shall not constitute a notice pursuant to Section 5 unless so specified by us,
and further provided that this Agreement shall continue to govern all
outstanding loans until the termination thereof.
12. Governing Law and Legal Proceedings
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (without giving effect to conflicts of
laws principles thereof).
(b) We hereby agree that any legal action or proceeding arising out of
or relating to this Agreement may be brought in the courts of the State of New
York, the courts of the United States of America located in the City of New York
or in any other court having jurisdiction with respect thereto, and we hereby
irrevocably consent to service of process in any said action or proceeding in
any of such courts by the mailing of copies thereof, postage prepaid, to us at
[ADDRESS OF DESIGNATED AGENT FOR SERVICE OF PROCESS IN NEW YORK], such service
to be effective 10 days after such mailing. We hereby waive, in relation to any
such action or proceeding, [any sovereign immunity or other immunity to suit or
to the execution or attachment (whether before or after judgment) to which we or
any of our property may be or become entitled, or](1) any defense to any action
or proceeding based on venue or that the action has been brought in an
inconvenient forum.
13. Force Majeure
Notwithstanding any other provision contained herein, BTC shall not be
liable for any action taken, or any failure to take any action required to be
taken hereunder or otherwise to fulfill BTC's obligations hereunder in the event
and to the extent that the taking of such action or such failure arises out of
or is caused by acts of governmental authorities (whether de jure or de facto),
including nationalization, expropriation, the imposition of currency
restrictions, war, insurrection, riot, revolution, terrorism or civil commotion;
acts of God, accident, fire, water damage, explosion, hurricane, cyclone,
earthquake, volcanic
- ----------
(1) Can delete for U.S. Clients.
8
<PAGE> 8
eruption, nuclear fusion, fission, or radioactivity; mechanical breakdown,
computer or system failure or computer virus, failure or malfunctioning of any
communications media for whatever reason; interruption (whether partial or
total) of power supplies or other utility or service; strike or other stoppage
(whether partial or total) of labor; any law, decree, regulation or order of any
government or governmental body (including any court or tribunal); or any other
cause (whether similar or dissimilar to any of the foregoing) whatsoever beyond
BTC's control.
14. Miscellaneous
This Agreement constitutes the entire agreement of the parties with
respect to BTC's acting as our agent in connection with the loan of our
securities which we have placed in custody with BTC, and supersedes all prior
understandings, written or oral, or any previous agreement with respect thereto.
Neither party shall be bound by any modifications of this Agreement unless it
has so agreed in writing.
If the terms hereof accurately reflect our agreement, please so
indicate by signing below.
[CLIENT NAME]
By: _____________________
Name:
Title:
AGREED TO AND ACCEPTED BY
AS OF THE DATE HEREOF:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
9
<PAGE> 9
Exhibit A
AUTHORIZATION TO LEND TO BANKERS TRUST INTERNATIONAL PLC
The following procedures will be employed to ensure that each loan to
Bankers Trust International ("BTI"), wholly owned subsidiary established under
English law of Bankers Trust Company ("Bankers Trust"), is made in conformity
with the requirements of the Department of Labor.
1. Loans of securities to BTI will be competitively negotiated. Each
prospective transaction with BTI will be evaluated by comparing rates and terms
offered by BTI to those offered by other unrelated borrowers on our approved
list of borrowers. Any loan of securities to BTI will be at market rates and in
no event less favorable than a loan of such securities, if such loan could be
made at the same time under the same circumstances to an unaffiliated borrower.
2. Bankers Trust will maintain transactional and market records which
contain information to assure that all loans made to BTI are effectively at
arms-length terms. These records will contain data pertaining to loans made to
BTI and other bids, if any, made for such loans or other rates on similar loans
by unaffiliated borrowers. You may obtain a copy of such records upon written
request.
3. As is the case with loans to unrelated approved borrow ers, if
prevailing market interest or rebate rates change, the rates on outstanding
loans to BTI will be adjusted accordingly.
4. All loans to BTI will be made on terms which are substantively
identical to those contained in the standard Bankers Trust UK Securities Lending
Agreement ("the Securities Lending Agreement"), which is our contract for loans
to unrelated approved UK borrowers. Among other things, the Securities Lending
Agreement with BTI will provide the lending client with all right, title and
interest in the collateral delivered by the borrower.
A copy of the BTI Securities Lending Agreement is available to you
at any time upon request. We will provide you at least thirty (30) days advance
written notice of any substantive amendments or changes to the Securities
Lending Agreement with BTI.
5. As is Bankers Trust's present policy for all loans to unrelated
borrowers, any and all loans to BTI will be:
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<PAGE> 10
(a) Collateralized for each loan transaction in an amount
equal to the agreed upon percentage, which shall be at least 102% of the market
value of securities, plus accrued interest (in the case of debt securities). We
will mark loans to market on a daily basis to ensure that the loan collateral is
maintained at the agreed upon percentage.
As is the case with loans to unrelated approved borrowers,
permissible collateral will include any combination of the following:
- Cash collateral which will be invested for you if you so
request by Bankers Trust, in the investment vehicle that you have chosen for the
investment of your cash collateral, a current description of which is available
upon request.
- Securities issued or guaranteed by the United States
Government or any agency thereof.
- Letters of credit issued by banks as may be acceptable to
Bankers Trust (a current list of such institutions is available upon request, at
any time.) In no event will Bankers Trust, or any affiliate of Bankers Trust, be
the issuer of a letter of credit in connection with the securities lending
program.
(b) Cancelable by you or by Bankers Trust at any time. Upon
termination of a loan, the securities are required to be returned to us as your
agent on the day that would be the standard settlement day in the principal
market in which securities are traded, for transactions effected on the business
day on which Bankers Trust as your agent gives notice of termination to BTI, in
no event to exceed 5 business days in the market in which the security is
traded.
6. You may receive a copy of BTI's most recent available audited and
unaudited financial statements upon request. Should we believe there to be any
material adverse change in the financial condition of BTI, we will promptly
advise you of such change and ask you for your approval to continue lending to
BTI.
7. In case of a default by BTI in any securities loan
transaction, Bankers Trust will promptly notify you of such fact and use all
appropriate means as your agent to enforce your rights under the BTI Securities
Lending Agreement against BTI. In such event, you may, if you so choose, at your
expense, assume the rights of Bankers Trust to enforce the terms of the BTI
Securities Lending Agreement against BTI.
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<PAGE> 11
8. The current monthly report furnished to you, covering all securities
loans outstanding in the previous month, enables you to review all lending
activity for your account, including BTI loans and all other loan transactions.
The format includes a list of outstanding loans and loans that terminated during
the prior month, showing the number of securities involved, value of securities
and collateral, daily and monthly rate of interest or rebate rates and number of
days securities have been out on loan. A weekly report of specific outstanding
loans is also available, upon request.
By:__________________________
Name:
Title:
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<PAGE> 12
Exhibit B
LOANS TO UK COUNTERPARTIES
Certain of the borrowers to which Bankers Trust Company ("BTC") may
loan our securities held in trust and/or custody are entities which are
organized and existing under the laws of the United Kingdom ("UK
Counterparties"). Loans to UK Counterparties will be made by BTC as our agent
pursuant to a form of securities lending agreement governed by the laws of the
United Kingdom (the "UK Agreement") which is available to us upon request.
[In order to ensure that securities loans to such UK Counterparties
which do not at the present time meet the requirements of Prohibited Transaction
Exemption 81-6 or another available exemption do not result in a prohibited
transaction under ERISA, BTC will require such borrowers to represent to BTC
that they are not a "party in interest" within the meaning of ERISA with respect
to any pension or retirement plan the assets of which are being lent.](2)
By signing this authorization, we grant our consent to BTC making, on
our behalf, the following representations and warranties to such UK
Counterparties:
(1) We are duly authorized and empowered to perform our
respective duties and obligations under the UK Agreement;
(2) We are not restricted under the terms of our constitution or
in any other manner from lending securities in accordance with
the UK Agreement or from otherwise performing our obligations
thereunder; and
(3) We are absolutely entitled to pass full beneficial ownership
of all securities loaned under the UK Agreement to the
applicable UK Counterparty free from all liens, charges and
encumbrances.
We authorize BTC as our agent to(a) disclose our name to the UK Inland
Revenue for approval of us as an approved lender to a UK Counterparty and (b)
undertake to the Inland Revenue on our behalf to lend securities on certain
specified terms, with which BTC as our agent will comply. We agree to provide
BTC with all documents, certificates or other information necessary to enable
BTC to make the appropriate filings on our behalf with the Inland Revenue to
become an approved lender to UK Counterparties. [We understand
- ----------
(2) For ERISA clients.
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<PAGE> 13
such approval is necessary to enable the UK Counterparty to make manufactured
payments in respect of interest, dividends or other distributions on the loaned
securities without deduction of [UK] withholding tax.](3) [We understand such
approval is necessary in order to prevent certain UK tax costs arising for the
UK Counterparty.](4)
In order to make loans to UK Counterparties, we understand that we will be
required to submit to the non-exclusive jurisdiction of the courts of England in
connection with any disputes which may arise out of or in connection with the UK
Agreement, and waive any objection to proceedings in such courts whether on the
grounds of sovereignty, venue or that the proceedings have been brought in an
inconvenient forum. By signing this authorization, we also consent to BTC's
entering into such agreements on our behalf.
Except as specifically described above, all provisions of the
Securities Lending Agreement between us and BTC shall be applicable to loans to
UK Counterparties.
THE LENDING OF SECURITIES TO UK COUNTERPARTIES IS AUTHORIZED UNDER
THE PROCEDURES DESCRIBED ABOVE SUBJECT TO ANY LIMITATIONS SET FORTH
BELOW.
By:________________________
Name:
Title:
- --------
(3) For use with clients resident and subject to tax in a jurisdiction having
a double tax treaty with the UK containing an "other income" article exempting
such income from UK tax.
(4) For use with other clients.
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<PAGE> 14
EXHIBIT C
I. Margin Requirements Referred to in Section 6(a)
For loans of securities the principal trading market for which is in
the United States, 102%, and for loans of securities the principal trading
market for which is outside the United States, 105%, of the aggregate market
value of the loaned securities plus any accrued but unpaid distributions
thereon.
II. Investment Vehicles Referred to in Section 6 (c)
[List]
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<PAGE> 15
___________, 1996
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10004
U.S.A.
Re: Securities Lending Agreement
Dear Sirs:
In accordance with Section 2 of the securities lending agreement
between you and us dated ___________ 1996, we hereby confirm our agreement that
the fee paid by the borrower with respect to each loan of securities thereunder
shall be apportioned between us as __% for us and __% for BTC.
Very truly yours,
[CUSTOMER]
By: _____________________
Name:
Title:
AGREED TO AND ACCEPTED:
BANKERS TRUST COMPANY
By: _______________________
Name:
Title:
16
<PAGE> 1
EX-99.B9A
DELAWARE GROUP TREASURY RESERVES, INC.
INVESTORS SERIES
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 20th day of December, 1990 by and
between DELAWARE GROUP TREASURY RESERVES, INC. ("Fund"), a Maryland
corporation, for the INVESTORS SERIES (the "Series") and DELAWARE SERVICE
COMPANY, INC. ("DSC"), a Delaware corporation, each having its principal office
and place of business at Ten Penn Center Plaza, Philadelphia, Pennsylvania
19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreement between Fund and Delaware
Management Company, Inc. provides that Fund shall conduct its own business and
affairs and shall bear the expenses and salaries necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
in: the maintenance of its corporate existence; the maintenance of its own
books, records and procedures; dealing with its own shareholders; the payment
of dividends; transfer of stock, including issuance and redemption of shares;
reports and notices to shareholders; calling and holding of shareholder
meetings; miscellaneous office expenses: brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the predecessor to DSC previously served as the Shareholder
Services Agent for the Series and the Fund has designated DSC to act as
Shareholder Services Agent for the Series as of the date of this Agreement; and
WHEREAS, Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 Fund hereby appoints DSC its Shareholder Services
Agent for the Series to provide as agent for the Fund services as Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent and DSC hereby
accepts such appointment and agrees to provide Fund, as its agent, the services
described herein.
<PAGE> 2
Section 1.2 Fund shall pay DSC and DSC shall accept, for the
services provided hereunder, the compensation provided for in Section VIII
hereof. Fund also shall reimburse DSC for expenses incurred or advanced by it
for the Fund in connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Fund represents that it has provided or made
available to DSC (or has given DSC an opportunity to examine) copies of, and,
DSC represents that it has received from Fund (or is otherwise familiar with),
the following documents:
A. The Articles of Incorporation or
other document evidencing Fund's form of organization and any current
amendments thereto.
B. The By-Laws of Fund;
C. Any resolution or other action of Fund or
the Board of Directors of Fund establishing or affecting the rights, privileges
or other status of any class or series of shares of Fund, or altering or
abolishing any such class or series;
D. A certified copy of a resolution of the
Board of Directors of Fund appointing DSC as Shareholder Services Agent for the
Series and authorizing the execution of this Agreement;
E. The form of share certificates of the Series
in the form approved by the Board of Directors of Fund;
F. A copy of Fund's currently effective
prospectus and Statement of Additional Information under the Securities Act of
1933, if effective;
G. Copies of all account application forms and
other documents relating to shareholder accounts of the Series.
H. Copies of documents relating to Plans of
Fund for the purchase, sale or repurchase of its shares, including periodic
payment or withdrawal plans, reinvestment plans or retirement plans;
-2-
<PAGE> 3
I. Any opinion of counsel to Fund relating to
the authorization and validity of the shares of the Series issued or proposed
to be issued under the law of the State of Fund's organization, including the
status thereof under any applicable securities laws;
J. A certified copy of any resolution of the
Board of Directors of Fund authorizing any person to give instructions to DSC
under this Agreement, (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
K. Any amendment, revocation or other document
altering, adding, qualifying or repealing any document or authority called for
under this Section 2.1.
Section 2.2 Fund and DSC may consult as to forms or documents
that may be required in performing services hereunder.
Section 2.3 Fund shall provide or make available to DSC a
certified copy of any resolution of the shareholders or the Board of Directors
of Fund providing for a dividend, capital gains distribution, distribution of
capital, stock dividend, stock split or other similar action affecting the
authorization or issuance of shares of Fund or the payment of dividends.
Section 2.4 In the case of any recapitalization or other capital
adjustment requiring a change in the form of stock or share certificate or the
books recording the same, Fund shall deliver or make available to DSC:
A. A certified copy of any document authorizing
or effecting such change;
B. Written instructions from an authorized
officer implementing such change; and
C. An opinion of counsel to Fund as to the
validity of such action, if requested by DSC.
Section 2.5 Fund warrants the following:
A. Fund is, or will be, a properly registered
investment company under the Investment Company Act of 1940 and any and all
shares which it issues will be properly registered and lawfully issued under
applicable federal and state laws.
-3-
<PAGE> 4
B. The provisions of this contract do not
violate the terms of any instrument by which the Fund is bound; nor do they
violate any law or regulation of any body having jurisdiction over the Fund or
its property.
Section 2.6 DSC warrants the following:
A. DSC is and will be properly registered as a
transfer agent under the Securities Exchange Act of 1934 and is duly authorized
to serve, and may lawfully serve as such.
B. The provisions of this contract do not
violate the terms of any instrument by which the Fund is bound; nor do they
violate any law or regulation of any body having jurisdiction over DSC or its
property.
III. SHARE CERTIFICATES
Section 3.1 Fund shall furnish or authorize DSC to obtain, at
Fund's expense a sufficient supply of blank stock certificates for the Series,
and from time to time will replenish such supply upon the request of DSC. Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this section.
Section 3.2 DSC shall safeguard, and shall account to Fund, upon
its demand for, all such share certificates: (A) as issued, showing to whom
issued, or (B) as unissued, establishing the safekeeping, cancellation or
destruction thereof.
Section 3.3 Fund shall promptly inform DSC in writing of any
change in the officers authorized to sign share certificates or in the form
thereof. If an officer whose manual or facsimile signature is affixed to any
blank share certificate shall die, resign or be removed prior to the issuance
of such certificate, DSC may nevertheless issue such certificate
notwithstanding such death, resignation or removal, and the Fund shall with
respect thereto, promptly provide to DSC any approval, adoption or ratification
as may be required by DSC.
-4-
<PAGE> 5
IV. TRANSFER AGENT
Section 4.1 As Transfer Agent, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
A. Upon receipt of authority to issue shares,
determine the total shares to be issued and issue such shares by crediting
shares to accounts created and maintained in the registration forms provided;
as applicable, prepare, issue and deliver stock certificates.
B. Upon proper transfer authorization, transfer
shares by debiting transferor-shareholder accounts and crediting such shares to
accounts created and/or maintained for transferee-shareholders; if applicable,
issue and/or cancel stock certificates.
C. Upon proper redemption authorization,
determine the total shares to be redeemed and redeemed; determine the total
redemption payments to be made and made; redeem shares by debting shareholder
accounts; as applicable receive and cancel stock certificates for shares
redeemed; and remit or cause to be remitted the redemption proceeds to
shareholders.
D. Create and maintain accounts; reconcile and
control cash due and paid, shares issued and to be issued, cash to be remitted
and remitted and shares debted and credited to accounts; provide such notices,
instructions or authorizations as Fund may require.
Section 4.2 DSC shall not be required to issue, transfer or
redeem Series' shares upon receipt of it from Fund, or from any federal or
state regulatory agency or authority, written notice that the issuance,
transfer or redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
Section 5.1 As Dividend Disbursing Agent for the Series, DSC
shall disburse and cause to be disbursed to Series' shareholders Series'
dividends, capital gains distributions or any payments from other sources as
directed by Fund. In connection therewith, but not in limitation thereof, DSC
shall:
-5-
<PAGE> 6
A. Calculate the total disbursement due and
payable and the disbursement to each shareholder as to shares owned, in
accordance with Fund's authorization.
B. Calculate the total disbursements for each
shareholder, as aforesaid, to be disbursed in cash; prepare and mail check
therefor.
C. Calculate the total disbursement for each
shareholder, as aforesaid, for which Series' shares are to be issued, and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
D. Prepare and mail or deliver such forms and
notices pertaining to disbursements as required by the federal or state
authority.
E. Create and maintain records, reconcile and
control disbursements to be made and made, both as to cash and shares, as
aforesaid; provide such notices, instruction or authorization as Fund may
require.
Section 5.2 DSC shall not be required to make any disbursement
upon the receipt from Fund, or from any federal or state agency or authority,
written notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
Section 6.1 As Shareholder Servicing Agent, DSC shall provide
those services ancillary to but in implementation of the services provided
under Sections I through V hereof, and those generally defined and accepted as
Shareholder Services. In connection therewith, but not in limitation thereof,
DSC shall:
A. Except where instructed in writing by the
Fund not to do so, and where in compliance with applicable law, accept orders
on behalf of the Fund; receive and process investments and applications; remit
to Fund or its custodian payments for shares acquired and to be issued; and
direct the issuance of shares in accordance with Section IV hereof.
B. Receive, record and respond to
communications of shareholders and their agents.
-6-
<PAGE> 7
C. As instructed by Fund, prepare and mail
shareholder account information, mail Series shareholder reports and Series
prospectuses.
D. Prepare and mail Fund proxies and material
for Fund shareholder meetings, receive and process proxies from shareholders,
and deliver such proxies as directed by Fund.
E. Administer investment plans offered by Fund
to investors and Series shareholders, including Retirement Plans, including
activities not otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
Section 7.1 The parties hereto intend that Series shareholders
and their shareholdings shall be confidential, and any information relating
thereto shall be released by DSC only to those persons or authorities who DSC
has reason to believe are authorized to receive such information; or, as
instructed by Fund.
Section 7.2 DSC may, in performing this Agreement, require Fund
or Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or shareholders.
Section 7.3 DSC may request or receive instructions from Fund and
may at Fund's expense, consult with counsel for the Fund or its own counsel,
with respect to any matter arising in connection with the performance of its
duties hereunder, and shall not be liable for any action taken or omitted by it
in good faith in accordance with such instructions or opinions of counsel.
Section 7.4 DSC shall maintain reasonable insurance coverage for
errors and omissions and reasonable bond coverage for fraud.
Section 7.5 Upon notice thereof to Fund DSC may employ others to
provide services to DSC in its performance of this Agreement.
-7-
<PAGE> 8
Section 7.6 Personnel and facilities of DSC used to perform
services hereunder may be used to perform similar services to other Funds of
the Delaware Group and to others, and, may be used to perform other services
for Fund, the other Funds of the Delaware Group and others.
Section 7.7 DSC shall provide its services as transfer agent
hereunder in accordance with Section 17 of the Securities Exchange Act of 1934,
and the rules and regulations thereunder. Further, the parties intend that the
processes, procedures, safeguards and controls employed should be those
generally applied and accepted for the type of services provided hereunder by
other institutions providing the same or similar services, and, those which
should provide efficient, safe and economical services so as to promote
promptness and accuracy and to maintain the integrity of Fund's records.
Section 7.8 Fund and DSC may, from time to time, set forth in
writing Guidelines For Selective Procedures to be applicable to the services
hereunder.
VIII. COMPENSATION
Section 8.1 Fund and DSC acknowledge that because DSC has common
ownership and close management ties with Fund's investment advisor and Fund's
distributor and serves the other Funds of the Delaware Group, DSC having been
originally established to provide the services hereunder for Fund and the other
Funds of the Delaware Group, advantages and benefits to Fund in the employment
of DSC hereunder can be available which may not generally be available to it
from others providing similar services.
Section 8.2 Fund and DSC further acknowledge that the
compensation by Fund to DSC is intended to induce DSC to provide services under
this agreement of a nature and quality which the Board of Directors of Fund,
including a majority who are not parties to this agreement or interested person
of the parties hereto, has determined after due consideration to be necessary
for the conduct of the business of the Fund in the best interests of the Series
and its shareholders.
Section 8.3 Compensation by Fund to DSC hereunder shall be
determined in accordance with Schedule A hereto as it shall be amended from
time to time as provided for herein and which is incorporated herein as a part
hereof.
-8-
<PAGE> 9
Section 8.4 Compensation as provided in Schedule A shall be
reviewed and approved in the manner set forth in Section 10.1 hereof by the
Board of Directors of Fund at least annually and may be reviewed and approved
more frequently at the request of either party. The Board may request and DSC
shall provide such information as the Board may reasonably require to evaluate
the basis of and approve the compensation.
IX. STANDARD OF CARE
Section 9.1 Fund acknowledges that DSC shall not be liable for,
and in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of the performance of its duties under this contract, agrees
to indemnify DSC against, any claim, or deficiency arising from the performance
of DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by Fund.
X. CONTRACTUAL STATUS
Section 10.1 This Agreement shall be executed and become effective
on the date first written above if approved by a vote of the Board of
Directors, including an affirmative vote of a majority of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on such approval. It shall continue in effect for an indeterminate
period, and is subject to termination on sixty (60) days notice by either party
unless earlier terminated or amended by agreement among the parties.
Compensation under this Agreement shall require approval by a majority vote of
the Board of Directors of Fund, including an affirmative vote of the majority
of the non-interested members of the Board cast in person at a meeting called
for the purpose of voting such approval.
-9-
<PAGE> 10
Section 10.2 This Agreement may not be assigned without the
approval of Fund.
Section 10.3 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
ATTEST:/s/Eric E. Miller /s/Winthrop S. Jessup
----------------- ---------------------
Eric E. Miller Winthrop S. Jessup
Assistant Secretary Chairman and
Chief Executive Officer
DELAWARE GROUP
TREASURY RESERVES, INC.
FOR THE INVESTORS SERIES
ATTEST:/s/Eric E. Miller By:/s/Wayne A. Stork
----------------- -----------------
Eric E. Miller Wayne A. Stork
Assistant Secretary President
-10-
<PAGE> 11
SCHEDULE A
COMPENSATION
1.DSC will determine and report to the Fund, at least annually, the
compensation for services to be Provided to the Fund for DSC's forthcoming
fiscal year or period.
2.In determining such compensation, DSC will fix and report a fee to be charged
per account and/or per transaction, as may be applicable, for services
provided. DSC will bill, and the Fund will pay, such compensation monthly.
3.The fee will consist of an annual per account charge coupled with a series of
transaction charges. These are as follows:
<TABLE>
<S> <C> <C>
A. ANNUAL CHARGE
-------------
Daily Dividend Funds $9.00 per annum
Other Funds $4.20 per annum
B. TRANSACTION CHARGE
------------------
TRANSACTION CHARGE
----------- ------
1. Dividend Payment $ 0.35
2. New Account 5.75
3. Purchase:
a. Wire 6.00
b. Money Market Automated 1.50
b. Other 2.25
4. Transfer 2.25
5. Certificate Issuance 2.00
6. Liquidation:
a. Wire 12.25
b. Draft .50
c. Money Market Regular 2.50
d. Daily Dividend Regular 6.00
7. Exchanges 7.00
</TABLE>
<PAGE> 1
EX-99.B9B
DELAWARE GROUP TREASURY RESERVES, INC.
CASHIERS SERIES
SHAREHOLDERS SERVICES AGREEMENT
THIS AGREEMENT, made as of this 20th day of December, 1990 by and
between DELAWARE GROUP TREASURY RESERVES, INC., a Maryland corporation
("Fund"), the CASHIERS SERIES (the "Series") and DELAWARE SERVICE COMPANY, INC.
("DSC"), a Delaware corporation, each having its principal office and place of
business at Ten Penn Center Plaza, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreement between Fund and Delaware
Management Company, Inc. provides that Fund shall conduct its own business and
affairs and shall bear the expenses and salaries necessary and incidental
thereto including, but not in limitation of the foregoing, the costs incurred
in: the maintenance of its corporate existence; the maintenance of its own
books, records and procedures; dealing with its own shareholders; the payment
of dividends; transfer of stock, including issuance and redemption of shares;
reports and notices to shareholders; calling and holding of shareholder
meetings; miscellaneous office expenses: brokerage commissions; legal and
accounting fees; taxes; and federal and state registration fees; and
WHEREAS, the predecessor to DSC previously served as the Shareholder
Services Agent for the Series and the Fund has designated DSC to act as
Shareholder Services Agent for the Series as of the date of this Agreement; and
WHEREAS, Fund and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:
I. APPOINTMENT AS AGENT
Section 1.1 Fund hereby appoints DSC its Shareholder Services
Agent for the Series to provide as agent for the Fund services as Transfer
Agent, Dividend Disbursing Agent and Shareholder Servicing Agent and DSC hereby
accepts such appointment and agrees to provide Fund, as its agent, the services
described herein.
<PAGE> 2
Section 1.2 Fund shall pay DSC and DSC shall accept, for the
services provided hereunder, the compensation provided for in Section VIII
hereof. Fund also shall reimburse DSC for expenses incurred or advanced by it
for the Fund in connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Fund represents that it has provided or made
available to DSC (or has given DSC an opportunity to examine) copies of, and,
DSC represents that it has received from Fund (or is otherwise familiar with),
the following documents:
A. The Articles of Incorporation or other
document evidencing Fund's form of organization and any current amendments
thereto;
B. The By-Laws of Fund;
C. Any resolution or other action of Fund or the
Board of Directors of Fund establishing or affecting the rights, privileges or
other status of any class or series of shares of Fund, or altering or abolishing
any such class or series;
D. A certified copy of a resolution of the Board
of Directors of Fund appointing DSC as Shareholder Services Agent for the Series
and authorizing the execution of this Agreement;
E. The form of share certificates of the Series
in the form approved by the Board of Directors of Fund;
F. A copy of Fund's currently effective
prospectus and Statement of Additional Information under the Securities Act of
1933, if effective;
G. Copies of all account application forms and
other documents relating to shareholder accounts in the Series.
H. Copies of documents relating to Plans of Fund
for the purchase, sale or repurchase of its shares, including periodic payment
or withdrawal plans, reinvestment plans or retirement plans;
-2-
<PAGE> 3
I. Any opinion of counsel to Fund relating to
the authorization and validity of the shares of the Series issued or proposed to
be issued under the law of the State of Fund's organization, including the
status thereof under any applicable securities laws;
J. A certified copy of any resolution of the
Board of Directors of Fund authorizing any person to give instructions to DSC
under this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and
K. Any amendment, revocation or other document
altering, adding, qualifying or repealing any document or authority called for
under this Section 2.1.
Section 2.2 Fund and DSC may consult as to forms or documents
that may be required in performing services hereunder.
Section 2.3 Fund shall provide or make available to DSC a
certified copy of any resolution of the shareholders or the Board of Directors
of Fund providing for a dividend, capital gains distribution, distribution of
capital, stock dividend, stock split or other similar action affecting the
authorization or issuance of shares of Fund or the payment of dividends.
Section 2.4 In the case of any recapitalization or other capital
adjustment requiring a change in the form of stock or share certificate or the
books recording the same, Fund shall deliver or make available to DSC:
A. A certified copy of any document authorizing
or effecting such change;
B. Written instructions from an authorized
officer implementing such change; and
C. An opinion of counsel to Fund as to the
validity of such action, if requested by DSC.
Section 2.5 Fund warrants the following:
A. Fund is, or will be, a properly registered
investment company under the Investment Company Act of 1940 and any and all
shares which it issues will be properly registered and lawfully issued under
applicable federal and state laws.
-3-
<PAGE> 4
B. The provisions of this contract do not
violate the terms of any instrument by which the Fund is bound; nor do they
violate any law or regulation of any body having jurisdiction over the Fund or
its property.
Section 2.6 DSC warrants the following:
A. DSC is and will be properly registered as a
transfer agent under the Securities Exchange Act of 1934 and is duly authorized
to serve, and may lawfully serve as such.
B. The provisions of this contract do not
violate the terms of any instrument by which DSC is bound; nor do they violate
any law or regulation of any body having jurisdiction over DSC or its property.
III. SHARE CERTIFICATES
Section 3.1 Fund shall furnish or authorize DSC to obtain, at
Fund's expense a sufficient supply of blank stock certificates for the Series,
and from time to time will replenish such supply upon the request of DSC. Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and all claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this section.
Section 3.2 DSC shall safeguard, and shall account to Fund, upon
its demand for, all such share certificates: (A) as issued, showing to whom
issued, or (B) as unissued, establishing the safekeeping, cancellation or
destruction thereof.
Section 3.3 Fund shall promptly inform DSC in writing of any
change in the officers authorized to sign share certificates or in the form
thereof. If an officer whose manual or facsimile signature is affixed to any
blank share certificate shall die, resign or be removed prior to the issuance
of such certificate, DSC may nevertheless issue such certificate
notwithstanding such death, resignation or removal, and the Fund shall with
respect thereto, promptly provide to DSC any approval, adoption or ratification
as may be required by DSC.
-4-
<PAGE> 5
IV. TRANSFER AGENT
Section 4.1 As Transfer Agent, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:
A. Upon receipt of authority to issue shares,
determine the total shares to be issued and issue such shares by crediting
shares to accounts created and maintained in the registration forms provided; as
applicable, prepare, issue and deliver stock certificates.
B. Upon proper transfer authorization, transfer
shares by debiting transferor-shareholder accounts and crediting such shares to
accounts created and/or maintained for transferee-shareholders; if applicable,
issue and/or cancel stock certificates.
C. Upon proper redemption authorization,
determine the total shares to be redeemed and redeemed; determine the total
redemption payments to be made and made; redeem shares by debting shareholder
accounts; as applicable receive and cancel stock certificates for shares
redeemed; and remit or cause to be remitted the redemption proceeds to
shareholders.
D. Create and maintain accounts; reconcile and
control cash due and paid, shares issued and to be issued, cash to be remitted
and remitted and shares debted and credited to accounts; provide such notices,
instructions or authorizations as Fund may require.
Section 4.2 DSC shall not be required to issue, transfer or
redeem Series' shares upon receipt of it from Fund, or from any federal or
state regulatory agency or authority, written notice that the issuance,
transfer or redemption of Series' shares has been suspended or discontinued.
V. DIVIDEND DISBURSING AGENT
Section 5.1 As Dividend Disbursing Agent for the Series, DSC
shall disburse and cause to be disbursed to Series' shareholders Series'
dividends, capital gains distributions or any payments from other sources as
directed by Fund. In connection therewith, but not in limitation thereof, DSC
shall:
-5-
<PAGE> 6
A. Calculate the total disbursement due and
payable and the disbursement to each shareholder as to shares owned, in
accordance with Fund's authorization.
B. Calculate the total disbursements for each
shareholder, as aforesaid, to be disbursed in cash; prepare and mail check
therefor.
C. Calculate the total disbursement for each
shareholder, as aforesaid, for which Series' shares are to be issued, and
authorized and instruct the issuance of Series' shares therefor in accordance
with Section IV hereof.
D. Prepare and mail or deliver such forms and
notices pertaining to disbursements as required by the federal or state
authority.
E. Create and maintain records, reconcile and
control disbursements to be made and made, both as to cash and shares, as
aforesaid; provide such notices, instruction or authorization as Fund may
require.
Section 5.2 DSC shall not be required to make any disbursement
upon the receipt from Fund, or from any federal or state agency or authority,
written notice that such disbursement shall not be made.
VI. SHAREHOLDER SERVICING AGENT
Section 6.1 As Shareholder Servicing Agent, DSC shall provide
those services ancillary to but in implementation of the services provided
under Sections I through V hereof, and those generally defined and accepted as
Shareholder Services. In connection therewith, but not in limitation thereof,
DSC shall:
A. Except where instructed in writing by the
Fund not to do so, and where in compliance with applicable law, accept orders on
behalf of the Fund; receive and process investments and applications; remit to
Fund or its custodian payments for shares acquired and to be issued; and direct
the issuance of shares in accordance with Section IV hereof.
-6-
<PAGE> 7
B. Receive, record and respond to communications
of shareholders and their agents.
C. As instructed by Fund, prepare and mail
shareholder account information, mail Series shareholder reports and Series
prospectuses.
D. Prepare and mail Fund proxies and material
for Fund shareholder meetings, receive and process proxies from shareholders,
and deliver such proxies as directed by Fund.
E. Administer investment plans offered by Fund
to investors and Series shareholders, including Retirement Plans, including
activities not otherwise provided in Section I through V of this Agreement.
VII. PERFORMANCE OF DUTIES
Section 7.1 The parties hereto intend that Series shareholders
and their shareholdings shall be confidential, and any information relating
thereto shall be released by DSC only to those persons or authorities who DSC
has reason to believe are authorized to receive such information; or, as
instructed by Fund.
Section 7.2 DSC may, in performing this Agreement, require Fund
or Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or shareholders.
Section 7.3 DSC may request or receive instructions from Fund and
may at Fund's expense, consult with counsel for the Fund or its own counsel,
with respect to any matter arising in connection with the performance of its
duties hereunder, and shall not be liable for any action taken or omitted by it
in good faith in accordance with such instructions or opinions of counsel.
Section 7.4 DSC shall maintain reasonable insurance coverage for
errors and omissions and reasonable bond coverage for fraud.
Section 7.5 Upon notice thereof to Fund DSC may employ others to
provide services to DSC in its performance of this Agreement.
-7-
<PAGE> 8
Section 7.6 Personnel and facilities of DSC used to perform
services hereunder may be used to perform similar services to other Funds of
the Delaware Group and to others, and, may be used to perform other services
for Fund, the other Funds of the Delaware Group and others.
Section 7.7 DSC shall provide its services as transfer agent
hereunder in accordance with Section 17 of the Securities Exchange Act of 1934,
and the rules and regulations thereunder. Further, the parties intend that the
processes, procedures, safeguards and controls employed should be those
generally applied and accepted for the type of services provided hereunder by
other institutions providing the same or similar services, and, those which
should provide efficient, safe and economical services so as to promote
promptness and accuracy and to maintain the integrity of Fund's records.
Section 7.8 Fund and DSC may, from time to time, set forth in
writing Guidelines For Selective Procedures to be applicable to the services
hereunder.
VIII. COMPENSATION
Section 8.1 Fund and DSC acknowledge that because DSC has common
ownership and close management ties with Fund's investment advisor and Fund's
distributor and serves the other Funds of the Delaware Group, DSC having been
originally established to provide the services hereunder for Fund and the other
Funds of the Delaware Group, advantages and benefits to Fund in the employment
of DSC hereunder can be available which may not generally be available to it
from others providing similar services.
Section 8.2 Fund and DSC further acknowledge that the
compensation by Fund to DSC is intended to induce DSC to provide services under
this Agreement of a nature and quality which the Board of Directors of Fund,
including a majority who are not parties to this agreement or interested person
of the parties hereto, has determined after due consideration to be necessary
for the conduct of the business of the Fund in the best interests of the Series
and its shareholders.
-8-
<PAGE> 9
Section 8.3 Compensation by Fund to DSC hereunder shall be
determined in accordance with Schedule A hereto as it shall be amended from
time to time as provided for herein and which is incorporated herein as a part
hereof.
Section 8.4 Compensation as provided in Schedule A shall be
reviewed and approved in the manner set forth in Section 10.1 hereof by the
Board of Directors of Fund at least annually and may be reviewed and approved
more frequently at the request of either party. The Board may request and DSC
shall provide such information as the Board may reasonably require to evaluate
the basis of and approve the compensation.
IX. STANDARD OF CARE
Section 9.1 Fund acknowledges that DSC shall not be liable for,
and in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of the performance of its duties under this contract, agrees
to indemnify DSC against, any claim, or deficiency arising from the performance
of DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance herewith or in accordance with
Guidelines or instructions given hereunder, shall be borne by Fund.
X. CONTRACTUAL STATUS
Section 10.1 This Agreement shall be executed and become effective
on the date first written above if approved by a vote of the Board of
Directors, including an affirmative vote of a majority of the non-interested
members of the Board, cast in person at a meeting called for the purpose of
voting on such approval. It shall continue in effect for an indeterminate
period, and is subject to termination on sixty (60) days notice by either party
unless earlier terminated or amended by agreement among the parties.
Compensation under this Agreement shall require approval by a majority vote of
the Board of Directors of Fund, including an affirmative vote of the majority
of the non-interested members of the Board cast in person at a meeting called
for the purpose of voting such approval.
-9-
<PAGE> 10
Section 10.2 This Agreement may not be assigned without the
approval of Fund.
Section 10.3 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
ATTEST:/s/Eric E. Miller /s/Winthrop S. Jessup
----------------- ---------------------
Eric E. Miller Winthrop S. Jessup
Assistant Secretary Chairman and
Chief Executive Officer
DELAWARE GROUP
TREASURY RESERVES, INC.
FOR THE CASHIERS SERIES
ATTEST:/s/Eric E. Miller /s/Wayne A. Stork
----------------- -----------------
Eric E. Miller Wayne A. Stork
Assistant Secretary President
-10-
<PAGE> 11
SCHEDULE A
COMPENSATION
1.DSC will determine and report to the Fund, at least annually, the
compensation for services to be Provided to the Fund for DSC's forthcoming
fiscal year or period.
2.In determining such compensation, DSC will fix and report a fee to be charged
per account and/or per transaction, as may be applicable, for services
provided. DSC will bill, and the Fund will pay, such compensation monthly.
3.The fee will consist of an annual per account charge coupled with a series of
transaction charges. These are as follows:
<TABLE>
<S> <C> <C>
A. ANNUAL CHARGE
-------------
Daily Dividend Funds $9.00 per annum
Other Funds $4.20 per annum
B. TRANSACTION CHARGE
------------------
TRANSACTION CHARGE
----------- ------
1. Dividend Payment $ 0.35
2. New Account 5.75
3. Purchase:
a. Wire 6.00
b. Money Market Automated 1.50
b. Other 2.25
4. Transfer 2.25
5. Certificate Issuance 2.00
6. Liquidation:
a. Wire 12.25
b. Draft .50
c. Money Market Regular 2.50
d. Daily Dividend Regular 6.00
7. Exchanges 7.00
</TABLE>
<PAGE> 1
EX-99.B11
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 44 to the Registration Statement (Form N-1A) (No.
2-75526) of Delaware Group Limited-Term Government Funds, Inc. of our report
dated February 18, 1997, included in the 1996 Annual Report to Shareholders of
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund.
Philadelphia, Pennsylvania /s/ Ernst & Young LLP
February 24, 1997
<PAGE> 2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Financial Statements" in the Statement of
Additional Information and to the incorporation by reference in this
Post-Effective Amendment No. 44 to the Registration Statement (Form N-1A) (No.
2-75526) of Delaware Group Limited-Term Government Funds, Inc. of our report
dated February 12, 1997, included in the 1996 Annual Report to Shareholders of
Delaware Group Limited-Term Government Funds, Inc. - U. S. Government Money
Fund.
Philadelphia, Pennsylvania /s/ Ernst & Young LLP
February 24, 1997
<PAGE> 3
Ex-99.B11
[Ernst & Young Letterhead]
To the Shareholders and Board of Directors
Delaware Group Limited-Term Government Funds, Inc. - Limited Term Government
Fund
We have audited the accompanying statements of net assets of Delaware Group
Limited-Term Government Funds, Inc. - Limited-Term Government Fund (the "Fund")
as of December 31, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1996, 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, 1996, 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 periods indicated
therein, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
February 18, 1997
<PAGE> 4
Ex-99.B11
[Ernst & Young Letterhead]
To the Shareholders and Board of Directors
Delaware Group Limited-Term Government Funds, Inc. - U.S. Government Money Fund
We have audited the accompanying statement of net assets of Delaware Group
Limited-Term Government Funds, Inc. - U.S. Government Money Fund (the "Fund")
as of December 31, 1996, 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 and financial highlights. Our procedures includes
confirmation of securities owned as of December, 31, 1996, by correspondence
with the Fund's 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 Fund
at December 31, 1996, 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
February 12, 1997
<PAGE> 1
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -----------------------------------------------------------------------------
AVERAGE ANNUAL COMPOUNDED RATE OF RETURN:
n
P(1 + T) = ERV
ONE
YEAR
- ------
1
$1000(1 - T) = $1,028.11
T = 2.81%
<PAGE> 2
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
ANNUALIZED RATE OF RETURN
FOR FISCAL YEAR ENDING 1996
- -----------------------------------------------------------------------------
AVERAGE ANNUAL COMPOUNDED RATE OF RETURN:
n
P(1 + T) = ERV
ONE
YEAR
- ------
1
$1000(1 - T) = $1,018.42
T = 1.84%
<PAGE> 3
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (INCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.77
Initial Shares 114.025
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 114.025 $0.129 0.000 115.712
- -----------------------------------------------------------------------------
Ending Shares 115.712
Ending NAV x $8.77
---------
$1,014.79
Less CDSC $10.00
---------
Investment Return $1,004.79
Total Return Performance
- -----------------
Investment Return $1,004.79
Less Initial Investment $1,000.00
---------
$4.79 / $1,000.00 x 100
Total Return: 0.48%
<PAGE> 4
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
THREE MONTHS (EXCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.77
Initial Shares 114.025
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 114.025 $0.129 0.000 115.712
- -----------------------------------------------------------------------------
Ending Shares 115.712
Ending NAV x $8.77
---------
Investment Return $1,014.79
Total Return Performance
- -----------------
Investment Return $1,014.79
Less Initial Investment $1,000.00
---------
$14.79 / $1,000.00 x 100
Total Return: 1.48%
<PAGE> 5
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (INCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.80
Initial Shares 113.636
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 113.636 $0.258 0.000 117.013
- -----------------------------------------------------------------------------
Ending Shares 117.013
Ending NAV x $8.77
---------
$1,026.20
Less CDSC $9.96
---------
Investment Return $1,016.24 / $1,000.00 x 100
Total Return Performance
- -----------------
Investment Return $1,016.24
Less Initial Investment $1,000.00
---------
$16.24 / $1,000.00 x 100
Total Return: 1.62%
<PAGE> 6
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
SIX MONTHS (EXCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.80
Initial Shares 113.636
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 113.636 $0.258 0.000 117.013
- -----------------------------------------------------------------------------
Ending Shares 117.013
Ending NAV x $8.77
---------
Investment Return $1,026.20
Total Return Performance
- -----------------
Investment Return $1,026.20
Less Initial Investment $1,000.00
---------
$26.20 / $1,000.00 x 100
Total Return: 2.62%
<PAGE> 7
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (INCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.91
Initial Shares 112.233
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 112.233 $0.388 0.000 117.283
- -----------------------------------------------------------------------------
Ending Shares 117.283
Ending NAV x $8.77
---------
$1,028.57
Less CDSC $9.84
---------
Investment Return $1,018.73
Total Return Performance
- -----------------
Investment Return $1,018.73
Less Initial Investment $1,000.00
---------
$18.73 / $1,000.00 x 100
Total Return: 1.87%
<PAGE> 8
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
NINE MONTHS (EXCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $8.91
Initial Shares 112.233
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 112.233 $0.388 0.000 117.283
- -----------------------------------------------------------------------------
Ending Shares 117.283
Ending NAV x $8.77
---------
Investment Return $1,028.57
Total Return Performance
- -----------------
Investment Return $1,028.57
Less Initial Investment $1,000.00
---------
$28.57 / $1,000.00 x 100
Total Return: 2.86%
<PAGE> 9
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (EXCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.05
Initial Shares 110.497
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 110.497 $0.524 0.000 117.230
- -----------------------------------------------------------------------------
Ending Shares 117.230
Ending NAV x $8.77
---------
Investment Return $1,028.11
Total Return Performance
- -----------------
Investment Return $1,028.11
Less Initial Investment $1,000.00
---------
$28.11 / $1,000.00 x 100
Total Return: 2.81%
<PAGE> 10
DELAWARE GROUP LIMITED TERM GOVERNMENT FUND C
TOTAL RETURN PERFORMANCE
ONE YEAR (INCLUDING CDSC)
- -----------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning OFFER $9.05
Initial Shares 110.497
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- -----------------------------------------------------------------------------
1996 110.497 $0.524 0.000 117.230
- -----------------------------------------------------------------------------
Ending Shares 117.230
Ending NAV x $8.77
---------
$1,028.11
Less CDSC $9.69
---------
Investment Return $1,018.42
Total Return Performance
- -----------------
Investment Return $1,018.42
Less Initial Investment $1,000.00
---------
$18.42 / $1,000.00 x 100
Total Return: 1.84%
<TABLE> <S> <C>
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<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 021
<NAME> LIMITED-TERM GOVERNMENT FUND A CLASS
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<INVESTMENTS-AT-VALUE> 507,673,905
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<TOTAL-ASSETS> 524,365,542
<PAYABLE-FOR-SECURITIES> 9,995,000
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<OTHER-ITEMS-LIABILITIES> 3,323,333
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<SENIOR-EQUITY> 58,277
<PAID-IN-CAPITAL-COMMON> 645,991,686
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<ACCUMULATED-NII-CURRENT> 10,749
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<ACCUMULATED-NET-GAINS> (138,824,105)
<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 464,649,397
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 46,358,864
<OTHER-INCOME> 0
<EXPENSES-NET> 5,672,843
<NET-INVESTMENT-INCOME> 40,686,021
<REALIZED-GAINS-CURRENT> (16,698,744)
<APPREC-INCREASE-CURRENT> (3,411,759)
<NET-CHANGE-FROM-OPS> 20,575,518
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<DISTRIBUTIONS-OF-INCOME> 37,528,293
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 4,092,791
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<NET-CHANGE-IN-ASSETS> (192,209,518)
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<PER-SHARE-NAV-END> 8.770
<EXPENSE-RATIO> 0.930
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 504,902,364
<INVESTMENTS-AT-VALUE> 507,673,905
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<PAYABLE-FOR-SECURITIES> 9,995,000
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<SENIOR-EQUITY> 58,277
<PAID-IN-CAPITAL-COMMON> 645,991,686
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<ACCUMULATED-NET-GAINS> (138,824,105)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,810,602
<NET-ASSETS> 12,959,400
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 46,358,864
<OTHER-INCOME> 0
<EXPENSES-NET> 5,672,843
<NET-INVESTMENT-INCOME> 40,686,021
<REALIZED-GAINS-CURRENT> (16,698,744)
<APPREC-INCREASE-CURRENT> (3,411,759)
<NET-CHANGE-FROM-OPS> 20,575,518
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 761,710
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 405,801
<NUMBER-OF-SHARES-REDEEMED> 344,506
<SHARES-REINVESTED> 55,428
<NET-CHANGE-IN-ASSETS> (192,209,518)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (122,125,362)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,998,870
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,672,843
<AVERAGE-NET-ASSETS> 12,893,536
<PER-SHARE-NAV-BEGIN> 9.050
<PER-SHARE-NII> 0.524
<PER-SHARE-GAIN-APPREC> (0.280)
<PER-SHARE-DIVIDEND> 0.524
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.770
<EXPENSE-RATIO> 1.780
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 504,902,364
<INVESTMENTS-AT-VALUE> 507,673,905
<RECEIVABLES> 15,175,835
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,515,802
<TOTAL-ASSETS> 524,365,542
<PAYABLE-FOR-SECURITIES> 9,995,000
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<OTHER-ITEMS-LIABILITIES> 3,323,333
<TOTAL-LIABILITIES> 13,318,333
<SENIOR-EQUITY> 58,277
<PAID-IN-CAPITAL-COMMON> 645,991,686
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<SHARES-COMMON-PRIOR> 3,617
<ACCUMULATED-NII-CURRENT> 10,749
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (138,824,105)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,810,602
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<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 46,358,864
<OTHER-INCOME> 0
<EXPENSES-NET> 5,672,843
<NET-INVESTMENT-INCOME> 40,686,021
<REALIZED-GAINS-CURRENT> (16,698,744)
<APPREC-INCREASE-CURRENT> (3,411,759)
<NET-CHANGE-FROM-OPS> 20,575,518
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 80,760
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 381,776
<NUMBER-OF-SHARES-REDEEMED> 41,739
<SHARES-REINVESTED> 8,688
<NET-CHANGE-IN-ASSETS> (192,209,518)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (122,125,362)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,998,870
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,672,843
<AVERAGE-NET-ASSETS> 1,396,031
<PER-SHARE-NAV-BEGIN> 9.050
<PER-SHARE-NII> 0.524
<PER-SHARE-GAIN-APPREC> (0.280)
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<PER-SHARE-NAV-END> 8.770
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<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-31-1996
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<INVESTMENTS-AT-VALUE> 507,673,905
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<PAID-IN-CAPITAL-COMMON> 645,991,686
<SHARES-COMMON-STOCK> 3,460,786
<SHARES-COMMON-PRIOR> 4,140,745
<ACCUMULATED-NII-CURRENT> 10,749
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (138,824,105)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,810,602
<NET-ASSETS> 30,348,633
<DIVIDEND-INCOME> 0
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<EXPENSES-NET> 5,672,843
<NET-INVESTMENT-INCOME> 40,686,021
<REALIZED-GAINS-CURRENT> (16,698,744)
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<NUMBER-OF-SHARES-SOLD> 1,295,392
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<PER-SHARE-NAV-BEGIN> 9.050
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<PER-SHARE-NAV-END> 8.770
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<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
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<PERIOD-END> DEC-31-1996
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195,807
<AVERAGE-NET-ASSETS> 1,349,045
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.047
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<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 012
<NAME> U.S. GOVERNMENT MONEY FUND CONSULTANT CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 15,408,842
<INVESTMENTS-AT-VALUE> 15,408,842
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<TOTAL-ASSETS> 15,516,725
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 3,888
<SENIOR-EQUITY> 15,513
<PAID-IN-CAPITAL-COMMON> 15,497,324
<SHARES-COMMON-STOCK> 430,476
<SHARES-COMMON-PRIOR> 329,069
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 430,476
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 864,489
<OTHER-INCOME> 0
<EXPENSES-NET> 118,618
<NET-INVESTMENT-INCOME> 745,871
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 745,871
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 24,844
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 581,297
<NUMBER-OF-SHARES-REDEEMED> 497,272
<SHARES-REINVESTED> 17,385
<NET-CHANGE-IN-ASSETS> 1,397,334
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78,833
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 195,807
<AVERAGE-NET-ASSETS> 1,349,045
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.047
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.047
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
