<PAGE>
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. 45 [X]
--
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 45
--
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, 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: March 2, 1998
-------------
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
__X__ on March 2, 1998 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
If appropriate:
_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendement
Title of Securities Being Registered
------------------------------------
Limited-Term Government Fund A Class
Limited-Term Government Fund B Class
Limited-Term Government Fund C Class
Limited-Term Government Fund Institutional Class
<PAGE>
--- C O N T E N T S ---
This Post-Effective Amendment No. 45 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 - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Item No. Description Location in Prospectuses
- -------- ----------- ------------------------
<S> <C> <C> <C>
Limited-Term Government Fund
A Class/ Institutional
B Class/ Class
C Class
1 Cover Page............................................. Cover Cover
2 Synopsis............................................... Synopsis; Summary Synopsis; Summary
of Expenses of Expenses
3 Condensed Financial Information....................... Financial Highlights Financial Highlights
4 General Description of Registrant .................... Investment Objective Investment Objective
and Policies; Shares; and Policies; Shares;
Additional Information Additional Information
on Policies and Risk on Policies and Risk
Factors Factors
5 Management of the Fund................................. Management of the Management of the
Fund Fund
6 Capital Stock and Other Securities .................... Delaware Difference; Dividends and
Dividends and Distributions;
Distributions; Taxes; Shares
Taxes; Shares
7 Purchase of Securities Being Offered................... Cover; How to Cover; How to Buy
Buy Shares; Shares; Calculation of
Calculation of Net Net Asset Value Per
Offering Price Share; Management of
and Net Asset the Fund
Value Per Share;
Management of the
Fund
8 Redemption or Repurchase............................... How to Buy Shares; How to Buy Shares;
Redemption and Redemption and
Exchange Exchange
9 Legal Proceedings...................................... None None
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------
<S> <C> <C>
Limited-Term Government Fund
10 Cover Page............................................ Cover
11 Table of Contents..................................... Table of Contents
12 General Information and History....................... General Information
13 Investment Objectives and Policies.................... Investment Objective and Policies
14 Management of the Registrant.......................... Officers and Directors
15 Control Persons and Principal Holders
of Securities......................................... Officers and Directors
16 Investment Advisory and Other Services................ Plans Under Rule 12b-1 for the Fund Classes
(under Purchasing Shares); Investment
Management Agreement; Officers and Directors;
General Information; Financial Statements
17 Brokerage Allocation.................................. Trading Practices
18 Capital Stock and Other Securities.................... Capitalization and Noncumulative Voting (under
General Information)
19 Purchase, Redemption and Pricing of
Securities Being Offered.............................. Purchasing Shares; Determining Offering Price and
Net Asset Value; Redemption and Repurchase;
Exchange Privilege
20 Tax Status............................................ Taxes
21 Underwriters.......................................... Purchasing Shares
22 Calculation of Performance Data....................... Performance Information
23 Financial Statements.................................. Financial Statements
</TABLE>
<PAGE>
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>
Delaware Investments includes --------------------------------
funds with a wide range of investment LIMITED-TERM GOVERNMENT FUND
objectives. Stock funds, income funds, --------------------------------
national and state specific tax-exempt A CLASS
funds, money market funds, global and --------------------------------
international funds and closed-end funds B CLASS
give investors the ability to create --------------------------------
a portfolio that fits their personal C CLASS
financial goals. For more information, --------------------------------
contact your financial adviser or call
Delaware Investments 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, PROSPECTUS
DIVIDEND DISBURSING, --------------------------------
ACCOUNTING SERVICES
AND TRANSFER AGENT MARCH 2, 1998
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
<PAGE>
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
MARCH 2, 1998
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 800-659-2265
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 investment 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 investment 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 March 2, 1998,
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 ("SEC").
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 SEC
also maintains a Web site (http://www.sec.gov) that contains Part B, material we
incorporated by reference, and other information regarding registrants that
electronically file with the SEC.
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>
TABLE OF CONTENTS
COVER PAGE.............................................................. 1
SYNOPSIS................................................................ 2
SUMMARY OF EXPENSES..................................................... 4
FINANCIAL HIGHLIGHTS.................................................... 6
INVESTMENT OBJECTIVE AND STRATEGIES
Suitability............................................................ 8
Investment Strategy and Risk Factors................................... 8
THE DELAWARE DIFFERENCE
Plans and Services..................................................... 10
CLASSES OF SHARES....................................................... 12
HOW TO BUY SHARES....................................................... 19
REDEMPTION AND EXCHANGE................................................. 22
DIVIDENDS AND DISTRIBUTIONS............................................. 27
TAXES................................................................... 28
CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE............. 30
MANAGEMENT OF THE FUND.................................................. 31
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISK CONSIDERATIONS... 34
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 THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
2
<PAGE>
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 Transfer 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 available from
Delaware Investments. Delaware Distributors, L.P. (the "Distributor") is the
national distributor for the Fund and for all of the other mutual funds
available from Delaware Investments. 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
available from Delaware Investments. 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
2.75% of the offering price. 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 (subject to a contingent deferred sales
charge ("Limited CDSC") of 1% if shares are redeemed within 12 months of
purchase if in connection with such purchase a dealer commission is paid). 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>
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 Fund nor the Distributor assesses a charge for redemptions or exchanges of
Class A Shares, except for certain redemptions of shares purchased at net asset
value, which may be subject to a CDSC if a dealer's commission was paid in
connection with such purchases. See Front-End Sales Charge Alternative -- Class
A Shares under Classes of Shares.
Class B Shares and Class C Shares may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares
that are offered. See Redemption and Exchange.
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>
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) ................... 2.75% 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(1) 2.00%(2) 1.00%(3)
Redemption Fees ........................................ None(4) None(4) None(4)
</TABLE>
<TABLE>
<CAPTION>
Annual Operating Expenses Class A Class B Class C
(as a percentage of average 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%(5)(6) 1.00%(5) 1.00%(5)
Other Operating Expenses ........................ 0.33% 0.33% 0.33%
---- ---- ----
Total Operating Expenses ...................... 0.98%(6) 1.83% 1.83%
==== ==== ====
</TABLE>
(1) 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 Limited
CDSC of 1% will be imposed on certain redemptions within 12 months of
purchase. Additional Class A purchase options involving the imposition of a
CDSC may be permitted as described in the Prospectus from time to time. See
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
(2) Class B Shares are subject to a CDSC of: (i) 2% if shares are redeemed
within the first two years of purchase; (ii) 1% if shares are redeemed
during the third year following purchase; and (iii) 0% thereafter. See
Deferred Sales Charge Alternative -- Class B Shares under Classes of Shares.
(3) Class C Shares are subject to a CDSC of 1% if the shares are redeemed within
12 months of purchase. See Level Sales Charge Alternative -- Class C Shares
under Classes of Shares.
5
<PAGE>
(4) CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.
(5) 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.
(6) 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%.
Investors utilizing the Asset Planner asset allocation service also
typically incur an annual maintenance fee of $35 per Strategy. However,
effective November 1, 1996, the annual maintenance fee is waived until further
notice. 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 Asset Planner in Part B.
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 ......... $37(1) $58 $80 $144 $37 $58 $80 $144
Class B Shares ......... $39 $68 $99(2) $192(2) $19 $58 $99(2) $192(2)
Class C Shares ......... $29 $58 $99 $215 $19 $58 $99 $215
</TABLE>
(1) Generally, no redemption charge is assessed upon a redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC or other 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
6
<PAGE>
Automatic Conversion of Class B Shares under Classes of Shares for a description
of the automatic conversion feature.
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
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.
- --------------------------------------------------------------------------------
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, all of which are incorporated by reference
into Part B. Further information about the Fund's performance is contained in
its Annual Report to shareholders. A copy of the Fund's Annual Report
(including the report of Ernst & Young LLP) may be obtained from Limited-Term
Funds, Inc. upon request at no charge.
- --------------------------------------------------------------------------------
7
<PAGE>
<TABLE>
<CAPTION>
Class A Shares
------------------------------------------------------------
Year Ended
12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period ......................... $ 8.770 $ 9.050 $ 8.990 $ 9.840
Income From Investment
Operations
Net Investment Income ........... 0.596 0.600 0.699 0.667
Net Gains or Losses from
Investments (both realized
and unrealized) ................ (0.150) (0.280) 0.060 (0.850)
-------- -------- -------- ----------
Total From Investment
Operations ................... 0.446 0.320 0.759 (0.183)
-------- -------- -------- ----------
Less Distributions
Dividends (from net investment
income) ........................ (0.596) (0.600) (0.699) (0.667)
Distributions (from capital
gains) ......................... none none none none
-------- -------- -------- ----------
Total Distributions ........... (0.596) (0.600) (0.699) (0.667)
======== ======== ======== ==========
Net Asset Value, End of
Period ......................... $ 8.620 $ 8.770 $ 9.050 $ 8.990
======== ======== ======== ==========
Total Return(1) ................. 5.23% 3.69% 8.71% (1.88%)
Ratios/Supplemental Data
Net Assets, End of Period
(000's omitted) ................ $355,079 $464,649 $653,451 $ 789,525
Ratio of Expenses to Average
Daily Net Assets ............... 0.98% 0.93% 0.96% 0.91%
Ratio of Net Investment
Income to Average Daily
Net Assets ..................... 6.83% 6.80% 7.71% 7.10%
Portfolio Turnover Rate ......... 79% 83% 73% 148%
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Class A Shares
----------------------------------------------------------------------------------------------
Year Ended
12/31/93 12/31/92 12/31/91 12/31/90 12/28/89 12/29/88
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period ......................... $ 10.000 $ 10.190 $ 9.770 $ 9.720 $ 9.700 $ 9.800
Income From Investment
Operations
Net Investment Income ........... 0.681 0.740 0.799 0.814 0.843 0.730
Net Gains or Losses from
Investments (both realized
and unrealized) ................ (0.160) (0.190) 0.420 0.050 0.020 (0.100)
--------- -------- -------- -------- -------- --------
Total From Investment
Operations ................... 0.521 0.550 1.219 0.864 0.863 0.630
--------- -------- -------- -------- -------- --------
Less Distributions
Dividends (from net
investment income) ............. (0.681) (0.740) (0.799) (0.814) (0.843) (0.730)
Distributions (from capital
gains) ......................... none none none none none none
--------- -------- -------- -------- -------- --------
Total Distributions ..... ..... (0.681) (0.740) (0.799) (0.814) (0.843) (0.730)
========= ======== ======== ======== ======== ========
Net Asset Value, End of
Period ......................... $ 9.840 $ 10.000 $ 10.190 $ 9.770 $ 9.720 $ 9.700
========= ======== ======== ======== ======== ========
Total Return(1) .................. 5.31% 5.62%(1) 13.04%(1) 9.32% 9.28% 6.63%
Ratios/Supplemental Data
Net Assets, End of Period
(000's omitted) ................ $1,126,031 $861,829 $144,129 $107,739 $107,637 $132,859
Ratio of Expenses to Average
Daily Net Assets ............... 0.88% 0.87%(2) 0.90%(2) 0.99% 0.97% 0.90%
Ratio of Net Investment
Income to Average Daily
Net Assets ..................... 6.77% 7.03%(3) 7.96%(3) 8.41% 8.72% 7.44%
Portfolio Turnover Rate ......... 171% 77% 42% 175% 311% 146%
- -----------
(1) Does not reflect maximum front-end sales charge, currently 2.75%, 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.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Class B Shares
------------------------------------------------------------
Period
5/2/94(1)
Year Ended through
12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 8.770 $ 9.050 $ 8.990 $ 9.430
Income From Investment Operations
Net Investment Income ................... 0.522 0.524 0.622 0.399
Net Gains or Losses from Investments
(both realized and unrealized) ......... (0.150) (0.280) 0.060 (0.440)
--------- --------- --------- ----------
Total From Investment Operations ...... 0.372 0.244 0.682 (0.041)
--------- --------- --------- ----------
Less Distributions
Dividends (from net investment income) .. (0.522) (0.524) (0.622) (0.399)
Distributions (from capital gains) ...... none none none none
--------- --------- --------- ----------
Total Distributions ................... (0.522) (0.524) (0.622) (0.399)
--------- --------- --------- ----------
Net Asset Value, End of Period .......... $ 8.620 $ 8.770 $ 9.050 $ 8.990
========= ========= ========= ==========
Total Return(2) ......................... 4.35% 2.81% 7.80% (0.44%)
Ratios/Supplemental Data
Net Assets, End of Period
(000's omitted) ........................ $ 12,119 $ 12,959 $ 12,313 $ 6,282
Ratio of Expenses to Average Daily
Net Assets ............................. 1.83% 1.78% 1.81% 1.76%
Ratio of Net Investment Income to
Average Daily Net Assets ............... 5.98% 5.91% 6.86% 6.25%
Portfolio Turnover Rate ................. 79% 83% 73% 148%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class C Shares
---------------------------------------
Period
11/29/95(3)
Year Ended through
12/31/97 12/31/96 12/31/95
<S> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 8.770 $ 9.050 $ 9.010
Income From Investment Operations
Net Investment Income ................... 0.522 0.524 0.051
Net Gains or Losses from Investments
(both realized and unrealized) ......... (0.150) (0.280) 0.040
--------- --------- --------
Total From Investment Operations ...... 0.372 0.244 0.091
--------- --------- --------
Less Distributions
Dividends (from net investment income) .. (0.522) (0.524) (0.051)
Distributions (from capital gains) ...... none none none
--------- --------- --------
Total Distributions ................... (0.522) (0.524) (0.051)
--------- --------- --------
Net Asset Value, End of Period .......... $ 8.620 $ 8.770 $ 9.050
========= ========= ========
Total Return(2) ......................... 4.34% 2.81% (3)
Ratios/Supplemental Data
Net Assets, End of Period
(000's omitted) ........................ $ 3,580 $ 3,090 $ 33
Ratio of Expenses to Average Daily
Net Assets ............................. 1.83% 1.78% (3)
Ratio of Net Investment Income to
Average Daily Net Assets ............... 5.98% 5.78% (3)
Portfolio Turnover Rate ................. 79% 83% (3)
- -----------
(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.
</TABLE>
9
<PAGE>
INVESTMENT OBJECTIVE AND STRATEGIES
The Fund seeks to provide a high stable level of income, while attempting
to minimize fluctuations in principal and provide maximum liquidity. It seeks to
do this by investing primarily in a portfolio of short- and intermediate-term
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities and instruments secured by such securities. The Fund may also
invest up to 20% of its assets in corporate notes and bonds, certificates of
deposit and obligations of both U.S. and foreign banks, commercial paper and
certain asset-backed 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.
10
<PAGE>
INVESTMENT STRATEGY AND RISK FACTORS
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 15 years.
Quality Guidelines
The Fund will invest primarily in securities issued or guaranteed by the
U.S. government (e.g., Treasury Bills and Notes), its agencies (e.g., Federal
Housing Administration) or instrumentalities (e.g., Federal Home Loan Bank) or
government-sponsored corporations (e.g., Federal National Mortgage Association),
as well as repurchase agreements and publicly- and privately-issued
mortgage-backed securities collateralized by such securities. The Fund may
invest up to 20% of its assets in: (1) corporate notes and bonds rated A or
above; (2) certificates of deposit and obligations of both U.S. and foreign
banks if they have assets of at least one billion dollars; (3) commercial paper
rated P-1 by Moody's Investors Service ("Moody's") and/or A-1 by Standard and
Poor's Ratings Group ("S&P"); and (4) 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
11
<PAGE>
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 102%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a temporary basis.
* * *
Certain of the above-described securities may be considered to be
derivative securities.
* * *
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
For a further discussion of the investment techniques described above, see
Additional Information on Investment Policies and Risk Considerations.
* * *
Investment Strategy and Risk Factors and Additional Information on
Investment Policies and Risk Considerations 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.
12
<PAGE>
THE DELAWARE DIFFERENCE
PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Investments
family 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 Delaware Investments' Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, various service features and other funds in the Delaware Investments
family of funds.
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 Investments
family of funds. 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 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.
13
<PAGE>
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 Investments 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.
Retirement Planning
An investment in the Fund may be a suitable investment option for
tax-deferred retirement plans. Delaware Investments offers a full spectrum of
qualified and non-qualified retirement plans, including the popular 401(k)
deferred compensation plan, IRA, and the new Roth IRA. Just call Delaware
Investments at 800-523-1918 for more information.
MoneyLine(SM) Direct Deposit Service
Delaware Investments offers the following services for fast and convenient
transfer of funds between your personal bank account and your Fund account.
1. MoneyLine(SM) 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(SM) 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. This service is not available for certain
retirement plans.
2. MoneyLine(SM) On Demand
You or your investment dealer may request purchases and redemptions of Fund
shares by using MoneyLine(SM) On Demand. When you authorize the Fund to accept
such requests from you or your investment dealer, funds will be withdrawn from
(for share purchases) or deposited to (for share redemptions) your predesignated
bank account. Your request will be processed the same day if you call prior to 4
p.m., Eastern time. There is a $25 minimum and a $50,000 maximum limit for
MoneyLine(SM) On Demand transactions. This service is not available for
retirement plans, except for purchases of shares by IRAs.
For each MoneyLine(SM) Service, it may take up to four business days for
the transactions to be completed. You can initiate either service by completing
an Account Services form. If your name and address are not identical to the name
and address on your Fund account, you must have your signature guaranteed. The
Fund does not charge a fee for any MoneyLine(SM) Service; however, your bank may
charge a fee. Please call the Shareholder Service Center for additional
information about these services.
14
<PAGE>
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
Investments family. 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 shares of funds in the Delaware Investments family over a 13-month
period. See Classes of Shares and Part B.
12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds from
a redemption of Class A Shares, within one year of the date of the redemption,
without paying a front-end sales charge. See Part B.
Exchange Privilege
The Exchange Privilege permits you to exchange all or part of your shares
into shares of other funds in the Delaware Investments family, 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 Investments family. 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.
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 Investments.
15
<PAGE>
CLASSES OF SHARES
Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net asset
value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A
Shares ("front-end sales charge alternative"), or on a contingent deferred
basis for Class B Shares ("deferred sales charge alternative") or Class C
Shares ("level sales charge alternative").
Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, 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
16
<PAGE>
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of these Classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, the Distributor and others will be paid, in the
case of Class A Shares, from the proceeds of the front-end sales charge and
12b-1 Plan fees and, in the case of Class B Shares and Class C Shares, from the
proceeds of the 12b-1 Plan fees and, if applicable, the CDSC incurred upon
redemption. Financial advisers may receive different compensation for selling
Class A, 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, if any, paid on Class A, Class B and Class C Shares, to the
extent any dividends are paid, will be calculated in the same manner, at the
same time, on the same day and will be in the same amount, except that the
additional amount of 12b-1 Plan expenses relating to Class B Shares and Class C
Shares will be borne exclusively by such shares. See Calculation of Offering
Price and Net Asset Value Per Share.
The NASD has adopted certain rules relating to investment company sales
charges. Limited-Term Funds, Inc. and the Distributor intend to operate in
compliance with these rules.
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 2.75%. See Calculation of Offering Price and
Net Asset Value Per Share.
17
<PAGE>
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
- --------------------------------------------------------------------------------
Dealer's
Front-End Sales Charge as % of Commission***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- ----------------------- ---------- -------------- ---------------
Less than $100,000 2.75% 2.78% 2.35%
$100,000 but under $250,000 2.00 2.09 1.75
$250,000 but under $500,000 1.00 1.04 0.75
$500,000 but under $1,000,000* 1.00 1.04 0.75
* 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 per share of the 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 Investments products and
services and who increase sales of Delaware Investments funds may receive an
additional commission of up to 0.15% of the offering price. Dealers who receive
90% or more of the sales charge may be deemed to be underwriters under the
Securities Act of 1933.
- --------------------------------------------------------------------------------
18
<PAGE>
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:
Dealer's Commission
(as a percentage of
Amount of Purchase amount purchased)
- ---------------------------------- --------------------
Up to $3 million 0.50%
Next $2 million up to $5 million 0.40
Amount over $5 million 0.20
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial adviser's eligibility for the
dealer's commission, purchases of Class A Shares of other Delaware Investments
funds as to which a Limited CDSC applies may be aggregated with those of the
Class A Shares of the Fund. Financial advisers also may be eligible for a
dealer's commission in connection with certain purchases made under a Letter of
Intention or pursuant to an investor's Right of Accumulation. Financial
advisers should contact the Distributor concerning the applicability and
calculation of the dealer's commission in the case of combined purchases.
An exchange from other Delaware Investments funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The
schedule and program for payment of the dealer's commission are subject to
change or termination at any time by the Distributor at its discretion.
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
available from Delaware Investments, 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 Investments fund holdings. In addition, assets held by investment
advisory clients of the Manager or its affiliates in a stable value account may
be combined with other Delaware Investments fund holdings. 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 Investments 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.
19
<PAGE>
It also permits you to use these combinations under a Letter of Intention.
A Letter of Intention allows you to make purchases over a 13-month period and
qualify the entire purchase for a reduction in front-end sales charges on Class
A Shares.
Combined purchases of $1,000,000 or more, including certain purchases made
at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative -- Class A Shares, above.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by
Allied Plans.
With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible
fund shares, both Delaware Investments and non-Delaware Investments, which were
not subject to a front-end sales charge, will be subject to the applicable
sales charge if exchanged for eligible Delaware Investments fund shares to
which a sales charge applies. No sales charge will apply if the eligible fund
shares were previously acquired through the exchange of eligible shares on
which a sales charge was already paid or through the reinvestment of dividends.
See Investing by Exchange under How to Buy Shares.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
adviser's eligibility for a dealer's commission on net asset value purchases of
eligible Delaware Investments fund shares in connection with Allied Plans, all
participant holdings in the Allied Plan will be aggregated.
The Limited CDSC is applicable to redemptions of net asset value purchases
from an Allied Plan on which a dealer's commission has been paid. Waivers of
the Limited CDSC, as described under Waiver of Limited Contingent Deferred
Sales Charge -- Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales
20
<PAGE>
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset Value
under Redemption and Exchange.
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
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 Investments family,
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 funds in the
Delaware Investments family of funds. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase
Class A Shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment advisers affiliated with a broker or dealer, if such broker, dealer
or investment adviser has entered into an agreement with the Distributor
providing specifically for the purchase of Class A Shares in connection with
special investment products, such as wrap accounts or similar fee based
programs. Investors may be charged a fee when effecting transactions in Class A
Shares through a broker or agent that offers these special investment products.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their trust
customers if they are not eligible to purchase shares of the Institutional
Class of the Fund; any group retirement plan (excluding defined benefit pension
plans), or such plans of the same employer, for which plan participant records
are maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of Delaware Investments funds and any stable
value account available to investment advisory clients of the Manager or its
affiliates, or (ii) is sponsored by an employer that has at any point after May
1, 1997 had more than 100 employees while such plan has held Class A Shares of
a Delaware Investments fund and such employer has properly represented to DIRSI
in writing that it has the requisite number of employees and has received
written confirmation back from DIRSI. See Group Investment Plans for
information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase
Institutional Class shares as a result of a change in distribution
arrangements.
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Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Investments account in connection with loans originated from accounts
previously maintained by another investment firm will also be invested at net
asset value.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A
Shares of any of the funds in Delaware Investments 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, SIMPLE IRA, SIMPLE 401(k),
Profit Sharing and Money Purchase Pension Plans and 401(k) Defined Contribution
Plans and 403(b)(7) and 457 Deferred Compensation Plans) may benefit from the
reduced front-end sales charges available on Class A Shares based on total plan
assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans 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 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 investment accounts of Delaware
Investments 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.
The Limited CDSC is applicable to any redemptions of net asset value
purchases made on behalf of any group retirement plan on which a dealer's
commission has been paid only if such redemption is made pursuant to a
withdrawal of the entire plan from Delaware Investments funds. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at
Net Asset Value under Redemption and Exchange.
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.
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
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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.
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.
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, 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
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<PAGE>
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 Investments fund. In the event of an exchange of the shares,
the "net asset value of such shares at the time of redemption" will be the net
asset value of the shares that were acquired in the exchange.
The following table sets forth the rates of the CDSC for Class B Shares of
the Fund:
Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
- --------------------------- --------------------
0-2 2%
3 1%
4 and thereafter None
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. See Automatic Conversion of Class B Shares, above. Investors are
reminded that Class A Shares into which Class B Shares will convert are subject
to ongoing annual 12b-1 Plan expenses of up to a maximum of 0.30% (currently, no
more than 0.15% pursuant to Board action) of average daily net assets of such
shares.
In determining whether a CDSC applies to a redemption of Class B Shares, it
will be assumed that shares held for more than three years are redeemed first,
followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the 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 Investments family
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<PAGE>
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 Conduct Rules, in connection
with the promotion of shares of Delaware Investments funds, 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 Conduct Rules 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
Conduct Rules 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>
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, Delaware Investments 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 Limited-Term Government Fund
A Class, Limited-Term Government Fund B Class or Limited-Term Government Fund C
Class to Delaware Investments 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 plan 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 Investments at 1818 Market Street, Philadelphia, PA 19103.
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<PAGE>
2. Subsequent Purchases--You may make additional investments anytime by
wiring funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.
If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.
Investing by Exchange
If you have an investment in another mutual fund in Delaware Investments,
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 available from Delaware
Investments, 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
available from Delaware Investments. Holders of Class B Shares of the Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C
Shares of the Fund are permitted to exchange all or part of their Class C
Shares only into Class C Shares of other Delaware Investments funds. Class B
Shares of the Fund and Class C Shares of the Fund acquired by exchange will
continue to carry the CDSC and, in the case of Class B Shares, the automatic
conversion schedule of the fund from which the exchange is made. The holding
period of Class B Shares of the Fund acquired by exchange will be added to that
of the shares that were exchanged for purposes of determining the time of the
automatic conversion into Class A Shares of the Fund.
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 Classes of Shares 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>
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
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. MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment dealer
may call the Fund to request a transfer of funds from your predesignated bank
account to your Fund account. See MoneyLine(SM) Services under The Delaware
Difference for additional information about this service.
4. 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 available from
Delaware Investments. You may also elect to invest in other mutual funds
available from Delaware Investments 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 available from Delaware Investments and invested automatically into
any other account in a Delaware Investments 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, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans or 403(b)(7) or 457 Deferred
Compensation Plans.
5. 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 available from Delaware Investments,
subject to the exceptions noted below as well as the eligibility and minimum
purchase requirements set forth in each fund's prospectus.
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<PAGE>
Reinvestments of distributions into Class A Shares of the Fund or of other
Delaware Investments funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Investments funds or into Class C Shares of the Fund or of other
Delaware Investments funds are also made without any sales charge and will not
be subject to a CDSC if later redeemed. See Automatic Conversion of Class B
Shares under Classes of Shares for information concerning the automatic
conversion of Class B Shares acquired by reinvesting dividends.
Holders of Class A Shares of the Fund may not reinvest their distributions
into Class B Shares or Class C Shares of any fund in Delaware Investments,
including the Fund. Holders of Class B Shares of the Fund may reinvest their
distributions only into Class B Shares of the funds available from Delaware
Investments 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 available from Delaware Investments which offer that class 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
Investments fund: SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing
and Money Purchase Pension Plans, 401(k) Defined Contribution Plans, 403(b)(7)
or 457 Deferred Compensation Plans.
Purchase Price and Effective Date
The offering price and net asset value of Class A, Class B and Class C
Shares are determined as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund, its agent or designee. 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 available from Delaware Investments. The Fund reserves the right to
reject purchase orders paid by third-party checks or checks that are not drawn
on a domestic branch of a United States financial institution. If a check drawn
on a foreign financial institution is accepted, you may be subject to additional
bank charges for clearance and currency conversion.
The Fund also reserves the right, following shareholder notification, to
charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified
of their insufficient account balance and advised that they have until the end
of the current calendar quarter to raise their balance to the stated minimum.
If the account has not reached the minimum balance requirement by that time,
the Fund will charge a $9 fee for that quarter and each subsequent calendar
quarter until the account is brought up to the minimum balance. The service fee
will be deducted from the account during the first week of each calendar
quarter for the previous quarter, and will be used to help defray the cost of
maintaining low-balance accounts. No fees will be charged without proper
notice, and no CDSC will apply to such assessments.
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<PAGE>
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.
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<PAGE>
Redemption and Exchange
You can redeem or exchange your shares in a number of different ways. The
exchange service is useful if your investment requirements change and you want
an easy way to invest in 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
available from Delaware Investments will best meet your changing objectives, and
the consequences of any exchange transaction. You may also call Delaware
Investments 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 in which you want to invest the proceeds.
Exchange instructions and redemption requests must be signed by the record
owner(s) exactly as the shares are registered. You may request a redemption or
an exchange by calling the Shareholder Service Center at 800-523-1918. The Fund
may suspend, terminate or amend the terms of the exchange privilege upon 60
days' written notice to shareholders.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the purchase check has cleared, which may take
up to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. The Fund reserves the right to reject a
written or telephone redemption request or delay payment of redemption proceeds
if there has been a recent change to the shareholder's address of record.
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
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<PAGE>
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.
Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds available from Delaware
Investments (in each case, "New Shares") in a permitted exchanged, will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this 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(s) must accompany your request and also be in good order.
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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 available from Delaware Investments, subject to the same conditions and
limitations as other exchanges noted above.
Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificate(s).
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 proceeds. If you ask for a check, it will normally be mailed the
next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account.
Simply call the Shareholder Service Center prior to the time the offering price
and net asset value are determined, as noted above.
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MoneyLine(SM) On Demand
Through the MoneyLine(SM) On Demand service, you or your investment dealer
may call the Fund to request a transfer of funds from your Fund account to your
predesignated bank account. See MoneyLine(SM) Services under The Delaware
Difference for additional information about this service.
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 available from Delaware Investments under the same
registration, subject to the same conditions and limitations as other exchanges
noted above. As with the written exchange service, telephone exchanges are
subject to the requirements of each fund, as described above. Telephone
exchanges may be subject to limitations as to amounts or frequency.
Systematic Withdrawal Plans
1. Regular Plans
This plan provides shareholders with a consistent monthly (or quarterly)
payment. This is particularly useful to shareholders living on fixed incomes,
since it can provide them with a stable supplemental amount. With accounts of
at least $5,000, you may elect monthly withdrawals of $25 (quarterly $75) or
more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine(SM) Direct
Deposit Service. Your funds will normally be credited to your bank account four
business days after the payment date. There are no separate fees for this
redemption method. See MoneyLine(SM) Services 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(SM) 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
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redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or
were acquired through the reinvestment of distributions. The 12% annual limit
will be reset on the date that any Systematic Withdrawal Plan is modified (for
example, a change in the amount selected to be withdrawn or the frequency or
date of withdrawals), based on the balance in the account on that date. See
Waiver of Contingent Deferred Sales Charge -- Class B and Class C Shares,
below.
For more information on Systematic Withdrawal Plans, call the Shareholder
Service Center.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares (or
shares into which such Class A Shares are exchanged) made within 12 months of
purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.
The Limited CDSC will be paid to the Distributor and will be equal to the
lesser of 1% of (1) the net asset value at the time of purchase of the Class A
Shares being redeemed or (2) the net asset value of such Class A Shares at the
time of redemption. For purposes of this formula, the "net asset value at the
time of purchase" will be the net asset value at purchase of the Class A Shares
even if those shares are later exchanged for shares of another Delaware
Investments fund and, in the event of an exchange of Class A Shares, the "net
asset value of such shares at the time of redemption" will be the net asset
value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than 12 months will not be
subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the 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) periodic distributions from an IRA, SIMPLE
IRA, or 403(b)(7) or 457 Deferred Compensation Plan due to death, disability, or
attainment of age 59 1/2, and IRA distributions qualifying under Section 72(t)
of the Code; (v) returns of excess contributions
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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, SIMPLE IRA, SEP/IRA or
403(b)(7) or 457 Deferred Compensation Plans; (iii) periodic distributions from
an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, 403(b)(7) or 457 Deferred Compensation
Plan due to death, disability or attainment of age 59 1/2, and IRA distributions
qualifying under Section 72(t) of the Code; and (iv) distributions from an
account if the redemption results from the death of all registered owners of the
account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.
The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in
the account is less than the then-effective minimum account size; (ii) returns
of excess contributions to an IRA, SIMPLE IRA, 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan, or 401(k)
Defined Contribution plan; (iii) periodic distributions from a 403(b)(7) or 457
Deferred Compensation Plan upon attainment of age 59 1/2, Profit Sharing Plan,
Money Purchase Plan, 401(k) Defined Contribution Plan upon attainment of age
70 1/2, and IRA distributions qualifying under Section 72(t) of the Code; (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) periodic distributions from an IRA or SIMPLE IRA on or after
attainment of age 59 1/2; and (vii) distributions from an account if the
redemption results from the death of all registered owners of the account (in
the case of accounts established under the Uniform Gifts to Minors or Uniform
Transfers to Minors Acts or trust accounts, the waiver applies upon the death
of all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase
of the shares being redeemed.
In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.
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DIVIDENDS AND 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(SM)
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(SM) Services under The Delaware
Difference for more information about this service.
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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.
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the Code.
Because many of these changes are complex, and only indirectly affect the Fund
and its distributions to you, they are discussed in Part B. Changes in the
treatment of capital gains, however, are discussed in this section.
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 and by
satisfying certain other requirements relating to the sources of its income and
diversification of its assets.
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 efore the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
who will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a maximum rate
of 20%. For investors who are in the 15% federal income tax bracket, these gains
will be taxed at a maximum rate of 10%. Capital gain distributions will qualify
for these new maximum tax rates, depending on when the Fund's securities were
sold and how long they were held by the Fund before they were sold. Investors
who want more information on holding periods and other qualifying rules relating
to these new rates should review the expanded discussion in Part B, or should
contact their own tax advisers.
Limited-Term Funds, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain distributions
which will qualify for these maximum federal tax rates.
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.
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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 available from Delaware Investments. 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
available from Delaware Investments 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 the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S. government
securities may be exempt from state personal income taxes. Because investors'
state and local taxes may be different than the federal taxes described above,
investors should consult their own tax advisers.
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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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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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 Delaware
Investments since 1938. On December 31, 1997, the Manager and its affiliates
within Delaware Investments, including Delaware International Advisers Ltd.,
were managing in the aggregate more than $39 billion in assets in the various
institutional or separately managed (approximately $24,040,760,000) and
investment company (approximately $15,705,742,000) 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, 1997. The directors of Limited-Term Funds, Inc.
annually review fees paid to the Manager.
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 Delaware Investments, 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 Investments' 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 Delaware Investments from 1981 to 1985.
He returned to Delaware Investments 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
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joining Delaware Investments in 1989, Mr. Reed was Vice President and Manager of
the fixed-income department at Irving Trust Company in New York. He joined
Delaware Investments in 1989 as a vice president for fixed-income.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Fund's portfolio
transactions.
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. 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.
Distribution (12b-1) and Service
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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 permits 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.
43
<PAGE>
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-Term 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, 1997, the ratios of expenses to the average daily net assets for the Class A
Shares, Class B Shares and Class C Shares were 0.98%, 1.83% and 1.83%,
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.
44
<PAGE>
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISK CONSIDERATIONS
Following are more detailed descriptions of investment strategies employed
by the Fund and any risks they may entail.
Put Options
A put option purchased by the Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Fund can be protected should the market value of the security decline due to a
rise in interest rates. However, the Fund must pay a premium for this right,
whether it exercises it or not. The Fund will only purchase put options to the
extent that the premiums on all outstanding put options do not exceed 2% of the
Fund's total assets.
A put option written by the Fund obligates it to buy the security
underlying the option at the exercise price during the option period, and the
purchaser of the option has the right to sell the security to the Fund. During
the option period, the Fund, as writer of the put option, may be assigned an
exercise notice by the broker/dealer through whom the option was sold requiring
the Fund to make payment of the exercise price against delivery of the
underlying security. This obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. The Fund will only write put options on a secured basis. The
advantage to the Fund of writing put options is that it receives premium income.
The disadvantage is that the Fund may be required, when the put is exercised, to
purchase securities at higher prices than the current market price.
A covered call option written by the Fund obligates it to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Fund receives premium income, which may offset the cost of purchasing put
options. However, the Fund may lose the potential market appreciation of the
security if the Manager's judgment is wrong and interest rates fall.
When the Fund purchases a call option, in return for a premium paid by the
Fund to the writer of the option, the Fund obtains the right to buy the security
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium upon
writing the option, has the obligation, upon exercise of the option, to deliver
the underlying security against payment of the exercise price. The advantage is
that the Fund may hedge against an increase in the price of securities which it
ultimately wishes to buy. However, the premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the option. The Fund will only purchase call options to the extent
that premiums paid on all outstanding call options do not exceed 2% of the
Fund's total assets.
Closing transactions essentially let the Fund offset put options or call
options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Fund may use both Exchange-traded and over-the-counter options. Certain
over-the-counter options may be illiquid. The Fund will not invest more than 10%
of its assets in illiquid securities.
Futures Contracts
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs a
contractual obligation to deliver the securities underlying the contract at a
specified price on a specified date during a specified future month.
45
<PAGE>
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.
46
<PAGE>
The rate of principal payment on asset-backed securities generally depends
on the rate of principal payments received on the underlying assets. Such rate
of payments may be affected by economic and various other factors such as
changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such asset-backed
securities do, however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interests cannot be
adequately or in many cases ever established, and other risks which may be
peculiar to particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance and technical requirements
under state laws. Therefore recoveries on repossessed collateral may not always
be available to support payments on the securities. For further discussion
concerning the risks of investing in such asset-backed securities, see Part B.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its custodian bank a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed.
Repurchase Agreements
Under a repurchase agreement, the Fund acquires ownership and possession
of a security, and the seller agrees to buy the security back at a specified
time and higher price. If the seller is unable to repurchase the security, the
Fund could experience delays and losses in liquidating the securities. To
minimize this possibility, the Fund considers the creditworthiness of banks and
dealers when entering into repurchase agreements.
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
47
<PAGE>
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.
* * *
Investments by Fund of Funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds (the "Foundation Funds"). From time to time,
the Fund may experience large investments or redemptions due to allocations or
rebalancings by the Foundation Funds. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse effects
on portfolio management to the extent that the Fund may be required to sell
securities or invest cash at times when it would not otherwise do so. These
transactions could also have tax consequences if sales of securities result in
gains and could also increase transactions costs or portfolio turnover. The
Manager will monitor such transactions and will attempt to minimize any adverse
effects on both the Fund and the Foundation Funds resulting from such
transactions.
Part B provides more information on the Fund's investment restrictions and
policies.
48
<PAGE>
----------------------------
For more information, call LIMITED-TERM GOVERNMENT
Delaware Investments at 800-828-5052. FUND INSTITUTIONAL
----------------------------
Investment Manager
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103
National Distributor P R O S P E C T U S
Delaware Distributors, L.P.
1818 Market Street ----------------------------
Philadelphia, PA 19103
March 2, 1998
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
DELAWAREsm
INVESTMENTS
- -----------
<PAGE>
LIMITED-TERM GOVERNMENT FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES MARCH 2, 1998
-------------------------------------------------------------
1818 Market Street, Philadelphia, PA 19103
For more information about the Limited-Term Government Fund Institutional Class
call Delaware Investments 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 Funds, Inc.'s registration statement), dated March 2, 1998, 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 ("SEC").
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
SEC also maintains a Web site (http://www.sec.gov) that contains Part B,
material we incorporated by reference, and other information regarding
registrants that electronically file with the SEC.
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
those classes are subject to sales charges and other expenses, which may affect
their performance. A prospectus for those classes can be obtained by writing to
Delaware Distributors, L.P. at the above address or by calling 800-523-4640.
-1-
<PAGE>
TABLE OF CONTENTS
Cover Page
Synopsis
Summary of
Expenses
Financial Highlights
Investment Objective and Strategies
Suitability
Investment Strategy and Risk Factors
Classes of Shares
How to Buy Shares
Redemption and Exchange
Dividends and Distributions
Taxes
Calculation of Net Asset Value Per Share
Management of the Fund
Additional Information on Investment Policies
and Risk Considerations
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 THE PRINCIPAL AMOUNT INVESTED. SHARES OF
THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS.
-2-
<PAGE>
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 available from Delaware
Investments. Delaware Distributors, L.P. (the "Distributor") is the national
distributor for the Fund and for all of the other mutual funds available from
Delaware Investments. 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 available
from Delaware Investments. 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>
SUMMARY OF EXPENSES
Limited-Term
Shareholder Transaction Expenses Government Fund
- -------------------------------------------------------------------------------
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*
Limited-Term
Annual Operating Expenses Government Fund
(as a percentage of average daily net assets) Institutional Class
- -------------------------------------------------------------------------------
Management Fees ........................................... 0.50%
12b-1 Fees ................................................ None
Other Operating Expenses .................................. 0.33%
----
Total Operating Expenses ............................... 0.83%
====
*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. Limited-Term
Funds, Inc. charges no redemption fees.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
Limited-Term Government -------- --------- --------- ---------
<S> <C> <C> <C> <C>
Fund Institutional Class ................... $8 $26 $46 $103
</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>
- --------------------------------------------------------------------------------
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, all of which are incorporated by reference
into Part B. Further information about the Fund's performance is contained in
its Annual Report to shareholders. A copy of the Fund's Annual Report
(including the report of Ernst & Young LLP) may be obtained from the Fund upon
request at no charge.
- --------------------------------------------------------------------------------
-5-
<PAGE>
<TABLE>
<CAPTION>
Year Ended
12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .. $ 8.770 $ 9.050 $ 8.990 $ 9.840
Income From Investment Operations
Net Investment Income ................. 0.610 0.613 0.712 0.681
Net Gains or Losses from Investments
(both realized and unrealized) ....... (0.150) (0.280) 0.060 (0.850)
--------- --------- --------- ----------
Total From Investment Operations .... 0.460 0.333 0.772 (0.169)
--------- --------- --------- ----------
Less Distributions
Dividends (from net investment income). (0.610) (0.613) (0.712) (0.681)
Distributions (from capital gains)..... none none none none
--------- --------- --------- ----------
Total Distributions ................. (0.610) (0.613) (0.712) (0.681)
--------- --------- --------- ----------
Net Asset Value, End of Period......... $ 8.620 $ 8.770 $ 9.050 $ 8.990
========= ========= ========= ==========
- ----------------------------
Total Return .......................... 5.39% 3.84% 8.87% (1.74%)
- ----------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's
omitted) ............................. $ 32,902 $ 30,349 $ 37,460 $ 37,238
Ratio of Expenses to Average Daily Net
Assets ............................... 0.83% 0.78% 0.81% 0.76%
Ratio of Net Investment Income to
Average Daily Net Assets.............. 6.98% 6.92% 7.86% 7.25%
Portfolio Turnover Rate ............... 79% 83% 73% 148%
<CAPTION>
Year Ended
12/31/93 12/31/92(1,2) 12/31/91(1) 12/31/90(1) 12/28/89(1) 12/29/88(1)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period .. $ 10.000 $ 10.190 $ 9.770 $ 9.720 $ 9.700 $ 9.800
Income From Investment Operations
Net Investment Income ................. 0.696 0.754 0.816 0.828 0.857 0.744
Net Gains or Losses from Investments
(both realized and unrealized) ....... (0.160) (0.190) 0.420 0.050 0.020 (0.100)
--------- -------- -------- --------- --------- ---------
Total From Investment Operations .... 0.536 0.564 1.236 0.878 0.877 0.644
--------- -------- -------- --------- --------- ---------
Less Distributions
Dividends (from net investment income). (0.696) (0.754) (0.816) (0.828) (0.857) (0.744)
Distributions (from capital gains)..... none none none none none none
--------- -------- -------- --------- --------- ---------
Total Distributions ................. (0.696) (0.754) (0.816) (0.828) (0.857) (0.744)
--------- -------- -------- --------- --------- ---------
Net Asset Value, End of Period......... $ 9.840 $ 10.000 $ 10.190 $ 9.770 $ 9.720 $ 9.700
========= ======== ======== ========= ========= =========
- ----------------------------
Total Return .......................... 5.44% 5.77%(3) 13.21%(3) 9.48% 9.44% 6.78%
- ----------------------------
Ratios/Supplemental Data
Net Assets, End of Period (000's
omitted) ............................. $ 47,700 $ 52,403 $146,598 $ 12,811 $ 3,933 $ 5,740
Ratio of Expenses to Average Daily Net
Assets ............................... 0.74% 0.75%(4) 0.75%(4) 0.84% 0.82% 0.75%
Ratio of Net Investment Income to
Average Daily Net Assets.............. 6.91% 7.58%(5) 8.11%(5) 8.56% 8.87% 7.59%
Portfolio Turnover Rate ............... 171% 77% 42% 175% 311% 146%
</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 into shares of Investors Series II class on June 1, 1992 pursuant
to a Plan of Recapitalization approved by shareholders of the Investors
Series I class. See Shares for additional information.
(2) 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.
(3) Total return for 1991 and 1992 reflect the expense limitations referenced in
Notes 4 and 5.
(4) 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.
(5) 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.
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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-backed 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.
INVESTMENT STRATEGY AND RISK FACTORS
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
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<PAGE>
short-term yields are higher. The Manager may purchase individual securities
with a remaining maturity of up to 15 years.
Quality Guidelines
The Fund will invest primarily in securities issued or guaranteed by the
U.S. government (e.g., Treasury Bills and Notes), its agencies (e.g., Federal
Housing Administration) or instrumentalities (e.g., Federal Home Loan Bank) or
government-sponsored corporations (e.g., Federal National Mortgage
Association), as well as repurchase agreements and publicly- and
privately-issued mortgage-backed securities collateralized by such securities.
The Fund may invest up to 20% of its assets in: (1) corporate notes and bonds
rated A or above; (2) certificates of deposit and obligations of both U.S. and
foreign banks if they have assets of at least one billion dollars; (3)
commercial paper rated P-1 by Moody's Investors Service ("Moody's") and/or A-1
by Standard and Poor's Ratings Group ("S&P"); and (4) 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 102%
collateralized by securities in which the Fund can invest directly. Repurchase
agreements help the Fund to invest cash on a temporary basis.
* * *
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<PAGE>
Certain of the above-described securities may be considered to be
derivative securities.
* * *
The Fund may loan up to 25% of its assets to qualified broker/dealers or
institutional investors for their use relating to short sales or other security
transactions.
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the Securities Act of 1933. Rule 144A permits many privately
placed and legally restricted securities to be freely traded among certain
institutional buyers such as the Fund. The Fund may invest no more than 10% of
the value of its net assets in illiquid securities.
For a further discussion of the investment techniques described above, see
Additional Information on Investment Policies and Risk Considerations.
* * *
Investment Strategy and Risk Factors and Additional Information on
Investment Policies and Risk Factors in this Prospectus and Part B further
clarifies the Fund's investment policies, risk factors and the methods used to
determine maturity. A brief discussion of those factors that materially
affected the Fund's performance during its most recently completed fiscal year
appears in the Fund's Annual Report.
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<PAGE>
CLASSES OF SHARES
The Distributor serves as the national distributor for the Fund. Shares of
the Class may be purchased directly by contacting the Fund or its agent or
through authorized investment dealers. All purchases of shares of the Class are
at net asset value. There is no front-end or contingent deferred sales charge.
Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.
Shares of the Class are available for purchase only by (a) retirement plans
introduced by persons not associated with brokers or dealers that are primarily
engaged in the retail securities business and rollover individual retirement
accounts from such plans; (b) tax-exempt employee benefit plans of the Manager
or its affiliates and securities dealer firms with a selling agreement with the
Distributor; (c) institutional advisory accounts of the Manager or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) 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. Class A Shares, Class B Shares and
Class C Shares may have different sales charges and other expenses which may
affect performance. 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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<PAGE>
HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer.
In all instances, investors must qualify to purchase shares of
the Class.
Investing Directly by Mail
1. Initial Purchases -- An Investment Application or, in the case of a
retirement plan account, an appropriate retirement plan application, must be
completed, signed and sent with a check payable to Limited-Term Government Fund
Institutional Class, to 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
Investments family 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 Investments family 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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<PAGE>
The effective date of a purchase made through an investment dealer is the
date the order is received by the Fund, its agent or designee. 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 Investments family. The Fund reserves the
right to reject purchase orders paid by third-party checks or checks that are
not drawn on a domestic branch of a United States financial institution. If a
check drawn on a foreign financial institution is accepted, you may be subject
to additional bank charges for clearance and currency conversion.
The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $1,000 as a result of
redemptions.
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<PAGE>
REDEMPTION AND EXCHANGE
Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order.
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 Investments
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 Investments family. 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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<PAGE>
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 Delaware Investments, 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(s) 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 certificate(s).
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
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<PAGE>
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.
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 Investments family 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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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly on the last business day of
each month. Payment by check of cash dividends will ordinarily be mailed within
three business days after the payable date.
Purchases of shares by wire begin earning dividends when converted into
Federal Funds and available for investment, normally the next business day
after receipt. Purchases by check earn dividends upon conversion to Federal
Funds, normally one business day after receipt.
Each business day, Limited-Term Funds, Inc. declares a dividend to all
shareholders of record in the Class at the time the net asset value per share
is determined. See Purchase Price and Effective Date under How to Buy Shares.
Thus, when redeeming shares, dividends continue to accrue up to and including
the date of redemption.
Each class of the Fund will share proportionately in the investment income
and expenses of the Fund, except that the Class will not incur any distribution
fee under the Fund's 12b-1 Plans which apply to the Limited-Term Government
Fund A Class, B Class and C Class.
The Fund can have two types of distributions: income dividends and capital
gains. Short-term capital gains distributions, if any, may be paid quarterly,
but in the discretion of the Fund's Board of Directors might be distributed
less frequently. Long-term capital gains, if any, will be distributed annually.
Both dividends and capital gains are automatically reinvested in your
account at net asset value.
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<PAGE>
TAXES
The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (the "1997 Act"). This new law makes sweeping changes in the Code.
Because many of these changes are complex, and only indirectly affect the Fund
and its distributions to you, they are discussed in Part B. Changes in the
treatment of capital gains, however, are discussed in this section.
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
and by satisfying certain other requirements relating to the sources of its
income and diversification of its assets.
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.
The Treatment of Capital Gain Distributions under the Taxpayer Relief Act of
1997
The 1997 Act creates a category of long-term capital gain for individuals
that will be taxed at new lower tax rates. For investors who are in the 28% or
higher federal income tax brackets, these gains will be taxed at a maximum rate
of 20%. For investors who are in the 15% federal income tax bracket, these
gains will be taxed at a maximum rate of 10%. Capital gain distributions will
qualify for these new maximum tax rates, depending on when the Fund's
securities were sold and how long they were held by the Fund before they were
sold. Investors who want more information on holding periods and other
qualifying rules relating to these new rates should review the expanded
discussion in Part B, or should contact their own tax advisers.
Limited-Term Funds, Inc. will advise you in its annual information
reporting at calendar year end of the amount of its capital gain distributions
which will qualify for these maximum federal tax rates.
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.
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<PAGE>
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 Investments family. 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 the federal taxes described above, shareholders may or may
not be subject to various state and local taxes. For example, distributions of
interest income and capital gains realized from certain types of U.S.
government securities may be exempt from state personal income taxes. Because
investors' state and local taxes may be different than the federal taxes
described above, investors should consult their own tax advisers.
Each year, Limited-Term Funds, Inc. will mail you information on the tax
status of the Fund's dividends and distributions. Shareholders will also
receive each year information as to the portion of dividend income, if any,
that is derived from U.S. government securities that are exempt from state
income tax. Of course, shareholders who are not subject to tax on their income
would not be required to pay tax on amounts distributed to them by the Fund.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.
See Accounting and Tax Issues in Part B for additional information on tax
matters relating to the Fund and
its shareholders.
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<PAGE>
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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<PAGE>
MANAGEMENT OF THE FUND
Directors
The business and affairs of Limited-Term Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Limited-Term Funds, Inc.'s directors and officers.
Investment Manager
The Manager furnishes investment management services to the Fund.
The Manager and its predecessors have been managing the funds in Delaware
Investments since 1938. On December 31, 1997, the Manager and its affiliates
within Delaware Investments, including Delaware International Advisers Ltd.,
were managing in the aggregate more than $39 billion in assets in the various
institutional or separately managed (approximately $24,040,760,000) and
investment company (approximately $15,705,742,000) 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, 1997.
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 Delaware Investments, 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 Delaware Investments from 1981 to 1985.
He returned to Delaware Investments 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 Delaware Investments in 1989,
Mr. Reed was Vice President and Manager of the fixed-income
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department at Irving Trust Company in New York. He joined Delaware Investments
in 1989 as a vice president for fixed-income.
Portfolio Trading Practices
Portfolio trades are generally made on a net basis without brokerage
commissions. However, the price may include a mark-up or mark-down. Banks,
brokers or dealers are selected by the Manager to execute the Fund's portfolio
transactions.
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.
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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<PAGE>
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 0.83% for the fiscal year ended December 31,
1997.
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.
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ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND RISK CONSIDERATIONS
Following are more detailed descriptions of investment strategies employed
by the Fund and any risks they
may entail.
Put Options
A put option purchased by the Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Fund can be protected should the market value of the security decline due to a
rise in interest rates. However, the Fund must pay a premium for this right,
whether it exercises it or not. The Fund will only purchase put options to the
extent that the premiums on all outstanding put options do not exceed 2% of the
Fund's total assets.
A put option written by the Fund obligates it to buy the security
underlying the option at the exercise price during the option period, and the
purchaser of the option has the right to sell the security to the Fund. During
the option period, the Fund, as writer of the put option, may be assigned an
exercise notice by the broker/dealer through whom the option was sold requiring
the Fund to make payment of the exercise price against delivery of the
underlying security. This obligation terminates upon expiration of the put
option or at such earlier time at which the writer effects a closing purchase
transaction. The Fund will only write put options on a secured basis. The
advantage to the Fund of writing put options is that it receives premium
income. The disadvantage is that the Fund may be required, when the put is
exercised, to purchase securities at higher prices than the current
market price.
A covered call option written by the Fund obligates it to sell one of its
securities for an agreed price up to an agreed date. The advantage is that the
Fund receives premium income, which may offset the cost of purchasing put
options. However, the Fund may lose the potential market appreciation of the
security if the Manager's judgment is wrong and interest rates fall.
When the Fund purchases a call option, in return for a premium paid by the
Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium
upon writing the option, has the obligation, upon exercise of the option, to
deliver the underlying security against payment of the exercise price. The
advantage is that the Fund may hedge against an increase in the price of
securities which it ultimately wishes to buy. However, the premium paid for the
call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option. The Fund will only purchase
call options to the extent that premiums paid on all outstanding call options
do not exceed 2% of the Fund's
total assets.
Closing transactions essentially let the Fund offset put options or call
options prior to exercise or expiration. If the Fund cannot effect closing
transactions, it may have to hold a security it would otherwise sell or deliver
a security it might want to hold.
The Fund may use both Exchange-traded and over-the-counter options.
Certain over-the-counter options may be illiquid. The Fund will not invest more
than 10% of its assets in illiquid securities.
Futures Contracts
Futures contracts are agreements for the purchase or sale for future
delivery of securities. When a futures contract is sold, the Fund incurs a
contractual obligation to deliver the securities underlying the contract
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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
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<PAGE>
other factors such as changes in interest rates or the concentration of
collateral in a particular geographic area. Therefore, the yield may be
difficult to predict and actual yield to maturity may be more or less than the
anticipated yield to maturity. Due to the shorter maturity of the collateral
backing such securities, there tends to be less of a risk of substantial
prepayment than with mortgage-backed securities but the risk of such a
prepayment does exist. Such asset-backed securities do, however, involve certain
risks not associated with mortgage-backed securities, including the risk that
security interests cannot be adequately or in many cases ever established, and
other risks which 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.
When-Issued and Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and
delivery taking place in the future in order to secure what is considered to be
an advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its custodian bank a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. The payment obligation and the interest rates
that will be received are each fixed at the time the Fund enters into the
commitment and no interest accrues to the Fund until settlement. Thus, it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed.
Repurchase Agreements
Under a repurchase agreement, the Fund acquires ownership and possession
of a security, and the seller agrees to buy the security back at a specified
time and higher price. If the seller is unable to repurchase the security, the
Fund could experience delays and losses in liquidating the securities. To
minimize this possibility, the Fund considers the creditworthiness of banks and
dealers when entering into repurchase agreements.
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
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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.
* * *
Investments by Fund of Funds
The Fund accepts investments from the series portfolios of Delaware Group
Foundation Funds, a fund of funds (the "Foundation Funds"). From time to time,
the Fund may experience large investments or redemptions due to allocations or
rebalancings by the Foundation Funds. While it is impossible to predict the
overall impact of these transactions over time, there could be adverse effects
on portfolio management to the extent that the Fund may be required to sell
securities or invest cash at times when it would not otherwise do so. These
transactions could also have tax consequences if sales of securities result in
gains and could also increase transactions costs or portfolio turnover. The
Manager will monitor such transactions and will attempt to minimize any adverse
effects on both the Fund and the Foundation Funds resulting from such
transactions.
Part B provides more information on the Fund's investment restrictions and
policies.
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Delaware Investments offers funds with a wide range of investment
objectives. Stock funds, income funds, national and state specific tax-exempt
funds, money market funds, global and international funds and closed-end funds
give investors the ability to create a portfolio that fits their personal
financial goals. For more information, shareholders of the Fund Classes should
contact their financial adviser or call Delaware Investments at 800-523-4640 and
shareholders of the Institutional Class should contact Delaware Investments 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
<PAGE>
- ------------------------------------------------------------
LIMITED-TERM GOVERNMENT FUND
- ------------------------------------------------------------
A CLASS
- ------------------------------------------------------------
B CLASS
- ------------------------------------------------------------
C CLASS
- ------------------------------------------------------------
INSTITUTIONAL CLASS
- ------------------------------------------------------------
CLASSES OF LIMITED-TERM GOVERNMENT
FUND
- ------------------------------------------------------------
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
- ------------------------------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- ------------------------------------------------------------
MARCH 2, 1998
DELAWARE
INVESTMENTS
- -----------
<PAGE>
- --------------------------------------------------------------------------------
PART B--STATEMENT OF ADDITIONAL INFORMATION
MARCH 3, 1997
- --------------------------------------------------------------------------------
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
- --------------------------------------------------------------------------------
1818 Market Street
Philadelphia, PA 19103
- --------------------------------------------------------------------------------
For more information about the Limited-Term Government Fund Institutional Class:
800-828-5052
For Prospectus and Performance of the Limited-Term Government Fund A Class,
Limited-Term Government Fund B Class and 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
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Cover Page 1
- --------------------------------------------------------------------------------
Investment Objective and Policies 3
- --------------------------------------------------------------------------------
Accounting and Tax Issues
- --------------------------------------------------------------------------------
Performance Information
- --------------------------------------------------------------------------------
Trading Practices and Brokerage
- --------------------------------------------------------------------------------
Purchasing Shares
- --------------------------------------------------------------------------------
Investment Plans
- --------------------------------------------------------------------------------
Determining Offering Price and Net Asset Value
- --------------------------------------------------------------------------------
Redemption and Repurchase
- --------------------------------------------------------------------------------
Income Dividends and Realized Securities
Profits Distributions
- --------------------------------------------------------------------------------
Investment Management Agreement
- --------------------------------------------------------------------------------
Officers and Directors
- --------------------------------------------------------------------------------
Exchange Privilege
- --------------------------------------------------------------------------------
General Information
- --------------------------------------------------------------------------------
Financial Statements
- --------------------------------------------------------------------------------
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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").
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
2.75% 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 March 3, 1998, and the current Prospectus
for the Institutional Class dated March 3, 1998, 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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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.
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<PAGE>
4. Purchase or sell real estate but this shall not prevent the Fund
from investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting or nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.
6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Fund may be deemed to
be an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
8. Write, purchase or sell options, puts, calls or combinations
thereof, except that the Fund may: (a) write covered call options with respect
to any part or all of its portfolio securities; (b) purchase call options to the
extent that the premiums paid on all outstanding call options do not exceed 2%
of the Fund's total assets; (c) write secured put options; (d) purchase put
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
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including Sunday or holidays) or such longer period as the Commission may
prescribe by rules and regulations, reduce the amount of its borrowings to such
an extent that the asset coverage of such borrowings shall be at least 300%. The
Fund will not pledge more than 10% of its net assets. The Fund will not issue
senior securities as defined in the 1940 Act, except for notes to banks.
Securities will not be purchased while the Fund has an outstanding borrowing.
Although not a fundamental investment restriction, the Fund currently
does not invest its assets in real estate limited partnerships.
Average Effective Maturity
The Fund limits its average effective dollar weighted portfolio
maturity to no more than three to five years. However, many of the securities in
which the Fund invests will have remaining maturities in excess of five years.
Some of the securities in the Fund's portfolio may have periodic
interest rate adjustments based upon an index such as the 91-day Treasury Bill
rate. This periodic interest rate adjustment tends to lessen the volatility of
the security's price. With respect to securities with an interest rate
adjustment period of one year or less, the Fund will, when determining average
weighted maturity, treat such a security's maturity as the amount of time
remaining until the next interest rate adjustment.
Instruments such as GNMA, FNMA, FHLMC securities and similar securities
backed by amortizing loans generally have shorter effective maturities than
their stated maturities. This is due to changes in amortization caused by
demographic and economic forces such as interest rate movements. These effective
maturities are calculated based upon historical payment patterns. For purposes
of determining the Fund's average effective maturity, the maturities of such
securities will be calculated based upon the issuing agency's payment factors
using industry-accepted valuation models.
Mortgage-Backed Securities--In addition to mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
the Fund may also invest up to 35% of its assets in securities issued by certain
private, nongovernment corporations, such as financial institutions, if the
securities are fully collateralized at the time of issuance by securities or
certificates 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
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the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 10% of the Fund's net assets.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities and certain REMICs also may be stripped.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. The Fund will invest
in such private-backed securities only if they are 100% collateralized at the
time of issuance by securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The Fund currently invests in privately-issued
CMOs and REMICs only if they are rated at the time of purchase in the two
highest grades by a nationally-recognized rating agency.
Asset-Backed Securities--The Fund may invest a portion of its assets in
asset-backed securities. The rate of principal payment on asset-backed
securities generally depends on the rate of principal payments received on the
underlying assets. Such rate of payments may be affected by economic and various
other factors such as changes in interest rates 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
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principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.
Options--The Fund may purchase call options, write call options on a
covered basis, write secured put options and purchase put options on a covered
basis only, and will not engage in option writing strategies for speculative
purposes.
The Fund may invest in options that are either Exchange listed or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close option positions and this may have an adverse
impact on the Fund's ability to effectively hedge its securities. The Fund will
not, however, invest more than 10% of its assets in illiquid securities.
A. Covered Call Writing--The Fund may write covered call options from
time to time on such portion of its portfolio, without limit, as Delaware
Management Company, Inc. (the "Manager") determines is appropriate in seeking to
obtain the Fund's investment objective. A call option gives the purchaser of
such option the right to buy, and the writer, in this case the Fund, has the
obligation to sell the underlying security at the exercise price during the
option period. The advantage to the Fund of writing covered calls is that the
Fund receives a premium which is additional income. However, if the security
rises in value, the Fund may not fully participate in the market appreciation.
During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to options on actual portfolio securities owned by the
Fund, the Fund may enter into closing purchase transactions. A closing purchase
transaction is one in which the Fund, when obligated as a writer of an option,
terminates its obligation by purchasing an option of the same series as the
option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
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
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underlying security. Conversely, a gain resulting from a closing purchase
transaction could be offset in whole or in part by a decline in the market value
of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
The Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold.
Options written by the Fund will normally have expiration dates between one and
nine months from the date written. The exercise price of a call option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.
B. Purchasing Call Options--The Fund may purchase call options to the
extent that premiums paid by the Fund do not aggregate more than 2% of the
Fund's total assets. The advantage of purchasing call options is that the Fund
may alter portfolio characteristics, and modify portfolio maturities without
incurring the cost associated with portfolio transactions.
The Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same Fund as the option previously purchased. The Fund
will realize a profit from a closing sale transaction if the price received on
the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.
Although the Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on a
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the results that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund.
C. Purchasing Put Options--The Fund may invest up to 2% of its total
assets in the purchase of put options. The Fund will, at all times during which
it holds a put option, own the security covered by such option.
The Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The
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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.
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.
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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
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.
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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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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.
Other Tax Requirements -- The Fund has qualified and intends to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As such, the Fund will
not be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code and it satisfies other
requirements relating to the sources of its income and diversification of its
assets.
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In order to qualify as a regulated investment company for federal
income tax purposes, the Fund must meet certain specific requirements,
including:
(i) The Fund must maintain a diversified portfolio of securities,
wherein no security (other than U.S. government securities and securities of
other regulated investment companies) can exceed 25% of the Fund's total assets,
and, with respect to 50% of the Fund's total assets, no investment (other than
cash and cash items, U.S. Government securities and securities of other
regulated investment companies) can exceed 5% of the Fund's total assets;
(ii) The Fund must derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains from
the sale or disposition of stock and securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities, or currencies;
(iii) The Fund must distribute to its shareholders at least 90% of its
investment company taxable income and net tax-exempt income for each of its
fiscal years, and
(iv) The Fund must realize less than 30% of its gross income for each
fiscal year from gains from the sale of securities and certain other assets that
have been held by the Fund for less than three months ("short-short income").
The Taxpayer Relief Act of 1997 (the "1997 Act") repealed the 30% short-short
income test for tax years of regulated investment companies beginning after
August 5, 1997; however, this rule may have continuing effect in some states for
purposes of classifying the Fund as a regulated investment company.
The Code requires the Funds to distribute at least 98% of its taxable
ordinary income earned during the calendar year and 98% of its capital gain net
income earned during the 12 month period ending October 31 (in addition to
amounts from the prior year that were neither distributed nor taxed to the Fund)
to you by December 31 of each year in order to avoid federal excise taxes. The
Fund intends as a matter of policy to declare and pay sufficient dividends in
December or January (which are treated by you as received in December) but does
not guarantee and can give no assurances that its distributions will be
sufficient to eliminate all such taxes.
The straddle rules of Section 1092 may apply. Generally, the straddle
provisions require the deferral of losses to the extent of unrecognized gains
related to the offsetting positions in the straddle. Excess losses, if any, can
be recognized in the year of loss. Deferred losses will be carried forward and
recognized in the year that unrealized losses exceed unrealized gains.
The 1997 Act has also added new provisions for dealing with
transactions that are generally called "Constructive Sale Transactions." Under
these rules, the Fund must recognize gain (but not loss) on any constructive
sale of an appreciated financial position in stock, a partnership interest or
certain debt instruments. The Fund will generally be treated as making a
constructive sale when it: 1) enters into a short sale on the same or
substantially identical property; 2) enters into an offsetting notional
principal contract; or 3) enters into a futures or forward contract to deliver
the same or substantially identical property. Other transactions (including
certain financial instruments called collars) will be treated as constructive
sales as provided in Treasury regulations to be published. There are also
certain exceptions that apply for transactions that are closed before the end of
the 30th day after the close of the taxable year.
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PERFORMANCE INFORMATION
From time to time, the Fund may state total return for each Class in
advertisements and other types of literature. Any statements of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life of fund, if applicable) periods. The
Fund may also advertise aggregate and average compounded return information of
each Class over additional periods of time.
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.
-14-
<PAGE>
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, 1997, computed as described above.
The average annual total return for Class A Shares at offer reflects the
maximum front-end sales charge of 2.75% paid on the purchase of shares. The
average annual total return for Class A Shares at net asset value (NAV) does not
reflect the payment of any front-end sales charge.
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.
Average Annual Total Return
Class A Class A
Shares Shares Institutional
(at Offer)(1)(2) (at NAV)(1) Class(1)(3)
1 year ended
12/31/97 2.32% 5.23% 5.39%
3 years ended
12/31/97 4.89% 5.86% 6.02%
5 years ended
12/31/97 3.58% 4.16% 4.31%
10 years ended
12/31/97 6.13% 6.43% 6.58%
Period 11/24/85(4)
to 12/31/97 6.25% 6.49% 6.62%
(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) Effective June 9, 1997, the maximum front-end sales charge was reduced from
3.00% to 2.75%. The above performance numbers are calculated using 2.75% as
the applicable sales charge for all time periods, and are more favorable
than they would have been had they been calculated using the former
front-end sales charges.
(3) Date of initial public offering was June 1, 1992.
(4) Date of initial public offering of Class A Shares.
-15-
<PAGE>
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, 1997. The average annual total return for
Class B Shares excluding deferred sales charge assumes the shares were not
redeemed on December 31, 1997 and therefore does not reflect the deduction of a
CDSC.
Average Annual Total Return
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
1 year ended
12/31/97 2.38% 4.35%
3 years ended
12/31/97 4.67% 4.96%
Period 5/2/94(1)
through 12/31/97 3.92% 3.92%
(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, 1997. The
average annual total return for Class C Shares excluding deferred sales charge
assumes the shares were not redeemed on December 31, 1997 and therefore does not
reflect the deduction of a CDSC.
Average Annual Total Return
Class C Shares Class C Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
1 year ended
12/31/97 3.36% 4.34%
Period 11/29/95(1)
through 12/31/97 3.92% 3.92%
(1) Date of initial public offering of Class C Shares.
-16-
<PAGE>
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, 1997 using this formula were 5.63%, 4.93%, 4.93%
and 5.94% 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.
On December 31, 1997, the average effective weighted average portfolio
maturity was 14 years for the Fund.
Investors should note that the income earned and dividends paid by the Fund
will vary with the fluctuation of interest rates and performance of the
portfolio. The net asset value of the fund may change. Unlike money market
funds, the Fund invests in longer-term securities that fluctuate in value and do
so in a manner inversely correlated with changing interest rates. The Fund's net
asset value will tend to rise when interest rates fall. Conversely, the Fund's
net asset value will tend to fall as interest rates rise. Normally, fluctuations
in interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held in the Fund will vary from day to day and investors
should consider the volatility of the Fund's net asset value as well as its
yield before making a decision to invest.
From time to time, the Fund may quote actual total return and/or yield
performance for its Classes in advertising and other types of literature. This
information may be compared to that of other mutual funds with similar
investment objectives and to stock, bond an other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the Fund (or Class) may be compared to data prepared by Lipper
Analytical Services, Inc., Morningstar, Inc. or the performance of unmanaged
indices compiled or maintained by statistical research firms such as Lehman
Brothers or Salomon Brothers, Inc.
-17-
<PAGE>
Lipper Analytical Services, Inc. maintains statistical performance
databases, as reported by a diverse universe of independently-managed mutual
funds. Morningstar, Inc. is a mutual fund rating service that rates mutual funds
on the basis of risk-adjusted performance. Rankings that compare the Fund's
performance to another fund in appropriate categories over specific time periods
also may be quoted in advertising and other types of literature. The total
return performance reported for these indices will reflect the reinvestment of
all distributions on a quarterly basis and market price fluctuations. The
indices do not take into account any sales charge or other fees. A direct
investment in an unmanaged index is not possible.
Salomon Brothers and Lehman Brothers are statistical research firms that
maintain databases of international market, bond market, corporate and
government-issued securities of various maturities. This information, as well as
unmanaged indices compiled and maintained by these firms, will be used in
preparing comparative illustrations. In addition, the performance of multiple
indices compiled and maintained by these firms may be combined to create a
blended performance result for comparative purposes. Generally, the indices
selected will be representative of the types of securities in which the Fund may
invest and the assumptions that were used in calculating the blended performance
will be described.
Comparative information on the Consumer Price Index may also be included in
advertisements or other literature. The Consumer Price Index, as prepared by the
U.S. Bureau of Labor Statistics, is the most commonly used measure of inflation.
It indicates the cost fluctuations of a representative group of consumer goods.
It does not represent a return from an investment.
Ibbotson Associates of Chicago, Illinois ("Ibbotson") provides
historical returns of the capital markets in the United States, including common
stocks, small capitalization stocks, long-term corporate bonds,
intermediate-term government bonds, long-term government bonds, Treasury bills,
the U.S. rate of inflation (based on the Consumer Price Index), and combinations
of various capital markets. The performance of these capital markets is based on
the returns of different indices. The Fund may use the performance of these
capital markets in order to demonstrate general risk-versus-reward investment
scenarios. Performance comparisons may also include the value of a hypothetical
investment in any of these capital markets. The risks associated with the
security types in any capital market may or may not correspond directly to those
of the Fund. The Fund may also compare performance to that of other compilations
or indices that may be developed and made available in the future.
The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury bills. From time to
time advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in shareholder
reports (including the investment composition of the Fund), as well as the views
as to current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. In addition, selected indices may be
used to illustrate historic performance of selected asset classes. The Fund may
also include in
-18-
<PAGE>
advertisements, sales literature, communications to shareholders or other
materials, charts, graphs or drawings which illustrate the potential risks and
rewards of investment in various investment vehicles, including but not limited
to, domestic stocks, and/or bonds, treasury bills and shares of the Fund. In
addition, advertisements, sales literature, communications to shareholders or
other materials may include a discussion of certain attributes or benefits to be
derived by an investment in the Fund and/or other mutual funds, shareholder
profiles and hypothetical investor scenarios, timely information on financial
management, tax and retirement planning (such as information on Roth IRAs and
Educational IRAs) and investment alternatives to certificates of deposit and
other financial instruments. Such sales literature, communications to
shareholders or other materials may include symbols, headlines or other material
which highlight or summarize the information discussed in more detail therein.
Materials may refer to the CUSIP numbers of the Fund and may illustrate
how to find the listings of the Fund in newspapers and periodicals. Materials
may also include discussions of other funds, products, and services.
The Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, the Fund may compare these measures to
those of other funds. Measures of volatility seek to compare the historical
share price fluctuations or total returns to those of a benchmark. Measures of
benchmark correlation indicate how valid a comparative benchmark may be.
Measures of volatility and correlation may be calculated using averages of
historical data. The Fund may advertise its current interest rate sensitivity,
duration, weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to the Fund may include information
regarding the background and experience of its portfolio managers.
The following table is an example, for purposes of illustration only, of
cumulative total return performance for each Class through December 31, 1997.
For these purposes, the calculations assume the reinvestment of any realized
securities profits distributions and income dividends paid during the indicated
periods. In addition, these calculations, as shown below, reflect maximum sales
charges, if any, paid on the purchase or redemption of shares, as applicable,
but not any income taxes payable by shareholders on the reinvested distributions
included in the calculations. The performance of Class A Shares may be shown
without reflecting the impact of any front-end sales charge. The performance of
Class B Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. Pursuant to applicable regulation, total return shown for
the Institutional Class for the periods prior to the commencement of operations
of such Class is calculated by taking the performance of Class A Shares and
adjusting it to reflect the elimination of all sales charges. However, for those
periods, no adjustment has been made to eliminate the impact of 12b-1 payments,
and performance may have been affected had such an adjustment been made.
-19-
<PAGE>
The net asset value of a Class fluctuates so shares, when redeemed, may be
worth more or less than the original investment, and a Class' results should not
be considered as representative of future performance.
Cumulative Total Return
Class A Institu-
Shares(1) tional
(at Offer)(2) Class(1)(3)
3 months ended
12/31/97 (2.05%) 0.81%
6 months ended
12/31/97 (0.67%)(4) 2.25%
9 months ended
12/31/97 0.95% 3.95%
1 year ended
12/31/97 2.32% 5.39%
3 years ended
12/31/97 15.41% 19.15%
5 years ended
12/31/97 19.24% 23.48%
10 years ended
12/31/97 81.25% 89.17%
Period 11/24/85(4)
through 12/31/97 108.33% 117.27%
(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) Effective June 9, 1997, the maximum front-end sales charge was reduced from
3.00% to 2.75%. The above performance numbers are calculated using 2.75% as
the applicable sales charge for all time periods, and are more favorable
than they would have been had they been calculated using the former
front-end sales charges.
(3) Date of initial public offering was June 1, 1992.
(4) 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 2.17%.
-20-
<PAGE>
Class B Shares Class B Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
3 months ended
12/31/97 (1.43%) 0.56%
6 months ended
12/31/97 (0.24%) 1.74%
9 months ended
12/31/97 1.20% 3.17%
1 year ended
12/31/97 2.38% 4.35%
3 years ended
12/31/97 14.69% 15.64%
Period 5/2/94(1)
through 12/31/97 15.13% 15.13%
(1) Date of initial public offering of Class B Shares.
Class C Shares Class C Shares
(Including (Excluding
Deferred Sales Deferred Sales
Charge) Charge)
3 months ended
12/31/97 (0.44%) 0.56%
6 months ended
12/31/97 0.75% 1.74%
9 months ended
12/31/97 2.18% 3.17%
1 year ended
12/31/97 3.36% 4.34%
Period 11/29/95(1)
through 12/31/97 8.36% 8.36%
(1) Date of initial public offering of Class C Shares.
-21-
<PAGE>
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Investments family of funds, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Fund's investment disciplines,
and investment disciplines of the funds in the Delaware Investments family,
employed in seeking their objectives. The Distributor may also from time to time
cite general or specific information about the institutional clients of the
Manager, 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 Investments offers three services -- Automatic Investing
Program, Direct Deposit Program and the Wealth Builder Option -- that can help
to keep your regular investment program on track. See Investing by Electronic
Fund Transfer - Direct Deposit Purchase Plan and Automatic Investing Plan under
Investment Plans and Wealth Builder Option under Investment Plans for a complete
description of these services including restrictions or limitations.
-22-
<PAGE>
The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.
Number
Investment Price Per of Shares
Amount Share Purchased
---------- --------- ---------
Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $5.00 20
Month 4 $100 $10.00 10
--------------------------------------------------------------------
$400 $37.50 48
Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)
This example is for illustration purposes only. It is not intended to
represent the actual performance of the Fund.
THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional Fund
shares, your investment is given yet another opportunity to grow. Each Fund may
include illustrations showing the power of compounding in advertisements and
other types of literature.
-23-
<PAGE>
TRADING PRACTICES AND BROKERAGE
Portfolio transactions are executed by the Manager on behalf of the
Fund in accordance with the standards described below.
Brokers, dealers and banks are selected to execute transactions for the
purchase or sale of portfolio securities on the basis of the Manager's judgment
of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged, but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.
The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 and the 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 Investments family. 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.
-24-
<PAGE>
The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Limited-Term
Funds, Inc.'s Board of Directors that the advantages of combined orders outweigh
the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the funds in the
Delaware Investments family as a factor in the selection of brokers and dealers
to execute portfolio transactions.
Portfolio Turnover
Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates, 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, 1996 and 1997, the
Fund's portfolio turnover rates were 83% and 79%, respectively.
-25-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's four
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class, and has agreed to use its best efforts to sell shares of
the Fund. See the Prospectuses for additional information on how to invest.
Shares of the Fund are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting Limited-Term
Funds, Inc. or 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 fund in the Delaware Investments family, the
Manager or any of the Manager's affiliates if the purchases are made pursuant to
a payroll deduction program. Shares purchased pursuant to the Uniform Gifts to
Minors Act or Uniform Transfers to Minors Act and shares purchased in connection
with an Automatic Investing Plan are subject to a minimum initial purchase of
$250 and a minimum subsequent purchase of $25. Accounts opened under the Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Institutional Class, but certain eligibility requirements must be satisfied.
Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. 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 amendments to its Conduct Rules, 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. 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. 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
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<PAGE>
0.30% (currently no more than 0.15% pursuant to Board action) of average daily
net assets of such shares. 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. Unlike Class B
Shares, Class C Shares do not convert to another class.
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 or in the case of any retirement plan
accounts, including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Limited-Term Funds, Inc. for any certificate issued. A shareholder may be
subject to fees for replacement of lost or stolen certificates, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact the Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
Alternative Purchase Arrangements
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 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 and may include a series of purchases over
a 13-month period under a Letter of Intention signed by the purchaser. See
Front-End Sales Charge Alternative in the Fund Classes' Prospectus for a table
illustrating reduced front-end sales charges. See Special Purchase Features -
Class A Shares, below, for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
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<PAGE>
Certain dealers who enter into an agreement to provide extra training and
information on Delaware Investments products and services and who increase sales
of the funds in the Delaware Investments family 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.
Dealer's Commission
As described more fully in the Prospectus for the Fund Classes, 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. See Front-End Sales Charge Alternative - Class A Shares in the
Prospectus for the Fund Classes for the applicable schedule and further details.
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 above and Class C Shares redeemed within 12 months of
purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on 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. During the fourth year after purchase and,
thereafter, until converted automatically into Class A Shares, Class B Shares
will still be subject to the annual 12b-1 Plan expenses of up to 1% of average
daily net assets of those shares. At the end of approximately five years after
purchase, the investor's Class B Shares will be automatically converted into
Class A Shares of the Fund. See Automatic Conversion of Class B Shares under
Classes of Shares in the Fund Classes' Prospectus. 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
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<PAGE>
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.
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
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<PAGE>
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 $602,267, $124,937 and
$34,273, 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 $161 --- ---
Broker Trails $568,458 $18,672 $5,986
Broker Sales Charges --- $78,515 $20,786
Dealer Service Expenses --- $914 $152
Interest on Broker Sales Charges --- $8,855 $920
Commissions to Wholesalers $9,802 $11,593 $4,432
Promotional-Broker Meetings $9,509 $1,200 $223
Promotional-Other $3,626 --- ---
Prospectus Printing $8,646 --- ---
Telephone $799 $242 $36
Wholesaler Expenses $1,266 $4,946 $1,738
Other --- --- ---
</TABLE>
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 funds available from Delaware Investments. In some instances,
these incentives or payments may be offered only to certain dealers who
maintain, have sold or may sell certain amounts of shares. The Distributor may
also pay a portion of the expense of preapproved dealer advertisements promoting
the sale of shares of the funds in the Delaware Investments family.
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<PAGE>
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.
Current and former officers, directors and employees of Limited-Term
Funds, Inc., any other fund in the Delaware Investments family, the Manager, the
Manager's affiliates, or any of the Manager's current affiliates and those that
may in the future be created, legal counsel to the funds, and registered
representatives and employees of broker/dealers who have entered into Dealer's
Agreements with the Distributor may purchase Class A Shares of the Fund and any
of the other funds in the Delaware Investments family, including any fund that
may be created, at the net asset value per share. Family members (regardless of
age) of such persons at their direction, and any employee benefit plan
established by any of the foregoing funds, corporations, counsel or
broker/dealers may also purchase shares at net asset value. Class A Shares may
also be purchased at net asset value by current and former officers, directors
and employees (and members of their families) of the Dougherty Financial Group
LLC.
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales 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 the funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager, or any of its affiliates, may purchase
Class A Shares at net asset value. Moreover, purchases may be effected at net
asset value for the benefit of the clients of brokers, dealers and registered
investment 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.
Purchases of Class A Shares at net asset value may also be made by the
following: financial institutions investing for the account of their customers
when they are not eligible to purchase shares of the Institutional Class of the
Fund; and any group retirement plan (excluding defined benefit pension plans),
or such plans of the same employer, for which plan participant records are
maintained on the Delaware Investment & Retirement Services, Inc. ("DIRSI")
proprietary record keeping system that (i) has in excess of $500,000 of plan
assets invested in Class A Shares of the funds in the Delaware Investments
family and any stable value product available through Delaware Investments, or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to DIRSI
in writing that it has the requisite number of employees and has received
written confirmation back from DIRSI.
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<PAGE>
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class shares as a result of a change in distribution arrangements.
Investors in Delaware Investments Unit Investment Trusts may reinvest
monthly dividend checks and/or repayment of invested capital into Class A Shares
of any of the funds available from Delaware Investments 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
Investment 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
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 Investments family (except shares
of any fund in the Delaware Investments family 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 fund in the Delaware Investments family which carried a front-end sales
charge, CDSC or Limited CDSC) previously purchased and still held as of the date
of their Letter of Intention toward the completion of such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate investment level
of the Letter of Intention will be determined and accepted by the Transfer Agent
at the point of plan establishment. The level and any reduction in front-end
sales charge will be based on actual plan participation and the projected
investments in funds that are available from Delaware Investments 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
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<PAGE>
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 fund available from Delaware
Investments 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
funds in the Delaware Investments family (except shares of any fund in the
Delaware Investments family 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 fund in the
Delaware Investments family which carried a front-end sales charge, CDSC or
Limited CDSC). In addition, assets held by investment advisory clients of the
Manager or its affiliates in a stable value account may be combined with other
holdings of shares of funds in the Delaware Investments family.
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 funds in the Delaware
Investments family which offer such classes (except shares of any of the funds
in the Delaware Investments family 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 fund in the
Delaware Investments family which carried a front-end sales charge, CDSC or
Limited CDSC). If, for example, any such purchaser has previously purchased and
still holds Class A Shares and/or shares of any other of the classes described
in the previous sentence with a value of $40,000 and subsequently purchases
$60,000 at offering price of additional shares of Class A Shares, the charge
applicable to the $60,000 purchase would currently be 2.00%. For the purpose of
this calculation, the shares presently held shall be valued at the public
offering price that would have been in effect were the shares purchased
simultaneously with the current purchase. Investors should refer to the table of
sales charges for Class A Shares to determine the applicability of the Right of
Accumulation to their particular circumstances.
12-Month Reinvestment Privilege
Holders of Class A Shares of the Fund (and of Institutional Class shares
which were acquired through an exchange from one of the other mutual funds in
the Delaware Investments family offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of the Fund or in Class A
Shares of any of the other funds available from Delaware Investments, 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
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<PAGE>
payment of a Limited CDSC. Persons investing redemption proceeds from direct
investments in mutual funds in the Delaware Investments family offered without a
front-end sales charge will be required to pay the applicable sales charge when
purchasing Class A Shares. The reinvestment privilege does not extend to a
redemption of 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 in the Prospectus,
based on total plan assets. If a company has more than one plan investing in the
Delaware Investments family of funds, then the total amount invested in all
plans would be used in determining the applicable front-end sales charge
reduction upon each purchase, both initial and subsequent, upon notification to
the Fund 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 investment accounts available from Delaware Investments 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 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
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<PAGE>
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.
<PAGE>
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 Funds in the Delaware Investments Family
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 Investments family,
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 Investments family may be invested in shares of the
Fund provided an account has been established. Dividends from Class A Shares may
not be directed to Class B Shares or Class C Shares. Dividends from Class B
Shares may only be directed to other Class B Shares and dividends from Class C
Shares may only be directed to other Class C Shares.
Capital gains and/or dividend distributions to participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
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Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments by Electronic Fund
Transfer. This method of investment assures the timely credit to the
shareholder's account of payments such as social security, veterans' pension or
compensation benefits, federal salaries, Railroad Retirement benefits, private
payroll checks, dividends, and disability or pension fund benefits. It also
eliminates lost, stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A, Class B and Class C
Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans.
* * *
Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either 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.
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Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in the Delaware
Investments family 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
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account is less than the amount specified for
investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation in Wealth Builder at
any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Class.
Asset Planner
To invest in the funds in the Delaware Investments family using the Asset
Planner asset allocation service, you should complete a Asset Planner Account
Registration Form, which is available only from a financial adviser or
investment dealer. Effective September 1, 1997, the Asset Planner Service is
only available to financial advisers or investment dealers who have previously
used this service. The Asset Planner service offers a choice of four predesigned
asset allocation strategies (each with a different risk/reward profile) in
predetermined percentages in Delaware Investments funds. With the help of a
financial adviser, you may also design a customized asset allocation strategy.
The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Investments accounts into the Asset Planner service may be made at net asset
value under the circumstances described under Investing by Exchange in the
Prospectus. Also see Buying Class A Shares at Net Asset Value under Classes of
Shares. 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 available from
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Delaware Investments may be used in the same Strategy with consultant class
shares that are offered by certain other funds in the Delaware Investments
family.
An annual maintenance fee, currently $35 per Strategy, is due at the time
of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.
Retirement Plans for the Fund Classes
An investment in Class A Shares, Class B Shares and Class C Shares may be
suitable for tax-deferred retirement plans. Delaware Investments offers a full
spectrum of qualified and non-qualified retirement plans, including the 401(k)
deferred compensation plan, Individual Retirement Account ("IRA"), and the new
Roth IRA. Among the retirement plans the Delaware Investments offers, Class B
Shares are available for investment only by Individual Retirement Accounts,
SIMPLE IRAs, Roth IRAs, Education IRAs, Simplified Employee Pension Plans,
Salary Reduction Simplified Employee Pension Plans, 457 Deferred Compensation
Plans and 403(b)(7) 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.
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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 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 taxpayer's
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.
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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.
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")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may be maintained by employers having 25 or fewer
employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified plans
based on salary deferral contributions. Plan documents are available to enable
employers to establish a plan. An employer may also elect to make profit sharing
contributions and/or matching contributions with investments in only Class A
Shares and Class C Shares or certain other funds in the Delaware Investments
family. Purchases under the Plan may be combined for purposes of computing the
reduced front-end sales charge applicable to Class A Shares as set forth in the
table in the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase 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 in the Prospectus for the Fund Classes.
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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 Investments 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 in the
Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that plan sponsors are
limited to 100 employees and, in exchange for mandatory plan sponsor
contributions, discrimination testing is no longer required.
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
Orders for purchases of Class A Shares are effected at the offering price
next calculated by the Fund after receipt of the order by the Fund, its agent,
designee, or certain other authorized persons. See Distribution and Service
under Investment Management Agreement. Orders for purchases of Class B Shares,
Class C Shares and Institutional Class Shares are effected at the net asset
value per share next calculated by the Fund after receipt of the order by the
Fund, its agent, designee, or other authorized persons. Selling dealers are
responsible for transmitting orders promptly.
The offering price for Class A Shares consists of the net asset value per
share plus any applicable front-end sales charges. Offering price and net asset
value are computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.
The New York Stock Exchange is scheduled to be open Monday through Friday
throughout the year except for the days when the following holidays are
observed: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. When the New York Stock Exchange is closed, the Fund will generally
be closed, pricing calculations will not be made and purchase and redemption
orders will not be processed.
An example showing how to calculate the net asset value per share and, in
the case of Class A Shares, the offering price per share, is included in the
Fund's financial statements which are incorporated by reference into this Part
B.
The Fund's net asset value per share is computed by adding the value of
all securities and other assets in the portfolio of the Fund, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and
income are accrued daily. U.S. government and other debt securities are 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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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
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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.
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
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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 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.
-46-
<PAGE>
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
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.
-47-
<PAGE>
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 in the Delaware Investments family
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, 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.
-48-
<PAGE>
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.
Under the Taxpayer Relief Act of 1997 (the "1997 Act"), the Fund is
required to track its sales of portfolio securities and to report its capital
gain distributions to you according to the following categories of holding
periods:
"Pre-Act long-term capital gains": securities sold by the Fund before May
7, 1997, that were held for more than 12 months. These gains will be
taxable to individual investors at a maximum rate of 28%.
"Mid-term capital gains" or "28 percent rate gain": securities sold by
the Fund after July 28, 1997 that were held more than one year but not
more than 18 months. These gains will be taxable to individual investors
at a maximum rate of 28%.
-49-
<PAGE>
"1997 Act long-term capital gains" or "20 percent rate gain": securities
sold by the Fund between May 7, 1997 and July 28, 1997 that were held for
more than 12 months, and securities sold by the Fund after July 28, 1997
that were held for more than 18 months. These gains will be taxable to
individual investors at a maximum rate of 20% for investors in the 28% or
higher federal income tax brackets, and at a maximum rate of 10% for
investors in the 15% federal income tax bracket.
"Qualified 5-year gains": For individuals in the 15% bracket, qualified
5-year gains are net gains on securities held for more than 5 years which
are sold after December 31, 2000. For individual who are subject to tax
at higher rate brackets, qualified 5-year gains are net gains on
securities which are purchased after December 31, 2000 and are held for
more than 5 years. Taxpayers subject to tax at a higher rate brackets may
also make an election for shares held on January 1, 2001 to recognize
gain on their shares in order to qualify such shares as qualified 5-year
property. These gains will be taxable to individual investors at a
maximum rate of 18% for investors in the 28% or higher federal income tax
brackets, and at a maximum rate of 8% for investors in the 15% federal
income tax bracket..
-50-
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Fund, subject to the supervision
and direction of Limited-Term Funds, Inc.'s Board of Directors.
The Manager and its predecessors have been managing the funds in the
Delaware Investments family since 1938. On December 31, 1997, the Manager and
its affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $39 billion in assets in
the various institutional or separately managed (approximately $24,040,760,000)
and investment company (approximately $15,705,742,000) 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, 1997, the
Fund's total net assets were $403,679,998. Investment management fees paid by
the Fund for the fiscal years ended December 31, 1995, 1996 and 1997 amounted to
$3,875,637, $2,987,753 and $2,233,564, 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.
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
-51-
<PAGE>
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.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order.
-52-
<PAGE>
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 Investments family. On
February 2, 1998, 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 2, 1998, 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 3,139,921 7.76%
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 94,562 6.75%
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 94,912 27.98%
MLPF&S for the sole benefit of its
Customers
ATTN: Fund Administration
4800 Deer Lake Drive East, 3rd Fl.
Jacksonville FL 32246-6484 47,149 13.90%
NFSC FEBO # BRO-349526 Daniel Murray 27 Vroom Ave.
Spring Lake NJ 07762-1623 22,831 6.73%
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
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 1,895,941 70.05%
Fleet Bank National Association
FBO ITO Pension Plan
2 Montgomery Ct. 2nd Floor
Jersey City NJ 07302-3802 200,089 7.39%
</TABLE>
DMH Corp., Delvoy, Inc., 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.
Certain officers and directors of Limited-Term Funds, Inc. hold
identical positions in each of the other funds in the Delaware Investments
family. 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.
-54-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
*Wayne A. Stork (60)
Chairman and Director and/or Trustee of Adviser Funds, Inc., each of the other 33 investment
companies in Delaware Investments, Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Chairman, President, Chief Executive Officer and Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, 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. and Delaware
International Holdings Ltd.
Chairman of Delaware Distributors, L.P.
Chief Executive Officer of Delvoy, Inc.
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.
* Jeffrey J. Nick (44)
President, Chief Executive Officer and Director and/or Trustee of Adviser Funds, Inc. and each of the
other 33 investment companies in Delaware Investments.
President, Chief Executive Officer and Director of Lincoln National Investment Companies, Inc. and
Delaware Management Holdings, Inc
President of Lincoln Funds Corporation.
From 1992 to 1996, Mr. Nick was Managing Director of Lincoln National UK plc and from 1989 to 1992,
he was Senior Vice President responsible for corporate planning and development for Lincoln
National Corporation.
Richard G. Unruh, Jr. (58)
Executive Vice President of Adviser Funds, Inc., each of the other 33 investment companies in
Delaware Investments, Delaware Management Holdings, Inc. and Delaware Capital Management,
Inc.
Executive Vice President and Director of Delaware Management Company, 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.
</TABLE>
- -----------
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the Investment Company Act of 1940.
-55-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Paul E. Suckow (50)
Executive Vice President/Chief Investment Officer, Fixed Income of Adviser Funds, Inc., each
of the other 33 investment companies in Delaware Investments, Delaware Management Company, Inc.
and Delaware Management Holdings, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Executive Vice President of Delaware Capital Management, Inc.
Director of Founders CBO Corporation and HYPPCO Finance Company Ltd.
Before returning to Delaware Investments 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 Delaware Investments.
Walter P. Babich (70)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33 investment companies in
Delaware Investments.
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 (59)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33 investment companies in
Delaware Investments.
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 (57)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33 investment companies in
Delaware Investments.
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 (77)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33 investment companies in
Delaware Investments.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.
</TABLE>
-56-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Thomas F. Madison (61)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33 investment companies in
Delaware Investments.
President and Chief Executive Officer, MLM Partners, Inc.
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402.
Mr. Madison has also been Chairman of the Board of Communications Holdings, Inc. since 1996.
From February to September 1994, Mr. Madison served as Vice Chairman--Office of the CEO of
The Minnesota Mutual Life Insurance Company and from 1988 to 1993, he was President of U.S.
WEST Communications--Markets.
Charles E. Peck (72)
Director and/or Trustee of Adviser Funds, Inc. and each of the other 33 investment companies in
Delaware Investments.
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 (58)
Executive Vice President, Chief Operating Officer, Chief Financial Officer of Adviser Funds, Inc., each
of the other 33 investment companies in Delaware Investments, Delaware Management Holdings, Inc,
Founders CBO Corporation, Delaware Capital Management, Inc. and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director of
Delaware Management Company, Inc., DMH Corp., Delaware Distributors, Inc., and Founders
Holdings, Inc.
President, Chief Executive Officer, Chief Financial Officer and Director of Delaware Service Company,
Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.
Chairman, Chief Executive Officer and Director of Delaware Investment & Retirement Services, Inc.
Chairman and Director of Delaware Management Trust Company.
Director of Delaware International Advisers Ltd. and Delvoy, Inc.
Vice President of Lincoln Funds Corporation
Before joining Delaware Investments 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.
</TABLE>
-57-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
George M. Chamberlain, Jr. (51)
Senior Vice President, Secretary and General Counsel of Adviser Funds, Inc., each of the other 33
investment companies in Delaware Investments, Delaware Distributors, L.P. and Delaware
Management Holdings, Inc.
Senior Vice President, Secretary, General Counsel 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.
Executive Vice President, Secretary, General Counsel and Director of Delaware Management Trust
Company.
Senior Vice President and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd. and Delvoy, Inc.
Secretary of Lincoln Funds Corporation
Attorney.
During the past five years, Mr. Chamberlain has served in various capacities at different times within
the Delaware organization.
Joseph H. Hastings (48)
Senior Vice President/Corporate Controller of Adviser Funds, Inc., each of the other 33 investment
companies in Delaware Investments and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMC Corp., Delaware Management Company, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc. and Delaware International Holdings Ltd.
Senior Vice President/Controller and Treasurer of Delvoy, Inc.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware Management Trust Company.
Senior Vice President/Assistant Treasurer of Founders CBO Corporation.
Treasurer of Lincoln Funds Corporation
1818 Market Street, Philadelphia, PA 19103.
Before joining Delaware Investments 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.
</TABLE>
-58-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Michael P. Bishof (35)
Senior Vice President/Treasurer of Adviser Funds, Inc., each of the other 33 investment companies in
Delaware Investments, Delaware Distributors, Inc. and Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management Company, Inc. and Delaware
Service Company, Inc.
Senior Vice President and Treasurer/Manager of Investment Accounting of Delaware Distributors, L.P.
Senior Vice President and Manager of Investment Accounting of Delaware International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining Delaware Investments in 1995, Mr. Bishof was a Vice President for Bankers Trust, New
York, NY from 1994 to 1995, a Vice President for CS First Boston Investment Management, New
York, NY from 1993 to 1994 and an Assistant Vice President for Equitable Capital Management
Corporation, New York, NY from 1987 to 1993.
Roger A. Early (44)
Vice President/Senior Portfolio Manager of Limited-Term Funds, Inc., of nine other income investment
companies in Delaware Investments and of Delaware Management Company, Inc.
Before joining Delaware Investments in 1994, Mr. Early was Senior Vice President/Portfolio Manager
for Federated Investors, Pittsburgh, PA from 1984 to 1994.
</TABLE>
-59-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Limited-Term Funds, Inc. and the total compensation received from all funds in
the Delaware Investments family for the fiscal year ended December 31, 1997 and
an estimate of annual benefits to be received upon retirement under the Delaware
Investments Retirement Plan for Directors/Trustees as of December 31, 1997.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Total
Aggregate Accrued as Estimated Compensation
Compensation Part of Annual from all 34
from Limited-Term Benefits Delaware
Limited-Term Funds, Inc. Upon Investments
Name Funds, Inc. Expenses Retirement* Funds
- ---- ----------- -------- ----------- -----
<S> <C> <C> <C> <C>
W. Thacher Longstreth $2,095 None $38,500 $59,827
Ann R. Leven $2,278 None $38,500 $65,160
Walter P. Babich $2,243 None $38,500 $64,160
Anthony D. Knerr $2,243 None $38,500 $64,160
Charles E. Peck $2,000 None $38,500 $56,682
Thomas F. Madison** $1,317 None $38,500 $43,537
</TABLE>
* Under the terms of the Delaware Investments 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 Investments family 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, 1997, he or she would be
entitled to annual payments totaling $38,500, in the aggregate, from all of
the funds in the Delaware Investments family, based on the number of funds
in the Delaware Investments family as of that date.
** Thomas F. Madison joined Limited-Term Funds, Inc.'s Board of Directors on
April 30, 1997.
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EXCHANGE PRIVILEGE
The exchange privileges available for shareholders of the Classes and for
shareholders of classes of other funds in the Delaware Investments family 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
Investments family. 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 Investments family 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 Investments family. 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 Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
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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) of shares
of the funds in the Delaware Investments family 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 funds in the Delaware Investments
family: (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 funds in the
Delaware Investments family are available for timed exchanges. Assets redeemed
or exchanged out of Timing Accounts in funds in the Delaware Investments family
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 funds in
the Delaware Investments family:
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.
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Trend Fund seeks long-term growth by investing in common stocks issued by
emerging growth companies exhibiting strong capital appreciation potential.
Small Cap Value Fund seeks capital appreciation by investing primarily in
common stocks whose market values appear low relative to their underlying value
or future potential.
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. Social Awareness Fund seeks to achieve long-term capital
appreciation. It seeks to achieve this objective by investing primarily in
equity securities of medium- to large-sized companies expected to grow over time
that meet the Fund's "Social Criteria" strategy.
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. High-Yield Opportunities Fund seeks to provide
investors with total return and, as a secondary objective, high current income.
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.
REIT Fund seeks to achieve maximum long-term total return with capital
appreciation as a secondary objective. It seeks to achieve its objectives by
investing in securities of companies primarily engaged in the real estate
industry.
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
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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 New Jersey Fund seeks a high level of current interest income
exempt from federal income tax and New Jersey state and local taxes, consistent
with preservation of capital. Tax-Free Ohio Fund seeks a high level of current
interest income exempt from federal income tax and Ohio state and local taxes,
consistent with preservation of capital. Tax-Free Pennsylvania Fund seeks a high
level of current interest income exempt from federal income tax and Pennsylvania
state and local taxes, consistent with the preservation of capital.
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.
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. Overseas Equity
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.
Delaware Group Premium Fund, Inc. offers 15 funds available exclusively
as funding vehicles for certain insurance company separate accounts. Decatur
Total Return Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. Delchester Series seeks as high a current
income as possible by investing in rated and unrated corporate bonds, U.S.
government securities and commercial paper. Capital Reserves Series seeks a high
stable level of current income while minimizing fluctuations in principal by
investing in a diversified portfolio of short- and intermediate-term securities.
Cash Reserve Series seeks the highest level of income consistent with
preservation of capital and liquidity through investments in short-term money
market instruments. DelCap Series seeks long-term capital appreciation by
investing its assets in a diversified portfolio of securities exhibiting the
potential for significant growth. Delaware 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.
Trend Series seeks long-term capital appreciation by investing primarily in
small-cap common
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<PAGE>
stocks and convertible securities of emerging and other growth-oriented
companies. These securities will have been judged to be responsive to changes in
the market place and to have fundamental characteristics to support growth.
Income is not an objective. Global Bond Series seeks to achieve current income
consistent with the preservation of principal by investing primarily in global
fixed-income securities that may also provide the potential for capital
appreciation. Strategic Income Series seeks high current income and total return
by using a multi-sector investment approach, investing primarily in three
sectors of the fixed-income securities markets: high-yield, higher risk
securities; investment grade fixed-income securities; and foreign government and
other foreign fixed-income securities. Devon Series seeks current income and
capital appreciation by investing primarily in income-producing common stocks,
with a focus on common stocks that the investment manager believes have the
potential for above-average dividend increases over time. Emerging Markets
Series seeks to achieve long-term capital appreciation by investing primarily in
equity securities of issuers located or operating in emerging countries.
Convertible Securities Series seeks a high level of total return on its assets
through a combination of capital appreciation and current income by investing
primarily in convertible securities. Quantum Series seeks to achieve long-term
capital appreciation by investing primarily in equity securities of medium to
large-sized companies expected to grow over time that meet the Series' "Social
Criteria" strategy.
Delaware-Voyageur US Government Securities Fund seeks to provide a high
level of current income consistent with the prudent investment risk by investing
in U.S. Treasury bills, notes, bonds, and other obligations issued or
unconditionally guaranteed by the full faith and credit of the U.S. Treasury,
and repurchase agreements fully secured by such obligations.
Delaware-Voyageur Tax-Free Arizona Insured Fund seeks to provide a high
level of current income exempt from federal income tax and the Arizona personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Minnesota Insured Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax, consistent with
the preservation of capital.
Delaware-Voyageur Tax-Free Minnesota Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax and the Minnesota
personal income tax, consistent with preservation of capital. The Fund seeks to
reduce market risk by maintaining an average weighted maturity from five to ten
years.
Delaware-Voyageur Tax-Free California Insured Fund seeks to provide a
high level of current income exempt from federal income tax and the California
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Florida Insured Fund seeks to provide a high level of
current income exempt from federal income tax, consistent with the preservation
of capital. The Fund will seek to select investments that will enable its shares
to be exempt from the Florida intangible personal property tax.
Delaware-Voyageur Tax-Free Florida Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. The Fund will seek to select investments that will enable its shares to
be exempt from the Florida intangible personal property tax. Delaware-Voyageur
Tax-Free Kansas Fund seeks to provide a high level of current income exempt from
federal income tax, the Kansas personal income tax and the Kansas Intangible
personal property tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Missouri Insured Fund seeks to provide a high level
of current income exempt from federal income tax and the Missouri personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free New Mexico Fund seeks to provide a high level of current income exempt
from federal income tax and the New Mexico personal income tax, consistent with
the preservation of capital. Delaware-Voyageur Tax-Free Oregon Insured Fund
seeks to provide a high level of current income exempt from federal income tax
and the Oregon personal income tax, consistent with the preservation of capital.
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Delaware-Voyageur Tax-Free Utah Fund seeks to provide a high level of current
income exempt from federal income tax, consistent with the preservation of
capital. Delaware-Voyageur Tax-Free Washington Insured Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital.
Delaware-Voyageur Tax-Free Florida Intermediate Fund seeks to provide a
high level of current income exempt from federal income tax, consistent with the
preservation of capital. The Fund will seek to select investments that will
enable its shares to be exempt from the Florida intangible personal property
tax. The Fund seeks to reduce market risk by maintaining an average weighted
maturity from five to ten years.
Delaware-Voyageur Tax-Free Arizona Fund seeks to provide a high level of
current income exempt from federal income tax and the Arizona personal income
tax, consistent with the preservation of capital. Delaware-Voyageur Tax-Free
California Fund seeks to provide a high level of current income exempt from
federal income tax and the California personal income tax, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Iowa Fund seeks to provide a
high level of current income exempt from federal income tax and the Iowa
personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Idaho Fund seeks to provide a high level of current
income exempt from federal income tax and the Idaho personal income tax,
consistent with the preservation of capital. Delaware-Voyageur Minnesota High
Yield Municipal Bond Fund seeks to provide a high level of current income exempt
from federal income tax and the Minnesota personal income tax primarily through
investment in medium and lower grade municipal obligations. National High Yield
Municipal Fund seeks to provide a high level of income exempt from federal
income tax, primarily through investment in medium and lower grade municipal
obligations. Delaware-Voyageur Tax-Free New York Fund seeks to provide a high
level of current income exempt from federal income tax and the personal income
tax of the state of New York and the city of New York, consistent with the
preservation of capital. Delaware-Voyageur Tax-Free Wisconsin Fund seeks to
provide a high level of current income exempt from federal income tax and the
Wisconsin personal income tax, consistent with the preservation of capital.
Delaware-Voyageur Tax-Free Colorado Fund seeks to provide a high level of
current income exempt from federal income tax and the Colorado personal income
tax, consistent with the preservation of capital.
Aggressive Growth Fund seeks long-term capital appreciation, which the
Fund attempts to achieve by investing primarily in equity securities believed to
have the potential for high earnings growth. Although the Fund, in seeking its
objective, may receive current income from dividends and interest, income is
only an incidental consideration in the selection of the Fund's investments.
Growth Stock Fund has an objective of long-term capital appreciation. The Fund
seeks to achieve its objective from equity securities diversified among
individual companies and industries. Tax-Efficient Equity Fund seeks to obtain
for taxable investors a high total return on an after-tax basis. The Fund will
attempt to achieve this objective by seeking to provide a high long-term
after-tax total return through managing its portfolio in a manner that will
defer the realization of accrued capital gains and minimize dividend income.
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Delaware-Voyageur Tax-Free Minnesota Fund seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. Delaware-Voyageur
Tax-Free North Dakota Fund seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.
For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.
Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).
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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 Investments family. The Manager, through a separate division, also
manages private investment accounts. While investment decisions of the Fund are
made independently from those of the other funds 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 15 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
Investments mutual funds available outside the annuity. See Delaware Group
Premium Fund, Inc., above.
Access persons and advisory persons of the funds in the Delaware
Investments family, as those terms are defined in SEC Rule 17j-1 under the 1940
Act, who provide services to the Manager, Delaware International Advisers Ltd.
or their affiliates, are permitted to engage in personal securities transactions
subject to the exceptions set forth in Rule 17j-1 and the following general
restrictions and procedures: (1) certain blackout periods apply to personal
securities transactions of those persons; (2) transactions must receive advance
clearance and must be completed on the same day as the clearance 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 Investments family. 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:
Limited CDSC Payments
Fiscal
Year Limited-Term
Ended Government Fund A Class
----- -----------------------
12/31/97 none
12/31/96 $3,838
12/31/95 $9,568
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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:
CDSC Payments
Fiscal
Year Limited-Term Limited-Term
Ended Government Fund B Class Government Fund C Class
----- ----------------------- -----------------------
12/31/97 $35,439 $2,431
12/31/96 32,704 1,016
12/31/95 31,134 none
* Date of initial public offering 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 Investments family. The Transfer Agent is paid a
fee by the Fund for providing these services consisting of an annual per account
charge of $11.00 plus transaction charges for particular services according to a
schedule. Compensation is fixed each year and approved by the Board of
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 Investments family for
which it provides such accounting services. Such fee is equal to 0.25%
multiplied by the total amount of assets in the complex for which the Transfer
Agent furnishes accounting services, where such aggregate complex assets are $10
billion or less, and 0.20% of assets if such aggregate complex assets exceed $10
billion. The fees are charged to each fund, including the Fund, on an aggregate
pro-rata basis. The asset-based fee payable to the Transfer Agent is subject to
a minimum fee calculated by determining the total number of investment
portfolios and associated classes.
The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of 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.
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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 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.
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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.
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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, Statements of Changes in Net Assets, Financial
Highlights and Notes to Financial Statements, as well as the report of Ernst &
Young LLP, independent auditors, for the fiscal year ended December 31, 1997 are
included in the Fund's Annual Report to shareholders. The financial statements
and financial highlights, the notes relating thereto and the report of Ernst &
Young LLP listed above are incorporated by reference from the Annual Report into
this Part B.
-72-
<PAGE>
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
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
Accountant's Report
* The financial statements and Accountant's Report listed
above for Limited-Term Government Fund are incorporated
by reference into Part B from the Registrant's Annual
Report for the fiscal year ended December 31, 1997.
(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.
<PAGE>
(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 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>
(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) Executed 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 incorporated into this
filing by reference to Post-Effective
Amendment No. 44 filed February 28, 1997.
(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) incorporated into this filing by
reference to Post-Effective Amendment No.
44 filed February 28, 1997.
(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) incorporated into this filing by
reference to Post-Effective Amendment No.
44 filed February 28, 1997.
(c) Executed Delaware Group of Funds Fund
Accounting Agreement between Delaware
Service Company, Inc. and the Registrant
(August 19, 1996) attached as Exhibit.
(i) Executed Amendment No. 1 to
(September 30, 1996) to Schedule
A to Delaware Group of Funds Fund
Accounting Agreement attached as
Exhibit.
(ii) Executed Amendment No. 2
(November 29, 1996) to Schedule A
to Delaware Group of Funds Fund
Accounting Agreement attached as
Exhibit.
(iii) Executed Amendment No. 3
(December 27, 1996) to Schedule A
to Delaware Group of Funds Fund
Accounting Agreement attached as
Exhibit.
<PAGE>
(iv) Amendment No. 4 (February 24,
1997) to Schedule A to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(v) Amendment No. 4A (April 14, 1997)
to Schedule A to Delaware Group
of Funds Fund Accounting
Agreement attached as Exhibit.
(vi) Amendment No. 5 (May 1, 1997) to
Schedule A to Delaware Group of
Funds Fund Accounting Agreement
attached as Exhibit.
(vii) Amendment No. 6 (July 21, 1997)
to Schedule A to Delaware Group
of Funds Fund Accounting
Agreement attached as Exhibit.
(viii) Executed Amendment No. 7 (October
14, 1997) to Delaware Group of
Funds Fund Accounting Agreement
attached as Exhibit.
(ix) Executed Amendment No. 8
(December 18, 1997) to Delaware
Group of Funds Fund Accounting
Agreement attached as Exhibit.
(10) Opinion of Counsel. Inapplicable.
(11) Consent of Auditors. Attached as Exhibit.
(12) Inapplicable.
*(13) Investment Letter of Initial Shareholder.
Incorporated into this filing by reference to
Pre-Effective Amendment No. 1 filed February 20,
1985.
(14) Inapplicable.
* Relates to U.S. Government Money Series.
<PAGE>
**(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, Post-Effective Amendment No. 43
filed February 29, 1996 and
Post-Effective Amendment No. 44 filed
February 28, 1997.
(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. Attached as
Exhibit.
** 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>
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 18,047 Accounts as of January 31, 1998
Limited-Term Government Fund B Class
Common Stock Par Value
$.001 Per Share 680 Accounts as of January 31, 1998
Limited-Term Government Fund C Class
Common Stock Par Value
$.001 Per Share 124 Accounts as of January 31, 1998
Limited-Term Government Fund Institutional Class
Common Stock Par Value
$.001 Per Share 41 Accounts as of January 31, 1998
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 1003 Accounts as of January 31, 1998
U.S. Government Money Fund Consultant Class
Common Stock Par Value
$.001 Per Share 88 Accounts as of January 31, 1998
</TABLE>
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.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser.
Delaware Management Company, Inc. ("DMC") serves as investment
manager to the Registrant and as investment manager or sub-adviser to certain
of the other funds in the Delaware Investments family (Delaware Group Equity
Funds I, Inc., Delaware Group Equity Funds II, Inc., Delaware Group Equity
Funds III, Inc., Delaware Group Equity Funds IV, Inc., Delaware Group Equity
Funds V, Inc., Delaware Group Government Fund, Inc., Delaware Group Income
Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund,
Inc., Delaware Group State Tax-Free Income Trust, Delaware Group Tax-Free
Money Fund, Inc., Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser
Funds, Inc., Delaware Group Dividend and Income Fund, Inc., Delaware Group
Global Dividend and Income Fund, Inc., Delaware Group Foundation Funds,
Voyageur Funds, Inc., Voyageur Tax-Free Funds, Inc., Voyageur Intermediate
Tax-Free Funds, Inc., Voyageur Insured Funds, Inc., Voyageur Investment Trust,
Voyageur Investment Trust II, Voyageur Mutual Funds, Inc., Voyageur Mutual
Funds II, Inc., Voyageur Mutual Funds III, Inc., Voyageur Arizona Municipal
Income Fund, Inc., Voyageur Colorado Insured Municipal Income Fund, Inc.,
Voyageur Florida Insured Municipal Income Fund, Voyageur Minnesota Municipal
Fund, Inc., Voyageur Minnesota Municipal Fund II, Inc. and Voyageur Minnesota
Municipal Fund III, Inc.) and provides investment advisory services to
institutional accounts, primarily retirement plans and endowment funds. In
addition, certain directors of the Manager also serve as directors/trustees of
the other funds in the Delaware Investments family, and certain officers are
also officers of these other funds. A company owned by the Manager's parent
company acts as principal underwriter to the mutual funds in Delaware
Investments (see Item 29 below) and another such company acts as the
shareholder services, dividend disbursing, accounting servicing and transfer
agent for all of the mutual funds in Delaware Investments.
The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
Wayne A. Stork Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of
Delaware Management Company, Inc.; Chairman of the
Board, President, Chief Executive Officer and
Director of DMH Corp., Delaware Distributors, Inc.
and Founders Holdings, Inc.; Chairman, Chief
Executive Officer and Director of Delaware
International Holdings Ltd. and Delaware
International Advisers Ltd.; Chairman of the Board
and Director of the Registrant, each of the other
funds in the Delaware Investments family, Delaware
Management Holdings, Inc., and Delaware Capital
Management, Inc.; Chairman of Delaware
Distributors, L.P.; President and Chief Executive
Officer of Delvoy, Inc.; and Director of Delaware
Service Company, Inc. and Delaware Investment &
Retirement Services, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
Richard G. Unruh, Jr. Executive Vice President and Director of Delaware
Management Company, Inc.; Executive Vice President
of the Registrant, each of the other funds in the
Delaware Investments family, 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, each of the other funds in the
Delaware Investments family and Delaware Management
Holdings, Inc.; Executive Vice President and
Director of Founders Holdings, Inc.; Executive Vice
President of Delaware Capital Management, Inc.; and
Director of Founders CBO Corporation
Director, HYPPCO Finance Company Ltd.
David K. Downes Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
Management Company, Inc., DMH Corp, Delaware
Distributors, Inc., Founders Holdings, Inc. and
Delvoy, Inc.; Executive Vice President, Chief
Operating Officer and Chief Financial Officer of
the Registrant and each of the other funds in the
Delaware Investments family, Delaware Management
Holdings, Inc., Founders CBO Corporation, Delaware
Capital Management, Inc. and Delaware Distributors,
L.P.; President, Chief Executive Officer, Chief
Financial Officer and Director of Delaware Service
Company, Inc.; President, Chief Operating Officer,
Chief Financial Officer and Director of Delaware
International Holdings Ltd.; Chairman, Chief
Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.; Chairman
and Director of Delaware Management Trust Company;
Director of Delaware International Advisers Ltd.;
and Vice President of Lincoln Funds Corporation
Chief Executive Officer and Director of Forewarn,
Inc. since 1993, 8 Clayton Place, Newtown Square,
PA
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
George M. Senior Vice President, General Counsel, Secretary
Chamberlain, Jr. and Director of Delaware Management Company, Inc.,
DMH Corp., Delaware Distributors, Inc., Delaware
Service Company, Inc., Founders Holdings, Inc.,
Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Delvoy,
Inc.; Senior Vice President, Secretary and General
Counsel of the Registrant, each of the other funds
in the Delaware Investments family, Delaware
Distributors, L.P. and Delaware Management
Holdings, Inc.; Senior Vice President and Director
of Delaware International Holdings Ltd.; Executive
Vice President, Secretary, General Counsel and
Director of Delaware Management Trust Company;
Director of Delaware International Advisers Ltd.;
Secretary of Lincoln Funds Corporation
Richard J. Flannery Senior Vice President/Corporate and International
Affairs of the Registrant, each of the other funds
in the Delaware Investments family, Delaware
Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors,
Inc., Delaware Distributors, L.P., Delaware
Management Trust Company, Delaware Capital
Management, Inc., Delaware Service Company, Inc.
and Delaware Investment & Retirement Services,
Inc.; Executive Vice President/Corporate &
International Affairs and Director of Delaware
International Holdings Ltd.; Senior Vice President/
Corporate and International Affairs and Director of
Founders Holdings, Inc. and Delvoy, Inc.; Senior
Vice President of Founders CBO Corporation; and
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
Limited Partner of Stonewall Links, L.P. since
1991, Bulltown Rd., Elverton, PA; Director and
Member of Executive Committee of Stonewall Links,
Inc. since 1991, Bulltown Rd., Elverton, PA
Michael P. Bishof Senior Vice President and Treasurer of the
Registrant, each of the other funds in the Delaware
Investments family and Founders Holdings, Inc.;
Senior Vice President/Investment Accounting of
Delaware Management Company, Inc. and Delaware
Service Company, Inc.; Senior Vice President and
Treasurer/Manager, Investment Accounting of
Delaware Distributors, L.P.; Assistant Treasurer of
Founders CBO Corporation; and Senior Vice President
and Manager of Investment Accounting of Delaware
International Holdings Ltd.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
Joseph H. Hastings Senior Vice President/Corporate Controller and
Treasurer of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital
Management, Inc., Delaware Distributors, L.P.,
Delaware Service Company, Inc., Delaware
International Holdings Ltd. and Delvoy, Inc.;
Senior Vice President/Corporate Controller of the
Registrant, each of the other funds in the Delaware
Investments family and Founders Holdings, 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.; Senior Vice
President/Assistant Treasurer of Founders CBO
Corporation; and Treasurer of Lincoln Funds
Corporation.
Michael T. Taggart Senior Vice President/Facilities Management and
Administrative Services of Delaware Management
Company, Inc.
Douglas L. Anderson Senior Vice President/Operations of Delaware
Management Company, Inc., Delaware Investment and
Retirement Services, Inc. and Delaware Service
Company, Inc.; Senior Vice President/Operations
and Director of Delaware Management Trust Company
James L. Shields Senior Vice President/Chief Information Officer of
Delaware Management Company, Inc., Delaware Service
Company, Inc. and Delaware Investment & Retirement
Services, Inc.
Eric E. Miller Vice President, Assistant Secretary and Deputy
General Counsel of the Registrant and each of the
other funds in the Delaware Investments family,
Delaware Management Company, Inc., Delaware
Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors Inc.,
Delaware Service Company, Inc., Delaware Management
Trust Company, Founders Holdings, Inc., Delaware
Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.; and Vice President and
Assistant Secretary of Delvoy, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
Richelle S. Maestro Vice President and Assistant Secretary of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Investments family,
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., Founders Holdings, Inc. and Delvoy,
Inc.; Vice President and Secretary of Delaware
International Holdings Ltd.; and Secretary of
Founders CBO Corporation;
Partner of Tri-R Associates since 1989, 10001
Sandmeyer Lane, Philadelphia, PA
Richard Salus(1) Vice President/Assistant Controller of Delaware
Management Company, Inc. and Delaware Management
Trust Company
Bruce A. Ulmer Vice President/Director of LNC Internal Audit of
Delaware Management Company, Inc., the Registrant,
each of the other funds in the Delaware Investments
family, Delaware Management Holdings, Inc., DMH
Corp., Delaware Management Trust Company and
Delaware Investment & Retirement Services, Inc.;
Vice President/Director of Internal Audit of
Delvoy, Inc.
Christopher Adams Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Susan L. Hanson Vice President/Strategic Planning of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Dennis J. Mara(2) Vice President/Acquisitions of Delaware Management
Company, Inc.
Scott Metzger Vice President/Business Development of Delaware
Management Company, Inc. and Delaware Service
Company, Inc.
Lisa O. Brinkley Vice President/Compliance of Delaware Management
Company, Inc., the Registrant, each of the other
funds in the Delaware Investments family, 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.; Vice President of
Delvoy, Inc.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
Rosemary E. Milner Vice President/Legal Registrations of Delaware
Management Company, Inc., the Registrant, each of
the other funds in the Delaware Investments family,
Delaware Distributors, L.P. and Delaware
Distributors, Inc.
Mary Ellen Carrozza Vice President/Client Services of Delaware
Management Company, Inc. and Delaware Pooled Trust,
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 Investments
family; Vice President of Founders Holdings, Inc.;
and Treasurer, Assistant Secretary and Director of
Founders CBO Corporation
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 Investments
family; Vice President of Founders Holdings, Inc.;
and President 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 Investments family and Delaware
Capital Management, Inc.
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 Investments family 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 Investments family
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each
of the tax-exempt and fixed income funds in the
Delaware Investments family
George H. Burwell Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., and each of the equity
funds in the Delaware Investments family
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------
John B. Fields Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., and each of the equity
funds in the Delaware Investments family and
Delaware Capital Management, Inc.
Gerald S. Frey(4) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., and each of the equity
funds in the Delaware Investments family
Christopher Beck(5) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., and each of the equity
funds in the Delaware Investments family
Elizabeth H. Howell(6) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and the Delaware-Voyageur
Tax-Free Minnesota Intermediate, Delaware-Voyageur
Minnesota Insured, Delaware-Voyageur Tax-Free
Minnesota, Delaware-Voyageur Tax-Free Idaho,
Delaware-Voyageur Tax-Free Kansas,
Delaware-Voyageur Tax-Free Missouri,
Delaware-Voyageur Tax-Free Oregon,
Delaware-Voyageur Tax-Free Washington,
Delaware-Voyageur Tax-Free Iowa and
Delaware-Voyageur Tax-Free Wisconsin Funds.
Andrew M. McCullagh(7) Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc. and the Delaware-Voyageur
Tax-Free Arizona Insured, Delaware-Voyageur
Tax-Free Arizona, Delaware-Voyageur Tax-Free
California Insured, Delaware-Voyageur Tax-Free
Colorado, Delaware- Voyageur Tax-Free New Mexico,
Delaware-Voyageur Tax-Free North Dakota and
Delaware-Voyageur Tax-Free Utah Funds.
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware
Management Company, Inc., and each of the equity
funds and the closed-end funds in the Delaware
Investments family
Paul Grillo Vice President/Portfolio Manager of Delaware
Management Company, Inc., the Registrant and each
of the tax-exempt and fixed income funds in the
Delaware Investments family
Marshall T. Bassett Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity
funds in the Delaware Investments family.
John Heffern Vice President/Portfolio Manager of Delaware
Management Company, Inc. and each of the equity
funds in the Delaware Investments family.
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
1 SENIOR MANAGER, Ernst & Young LLP prior to December 1996.
2 CORPORATE CONTROLLER, IIS prior to July 1997 and DIRECTOR, FINANCIAL
PLANNING, Decision One prior to March 1996.
3 INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
4 SENIOR DIRECTOR, Morgan Grenfell Capital Management prior to June 1996.
5 SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
6 SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
7 SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset
Management LLC prior to May 1997.
Item 29. Principal Underwriters.
(a) Delaware Distributors, L.P. serves as principal underwriter for
all the mutual funds in the Delaware Investments family.
(b) Information with respect to each director, officer 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
Company, Inc. Limited Partner Investment Manager
Delaware Capital
Management, Inc. Limited Partner None
Wayne A. Stork Chairman Chairman
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice
Chief Operating Officer President/Chief
and Chief Financial Officer Operating Officer/
Chief Financial Officer
George M. Chamberlain, Jr. Senior Vice President/Secretary/ Senior Vice President/
General Counsel Secretary/General Counsel
Richard J. Flannery Senior Vice President/Corporate Senior Vice President/
and International Affairs Corporate and
International Affairs
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/Financial None
Institutions
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
Holly W. Reimel Vice President/Manager, National
Accounts None
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
William F. Hostler Senior Vice President/ None
Marketing Services
J. Chris Meyer Senior Vice President/ None
Director Product Management
Stephen H. Slack Senior Vice President/Wholesaler None
William M. Kimbrough Senior Vice President/Wholesaler None
Daniel J. Brooks Senior Vice President/Wholesaler None
Bradley L. Kolstoe Senior Vice President/Western None
Division Sales Manager
Henry W. Orvin Senior Vice President/Eastern None
Division Sales Manager
Michael P. Bishof Senior Vice President and Treasurer/ Senior Vice
Manager, Investment Accounting President/Treasurer
Eric E. Miller Vice President/Assistant Secretary/ Vice President/
Deputy General Counsel Assistant Secretary/
Deputy General Counsel
Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Lisa O. Brinkley Vice President/Compliance Vice President/
Compliance
Rosemary E. Milner Vice President/Legal Registrations Vice President/Legal
Registrations
Daniel H. Carlson Vice President/Strategic Marketing None
Diane M. Anderson Vice President/Plan Record Keeping None
and Administration
Anthony J. Scalia Vice President/Defined Contribution None
Sales, SW Territory
Courtney S. West Vice President/Defined Contribution None
Sales, NE Territory
Denise F. Guerriere Vice President/Client Services None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Participant Services None
Jerome J. Alrutz Vice President/Retail Sales None
Joanne A. Mettenheimer Vice President/New Business None
Development
Scott Metzger Vice President/Business Development Vice President/Business
Development
Stephen C. Hall Vice President/Institutional Sales None
Gregory J. McMillan Vice President/National Accounts None
Christopher H. Price Vice President/Manager, None
Insurance
Stephen J. DeAngelis Vice President/Product None
Development
Andrew W. Whitaker Vice President/Financial Institutions None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Jesse Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales
Susan T. Friestedt Vice President/Client Service None
Dinah J. Huntoon Vice President/Product None
Manager Equity
Soohee Lee Vice President/Fixed Income None
Product Management
Michael J. Woods Vice President/UIT Product None
Management
Ellen M. Krott Vice President/Marketing None
Dale L. Kurtz Vice President/Marketing Support None
David P. Anderson Vice President/Wholesaler None
Lee D. Beck Vice President/Wholesaler None
Gabriella Bercze Vice President/Wholesaler 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
Thomas C. Gallagher Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ ---------------- ---------------
<S> <C> <C>
Jeffrey A. Keinert Vice President/Wholesaler None
Thomas P. Kennett Vice President/Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Patrick L. Murphy Vice President/Wholesaler None
Stephen C. Nell Vice President/Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Mary Ellen Pernice-Fadden Vice President/Wholesaler None
Mark A. Pletts Vice President/Wholesaler None
Philip G. Rickards Vice President/Wholesaler None
Laura E. Roman Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Julia A. Stanton Vice President/Wholesaler None
Larry D. Stone Vice President/Wholesaler None
Edward J. Wagner Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
John A. Wells Vice President/Marketing Technology None
Scott Whitehouse Vice President/Wholesaler None
</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders, upon
request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the question
of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding
shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Philadelphia and Commonwealth of Pennsylvania on
this 26th day of February, 1998.
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
By /s/Wayne A. Stork
-------------------------
Wayne A. Stork
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/Wayne A. Stork Chariman of the Board and Director February 26, 1998
- ------------------------------------------
Wayne A. Stork
/s/David K. Downes Executive Vice President/Chief Operating
- ----------------------------------------- Officer/Chief Financial Officer February 26, 1998
David K. Downes (Principal Financial Officer and Principal
Accounting Officer)
/s/Walter P. Babich * Director February 26, 1998
- ------------------------------------------
Walter P. Babich
/s/Anthony D. Knerr * Director February 26, 1998
- ------------------------------------------
Anthony D. Knerr
/s/Ann R. Leven * Director February 26, 1998
- ------------------------------------------
Ann R. Leven
/s/W. Thacher Longstreth * Director February 26, 1998
- ------------------------------------------
W. Thacher Longstreth
/s/Thomas F. Madison * Director February 26, 1998
- ------------------------------------------
Thomas F. Madison
/s/Jeffrey J. Nick Director February 26, 1998
- -------------------------------------------
Jeffrey J. Nick
/s/Charles E. Peck * Director February 26, 1998
- -------------------------------------------
Charles E. Peck
*By /s/Wayne A. Stork
---------------------
Wyne A. Stork
as Attorney-in-Fact for
each of the persons indicated
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
EX-99.B8A Executed Custodian Agreement
EX-99.B9C Executed Delaware Group of Funds Fund Accounting Agreement
EX-99.B9CI Executed Amendment No. 1 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CII Executed Amendment No. 2 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CIII Executed Amendment No. 3 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CIV Executed Amendment No. 4 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CV Executed Amendment No. 4A to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CVI Executed Amendment No. 5 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CVII Executed Amendment No. 6 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CVIII Executed Amendment No. 7 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B9CIX Executed Amendment No. 8 to Delaware Group of Funds Fund Accounting
Agreement
EX-99.B11 Consent 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
EX-99.B19 Directors' Power of Attorney
</TABLE>
<PAGE>
Bankers Trust Company EX-99.B8A
One Bankers Trust Plaza, New York, New York 10006
Mailing Address:
P.O. Box 318, Church Street Station
New York, New York 10008-0318
Mutual Fund/Business Trust/Series
CUSTODIAN AGREEMENT
AGREEMENT dated as of June 1, 1996 between BANKERS TRUST COMPANY (the
"Custodian") and those registered investment companies listed on Exhibit A
hereto, as such Exhibit shall be amended from time to time (each, a
"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 (as hereinafter defined in Section 14),
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 (or Customer's transactions on behalf of a Portfolio)
in any country shall be deemed to authorize the holding of such Securities and
Cash in that country.
- 1 -
<PAGE>
3. Custody Account. The Custodian agrees to establish and maintain
one or more separate custody accounts on its books each in the name of, as
appropriate, the Customer or the Customer on behalf 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 account of such Portfolio. Upon
delivery by the Customer to the Custodian of any Property belonging to a
Portfolio, the Customer shall, by Instructions, specifically indicate to 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; provided, however, the
Securities so delivered shall be subject to the same restrictions on transfer
(if any) and shall be of the same market value as the Securities that are the
subject of the Instructions, unless the prevailing market practice in a market
causes the Custodian and the Subcustodian, in the exercise of reasonable care,
to be unable to obtain delivery of Securities which meet the requirements
described in this proviso, in which case, the Custodian shall provide the
Customer prompt written notice of delivery of Securities not meeting such
requirements.
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) pursuant to the terms of this Agreement, 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, and provide prompt notice of any such
actions;
(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, and provide prompt notice of any such actions;
(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, take all reasonable steps under the
circumstances to obtain 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;
- 2 -
<PAGE>
(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 taking all reasonable steps under
the circumstances 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 for Custodian reasonably 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;
(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 promptly 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, Instructions approving the employment of each
such Subcustodian or Securities System shall have been received by Custodian;
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 as such Rule may be amended from time to time ("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) Instructions approving in advance the employment of such
- 3 -
<PAGE>
non-U.S. Subcustodian, and the agreement between the Custodian and such
non-U.S. Subcustodian, shall have been received by Custodian; 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 previously approved Subcustodian or Securities System with
respect to the Customer, and if desirable and practicable, 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 Directors or 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 Directors or 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 becomes aware of any material adverse
changes in the facts or circumstances upon which such information is based or
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. Any selection of and form of contract with a
Subcustodian shall be subject to approval by the Customer that such selection
and contract are consistent with the requirements of Rule 17f-5 (and Rule
17f-4, if applicable) under the 1940 Act, and the Custodian warrants that such
arrangement shall comply with Section 5 of this Agreement.
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 in the event of loss; (ii)
so long as and to the extent that Rule 17f-5 requires, the
- 4 -
<PAGE>
Property is 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, (iii) so long as and to the extent that Rule
17f-5 requires, beneficial ownership of such Property be
freely transferable without the payment of money or value
other than for safe custody or administration, (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) officers of or auditors
employed by, or other representatives of or designated by,
the Custodian, including the independent public accountants
of or designated by, 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. Except for holding of Property pursuant to Section 4
hereof, the Custodian may at any time or times in its sole discretion, upon
advance written notification to Customer, 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, under any circumstances, 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. Where certificates are legended or otherwise not
fungible with publicly traded certificates (and in other cases where the
- 5 -
<PAGE>
Custodian and the Customer may agree), the Customer reserves the right to
instruct the Custodian as to the name only in which such Securities shall be
registered and the Custodian, to the extent reasonably practicable, shall
comply with such Instructions; provided, however if Custodian reasonably
determines that compliance with such Instructions is not reasonably
practicable or otherwise may conflict with applicable law, rule or regulation,
Custodian shall promptly notify Customer and shall comply with reasonable
alternatives as to which the parties may agree. 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 books, records and accounts shall be maintained and
preserved in the form reasonably requested by the Customer and in accordance
with the 1940 Act and the Rules and Regulations thereunder, including, without
limitation, Section 31 thereof and Rule 31a-1 and 31a-2 thereunder. All books,
records and accounts pertaining to the Customer and the Accounts, which are in
the possession of the Custodian, shall be the property of the Customer and
such materials or (unless the delivery of original materials is required
pursuant to applicable law) legible copies thereof in a format acceptable to
the Customer, shall be surrendered promptly upon request. 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 exceptions or objections to any such statement within one
hundred eighty (180) 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, absent
manifest errors or omissions.
(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 such
service or furnishing any information derived therefrom. To the extent that
such service shall provide access to information concerning (i) all
- 6 -
<PAGE>
transactions involving the delivery in and out of Custodian of Cash and/or
Securities; (ii) payments of principal and interest or dividends; (iii)
pending transactions and fails; (iv) schedules of Custodian holdings,
Custodian shall comply with the standards for reports furnished in accordance
with Section 8(a) above.
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. So long as and to the extent that Rule 17f-5 shall permit, 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 portion of the respective beneficial holders of such class of
security in any manner the Custodian deems to be fair and equitable and shall
provide Customer prompt notice of any such action.
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.
The Custodian shall hold in such segregated accounts for the Account of a
Portfolio, Securities so designated by Customer.
12. Settlement Procedures. (a) 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
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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. So long as and to the extent that the Custodian has
exercised reasonable care, 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.
(b) With respect to Accounts containing Securities maintained outside
the United States, the Custodian shall credit or debit such Accounts on a
contractual settlement date with Cash or Securities with respect to any sale,
exchange or purchase of Securities.
(i) The Custodian may reverse credits or debits made to
the Accounts in its discretion if the related
transaction fails to settle within a reasonable
period, determined by the Custodian in its
discretion, after the contractual settlement date
for the related transaction; provided that, the
Custodian shall give Customer prior notification of
any such reversal. Where the foregoing notification
is oral, the Custodian shall promptly provide
written notification of the same (which
confirmation may be electronic).
(ii) If any Securirites delivered pursuant to this
Section 12(b) are returned by the recipient
thereof, the Custodian may, after receiving advance
approval from the Customer, which approval shall
not be unreasonably withheld, reverse the credits
and debits of the particular transaction at any
time.
(c) Without affecting the obligations of the Custodian under Section
12(b) and 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 the Account unless there is sufficient Cash in
the Account at the time or to settle the sale of any Securities in the Account
unless such Securities are in deliverable form. Notwithstanding the foregoing,
if the purchase price of such securities exceeds the amount of Cash in the
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 the Account in the amount of the difference solely for the
purpose of facilitating the settlement of such purchase of securities for
prompt delivery for the Account. The Customer agrees to immediately repay the
amount of any such overdraft in the ordinary course of business, exclusively
out of the Property in the Account that has engaged in the transaction that
gives rise to such overdraft and further agrees to indemnify and hold the
Custodian harmless from and against Custodian's actual losses, damages, costs
and expenses, including the charges for such overdraft as set forth in Exhibit
C hereof exclusively out of such Property, provided however, that Customer
shall not be liable for any consequential or special damages. The Customer
agrees that it will not use the Account to facilitate the purchase of
securities if at the time Customer places the purchase order it knows there
will not be sufficient funds in the Account at the time of settlement (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 with 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.
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(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 of 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 or repurchase agreements, 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.
(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) In the case of covered call options, the issuance of a depository
pledge receipt or similar notice of custody or for release of Securities to
designated brokers under such 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) In connection with the establishment of a segregated account in
accordance with Section 11 hereof.
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(o) Upon the termination of this Agreement as set forth in Section 20
hereof.
(p) For the purpose of paying distributions to shareholders of the
capital stock of the Customer.
(q) In connection with transactions under master repurchase
agreements and master accounts and the delivery of inital and variation margin
for futures contracts.
(r) For other proper purposes as may be specified in Instructions.
The Customer agrees that the Custodian shall have no obligation to
verify the purpose for which a transaction is being effected; provided that if
the Custodian has actual knowledge that the transaction is for an improper
purpose, it shall notify the Customer.
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 (including, without limitation, facsimile
transmission) in the manner set forth in clause (i) above, but the lack of
such confirmation shall in no way affect any action taken 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, such
as the Instructions communicated in the letter to Sandy Gross dated November
14, 1996 concerning confirmation of wire transfers sent to the Custodian by
facsimile transmission, the terms of which letter are incorporated herein by
reference.
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 in good faith
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 shall comply with all applicable provisions
and requirements of the 1940 Act, the Securities Act of 1933 (the "1933 Act"),
the 1934 Act, and any laws, rules, and regulations or governmental authorities
having jurisdiction with respect to the provisions which directly apply to the
services provided to the Customer hereunder. 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
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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 reasonable
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, such indemnification to be provided exclusively from
the Property in the Account as to which Custodian shall have acted (or failed
to act) when it incurred such losses, damages, costs and expenses. 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 or damage to the Customer or, if the Customer shall
incur costs and expenses (including, without limitation, fees and expenses of
counsel) 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 losses, damages, costs and expenses (including
reasonable fees and expenses of counsel) by reason of such failure without
reference to any special conditions or circumstances. In no event shall either
the Custodian or the Customer be liable for any consequential or special
damages of such other party. 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
agrees to defend and indemnify the Custodian and hold the Custodian harmless
from and against any and all losses, damages, costs and expenses (including
the reasonable fees and expenses of counsel) incurred by the 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
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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.
Upon receipt by the Custodian of notice from a subcustodian, or
otherwise upon the Custodian becoming aware in the ordinary course of its
custodial activities, of any of the events (other than any of such events
which are acts of God) referred to in the immediately preceding paragraph, the
Custodian will as soon as practicable notify the Customer. The Customer may
discuss with the Custodian reasonable steps to safeguard the Property, and the
Custodian shall use reasonable efforts to take such steps as may be agreed
between the Customer and the Custodian; provided that should the Custodian in
good faith determine that the taking of any such steps would result in the
incurrence by the Custodian of costs, expenses and liabilities, the Custodian
need not take any such steps until the Customer shall have furnished to the
Custodian reasonable security or indemnity for such costs, expenses and
liabilities.
The Custodian shall, throughout the term of this Agreement, effect
and maintain insurance cover in respect of such risks with such insurers and
on such terms as it deems appropriate and necessary to protect the Property.
Nothing in this Section 15 shall prohibit the Custodian from self-insuring all
or any part of the risks relating to the performance of this Agreement as it
in its sole discretion deems appropriate, but only as long as Property could
be protected to the same extent as it would were such insurance maintained
with a third party insurer unaffiliated with Custodian; and if Custodian knows
or has reason to know that the Property is not so protected, Custodian shall
promptly notify Customer and shall be obligated to obtain appropriate and
necessary insurance from an unaffiliated third party insurer. The Custodian
shall furnish to the Customer upon request certification as to the
effectiveness and amounts of such insurance.
The Custodian maintains business line and technology resources
business continuity plans which are monitored internally and externally to
ensure that the plans are regularly updated and tested and comply with
firmwide standards. Upon request, Custodian shall provide written assurance to
the Customer of the continued maintenance of reasonable arrangements for the
emergency use of electronic data processing equipment to the extent
appropriate.
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 reasonable 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. Provided that the Custodian exercises reasonable care to comply
with Instructions generally, and more particularly in connection with the
purchase, sale or exchange of Securities made by or for the Customer in any
country, 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.
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<PAGE>
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) reasonable
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 which is not due to the
Custodian's or a Subcustodian's lack of reasonable care 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 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, including but not limited to amounts payable pursuant to indemnities
granted by the Customer under this Agreement; provided that Custodian shall
give Customer notification prior to effecting any such charge. 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 sixty (60) 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 sixty (60)
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 Section 17. 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. If within sixty (60) 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 upon advance
written notice to Customer deliver such Securities and pay such Cash to a bank
or trust company which is qualified as an eligible foreign custodian under
Rule 17f-5 of the 1940 Act and 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 and the duties outlined in this subsection 20(a);
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provided that where the Custodian is the terminating party and the Custodian
had not notified the Customer that termination is for breach of this Agreement
by Customer, such sixty (60) day period shall be extended for an additional
period as requested by Customer of up to ninety (90) additional days.
(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 sixty (60) 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:
Delaware Group of Funds
1818 Market Street, 7th Floor
Philadelphia, PA 19103
Attention: Michael P. Bishof
Phone: (215) 255-2852
Fax: (215) 255-1645
if to the Custodian, to:
Bankers Trust Company
16 Wall Street, 4th Floor
New York, NY 10005
Attention: Vicky Platt
Phone: (212) 618-2645
Fax: (212) 618-2193
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.
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<PAGE>
23. 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 Sections
17(f) and 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.
24. 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.
25. Publicity. Unless material is produced in accordance with
applicable law, 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.
26. Representative Capacity and Binding Obligation. A copy of the
Articles of Incorporation/Declaration of Trust of the Customer is on file with
The Secretary of the State of Maryland or in the Trust's offices, and notice
is hereby given that this Agreement is not executed on behalf of the Directors
or Trustees of the Customer as individuals, and the obligations of this
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<PAGE>
Agreement are not binding upon any of the Directors or 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, director or
officer of the Customer may be held personally liable or responsible for any
obligations of the Customer arising out of this Agreement.
27. 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. Notwithstanding the foregoing, this Section shall not
limit any party from instituting suit in the competent court of any other
jurisdiction.
28. 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.
29. 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.
30. 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.
31. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
DELAWARE GROUP OF FUNDS
on behalf of each Customer and Portfolio
listed on Exhibit A hereto
By: /s/ David K. Downes
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
- 16 -
<PAGE>
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
Name: Richard M. Quintal
Title: Managing Director
- 17 -
<PAGE>
EXHIBIT A
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust
Company and Delaware Group of Funds.
LIST OF PORTFOLIOS
The following is a list of Portfolios referred to in the first
WHEREAS clause of the above-referenced Custodian Agreement. Terms used herein
as defined terms unless otherwise defined shall have the meanings ascribed to
them in the above-referenced Custodian Agreement.
<TABLE>
<CAPTION>
Customers: Portfolios
- --------------------------------------------------------------------------------
<S> <C>
Delaware Group Trend Fund, Inc.
Delaware Group Decatur Fund, Inc. Decatur Income Fund Series
Decatur Total Return Fund Series
Delaware Group Government Government Income Series
Fund, Inc.
Delaware Group Limited-Term U.S. Government Money Series
Government Funds, Inc.
Limited Term Government Fund Series
Delaware Cash Reserve, Inc.
Delaware Group Tax-Free
Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc. Tax Free USA Fund Series
Tax-Free Insured Fund Series
Tax-Free USA Intermediate Fund Series
Delaware Pooled Trust, Inc. The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The Fixed Income Portfolio
The Limited Term Maturity Portfolio
The Defensive Equity Small/ Mid-Cap Portfolio
Delaware Group Income Funds, Inc Strategic Income Fund Series
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Customers: Portfolios
- --------------------------------------------------------------------------------
<S> <C>
Delaware Group Global Dividend and
Income Fund, Inc.
Dated as of: April 1, 1997 DELAWARE GROUP OF FUNDS,
on behalf of each Customer and Portfolio
listed on this Exhibit A to the
Custodian Agreement
By: /s/ David K. Downes
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
Name: Richard M. Quintal
Title: Managing Director
</TABLE>
<PAGE>
EXHIBIT B
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust
Company and Delaware Group of Funds.
PROXY SERVICE
The following is a description of the Proxy Service referred to in
Section 10 of the above referenced 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; provided, however, under no circumstances
(unless impracticable) shall a translation received by the
Custodian be supplied to Customer later than the day on
which action is required, at a time which shall enable
action timely to be taken.
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.
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
<PAGE>
- 2-
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), upon receipt of Instructions to do so, 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: June 1, 1996 DELAWARE GROUP OF FUNDS,
on behalf of each Customer and Portfolio
listed on Exhibit A to the Custodian Agreement
By: /s/ David K. Downes
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
Name: Richard M. Quintal
Title: Managing Director
<PAGE>
EXHIBIT C
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust
Company and Delaware Group of Funds.
CUSTODY FEE SCHEDULE
Monthly Account Maintenance: No Charge
(including segregated accounts)
Regional Annual Asset and Per Transaction Fees:
TIER I International
ANNUAL ASSET FEE RECEIVE AND DELIVER
COUNTRY IN BASIS POINTS TRANSACTION FEES
------- --------------- ----------------
Australia 3.0 $50.00
Austria 5.0 $50.00
Belgium 4.0 $50.00
Canada 1.5 $50.00
Cedel 2.0 $25.00
Denmark 4.0 $50.00
Euroclear 2.0 $25.00
Finland 10.0 $75.00
France 4.0 $50.00
Germany 2.0 $30.00
Greece 35.0 $120.00
Hong Kong 5.0 $35.00
Indonesia 8.0 $35.00
Ireland 5.0 $50.00
Italy 3.0 $50.00
Japan 2.5 $50.00
Korea 15.0 $50.00
Malaysia 7.0 $50.00
Mexico 5.0 $50.00
Netherlands 4.0 $45.00
New Zealand 4.0 $50.00
Norway 5.0 $50.00
Philippines 8.0 $30.00
Singapore 7.0 $50.00
South Africa 5.0 $50.00
Spain 6.0 $50.00
Sweden 4.0 $50.00
Switzerland 3.0 $60.00
United Kingdom 1.5 $20.00
<PAGE>
TIER II United States
Annual Asset Fee: 0.25 BASIS POINTS
Transaction Fees:
* DTC-Automated (as defined below) $3.00
* DTC Manual (as defined below) $10.00
* PTC Automated $6.00
* PTC Manual $10.00
* FED Automated $6.00
* FED Manual $10.00
* Physical Automated $15.00
* Physical Manual $19.00
* P&I Payments $2.00
* Redemptions $10.00
* Reorganizations Included in safekeeping charge
* Outgoing Wires $8.00
* Incoming Wires No Charge
* Internal Cash Transfers No Charge
NOTES
1. Fees for investments in countries not listed will be negotiated separately.
2. There is no cost associated with the inward transition of assets, but the
client is responsible for all re-registration charges and stamp duty; i.e.
Spain and Indonesia.
3. The above fees are inclusive of the provision of Globe*View and or Polaris
software, but client is responsible for the provision of a suitable PC,
printer and modem and all associated line charges.
4. Above pricing excludes out-of-pocket (e.g. postage and insurance, transfer
agent fees).
5. Earnings Credits and Overdraft Charges with respect to Accounts containing
Property maintained within the United States:
For each month during which the Custodian holds Property for a
Customer, there shall be an adjustment to the custody fees noted above,
calculated as follows:
(a) the closing cash balances on the days of a month during which
Property is maintained in an Account ("Closing Cash Balance"), other than
those days on which the Closing Cash Balance is an overdraft position in
excess of $1,000,000 ("Excluded Days"), shall be aggregated and that sum shall
be divided by the number of days whose Closing Cash Balances are so added
("Average Monthly Balance"). If such Average Monthly Balance is more than
zero, the Average Monthly Balance will be multiplied by that number which is
the product of multiplying the Overnight Federal Funds Rate (defined below),
minus .50%, by a fraction, the denominator of which shall be 365 and the
numerator of which shall be the number of days (other than Excluded Days) on
which there is a Closing Cash Balance in that month. If such Average Monthly
Balance is less than zero, the Average Monthly Balance shall be multiplied by
that number which is the product of multiplying the Overnight Federal Funds
<PAGE>
Rate (defined below), plus 1.00%, by a fraction, the denominator of which
shall be 365 and the numerator of which shall be the number of days (other
than Excluded Days) on which there is a Closing Cash Balance in that month. If
the Average Monthly Balance for a particular month is more than zero, the
amount calculated pursuant to this paragraph (a) shall be deducted from an
Account's custody fee for the relevant month. If the Average Monthly Balance
for a particular month is less than zero, the amount calculated shall be added
to such custody fee for such month.
(b) for an Excluded Day, the amount of the closing overdraft position
for such day shall be multiplied by the fraction, the numerator of which shall
be the Overnight Federal Funds Rate, plus 1.00% and the denominator of which
shall be 365. The amount so calculated will be added to the custody fee
payable by the Account for the relevant month.
(c) for purposes of paragraphs (a) and (b)above, the term "Overnight
Federal Funds Rate" shall mean, for any month, the average of daily Federal
funds rates for a given month; in turn, the daily Federal funds rate shall
mean, for any day, the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the business day next succeeding such day.
6. Earnings Credits earned in a calendar year are valid for only that year and
the immediately succeeding calendar quarter. Any accumulation not used up by
the end of the 1st quarter of the immediately following year will be
forfeited.
7. Earnings Credit and Overdraft Rates with respect to Accounts containing
Property maintained in foreign markets, where applicable, will vary by market.
As part of the monthly reporting package, the Custodian provides a Statement
of Earnings that details by currency account the daily balance maintained and
the interest or debit rate earned on that particular day. The net negative (or
positive) interest is accrued and reflected at the bottom the statement; this
amount is credited on the third business day following the month end.
8. A manual transaction is an instruction, which is sent to Bankers Trust
outside of Globe*View, Polaris or CPU transmissions, i.e. facsimile.
9. Transactional fees will be incurred in the Master Repo account. Account
maintenance and asset fees will be waived for the Master Repo Account.
10. New pricing is effective June 1, 1996 and will not be modified before
June 1, 1999.
11. Fees for FX trades executed with BTCo. will be waived. Third party FX fees
are $50.00 per transaction.
12. Fees are billed monthly.
13. "DTC-Automated" shall mean those trades which are settled automatically at
DTC or through Polaris or another sucessor electronic system without manual
intervention of an employee of the Custodian; and "DTC-Manual" shall mean
those trades which are settled through Polaris or another sucessor electronic
system with the manual intervention of an employee of the Custodian.
<PAGE>
DELAWARE GROUP OF FUNDS,
on behalf of each Customer and Portfolio
listed on Exhibit A to the Custodian Agreement BANKERS TRUST COMPANY
ACCEPTED BY: PREPARED BY:
By: /s/ David K. Downes By: /s/ Richard M. Quintal
Name: David K. Downes Name: Richard M. Quintal
Title: Senior Vice President/Chief Administrative Title: Managing Director
Officer/Chief Financial Officer (DATE) June 1, 1996
(DATE) June 1, 1996
Except as set forth above, 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>
EXHIBIT D
To Custodian Agreement dated as of June 1, 1996 between Bankers Trust
Company and Delaware Group of Funds.
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 the Account.
Defined terms shall, unless otherwise noted, have the meanings ascribed to
them in the above referenced Custodian Agreement.
(a) When withholding tax has been deducted with respect to income
from any Property in an Account, the Custodian will post the tax reclaim in
the relevant currency to the Account on the earlier of the date of receipt of
the tax reclaim payment or the Contractual Reclaim Posting Date (as defined in
the columnar heading below) in accordance with the following schedule (subject
to the provisions of paragraphs (b) and (c) below):
Market Contractual Reclaim Posting Date
------ --------------------------------
(unless otherwise noted in paragraph (b),
the number of days subsequent to the
receipt by Custodian of the
dividend/interest payment from which tax
has been withheld)
Austria 110
Belgium 270
Denmark 100
France 270
Germany 170
Italy 90
Spain 260
Switzerland 250
UK 100
This service shall be provided by the Custodian with regard to other countries
in which Customer may invest as the Custodian and Customer shall mutually
agree. In the event of a change in tax laws, regulations, or treaties, or the
re-interpretation by a relevant governmental authority of any of the
foregoing, which change causes a material modification to the tax reclaim
process in such market, the Custodian and the Customer shall enter into good
faith negotiations to modify this Exhibit D as appropriate.
(b) In instances where a tax reclaim payment has not been received
and the Custodian's obligation is therefore to post a reclaim on a particular
Contractual Reclaim Posting Date, that obligation is conditioned upon the
Custodian's receipt from the Customer of all necessary documentation completed
accurately as to all material terms within a reasonable time prior to such
Contractual Reclaim Posting Date. If a Customer fails to so deliver the
<PAGE>
necessary documentation to Custodian within such time, the day from which the
Contractual Reclaim Posting Date is measured shall be the date on which such
documentation is supplied to Custodian, not the date on which the
dividend/interest payment from which the tax is withheld is paid to Custodian.
The two previous sentences notwithstanding, if Customer's failure to deliver
such documentation within such time results from Custodian's failure to: (i)
notify Customer of any deadlines for delivery of documentation; (ii) deliver
all necessary documentation to Customer within a reasonable time prior to the
date on which the completed documentation must be delivered to Custodian or
(iii) promptly notify Customer of any deficiency in the required documentation
provided to Custodian, the Contractual Reclaim Posting Date shall be measured
from the date the Custodian receives the dividend/interest payment from which
the tax has been withheld.
(c) The Custodian shall not be obligated to post tax reclaims with
regard to a particular country, if (i) the government of such country ceases
to honor tax reclaims generally or (ii) imposes regulatory changes, delays or
currency restrictions which materially adversely affect or preclude the
payment of tax reclaims or (iii) the tax authority in such country from which
a reclaim is being sought declares a claim to be invalid or after appropriate
and timely inquiry by the Custodian, otherwise fails to confirm the validity
of a claim within a reasonable period of time. If the tax reclaim has been
posted previously to the Account, the Custodian shall have the right following
advance notice to the Customer to reverse any such credits (provided that with
respect to the events referred to in clause (ii) above, the Custodian's right
to reverse such credits shall be subject to approval by the Customer, which
approval shall not unreasonably be withheld); and the Customer, exclusively
out of the Property held in such Account, agrees to hold the Custodian
harmless from Custodian's actual losses, damages, costs and expenses
(including the reasonable fees and expenses of counsel) arising therefrom,
except that in no event shall Customer be liable for consequential or special
damages of the Custodian. If, notwithstanding the circumstances described in
this paragraph (c), Custodian actually receives a tax reclaim payment,
Custodian shall promptly post such tax reclaim in the relevant currency to the
Account.
(d) 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.
(e) 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 material fact previously communicated to Custodian in
writing 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 reasonably rely on any such information provided by the
Customer.
(f) In connection with providing the foregoing service, the Custodian
may, at its own expense, consult and reasonably rely on the advice of counsel
or other professional tax advisers in such jurisdictions. So long as the
Custodian shall have used reasonable care in selecting such advisers, the
<PAGE>
Custodian is entitled to reasonably rely, and may act, on advice received from
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 advice.
(g) Subject to the provisions set forth above, the Custodian shall
perform the services provided in this Exhibit D in accordance with the
standard of care described in Section 15 of the Custodian Agreement.
Dated as of: June 1, 1996 DELAWARE GROUP OF FUNDS,
on behalf of each Customer and Portfolio
listed on Exhibit A to the Custodian Agreement
By: /s/ David K. Downes
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Officer/Chief Financial Officer
BANKERS TRUST COMPANY
By: /s/ Richard M. Quintal
Name: Richard M. Quintal
Title: Managing Director
<PAGE>
EX-99.B9C
DELAWARE GROUP OF FUNDS
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made as of this 19th day of August, 1996 by and
between the registered investment companies in the Delaware Group listed on
Schedule A, which Schedule may be amended from time to time as provided in
Section 8 hereof (each corporation or common law or business trust,
hereinafter referred to as a "Company," and all such entities collectively
hereinafter referred to as, the "Companies"), on behalf of the portfolio(s) of
securities of such Companies listed on Schedule A, which Schedule may be
amended from time to time (when used in this Agreement in the context of a
Company that offers only a single portfolio/series of shares, the term
"Portfolio" shall be a reference to such Company, and when used in the context
of a Company that offers multiple portfolios/series of shares, shall be a
reference to each portfolio/series of such Company) and DELAWARE SERVICE
COMPANY, INC. ("DSC"), a Delaware corporation, having its principal office and
place of business at 1818 Market Street, Philadelphia, Pennsylvania 19103.
W I T N E S S E T H:
WHEREAS, the Investment Management Agreements between the Companies
with respect to each Portfolio and either Delaware Management Company, Inc. or
its U.K. affiliate, Delaware
<PAGE>
International Advisers Ltd., provide, in part, that each Portfolio shall
conduct its business and affairs and shall bear the expenses necessary and
incidental thereto including, but not in limitation of the foregoing, the
costs incurred with respect to accounting services; and
WHEREAS, the services to be provided under this agreement previously
were provided by employees of the Companies; and
WHEREAS, the Companies and DSC desire to have a written agreement
concerning the performance of accounting services for each Portfolio 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 The Companies hereby appoint DSC the accounting agent
("Accounting Agent") for all of the classes of each Portfolio, to provide such
accounting services as are set forth herein and DSC hereby accepts such
appointment and agrees to provide the Companies, as their agent, the services
described herein.
Section 1.2 The Companies shall pay DSC and DSC shall accept, for the
services provided hereunder, the compensation provided for in Section VI
hereof. The Companies also shall
-2-
<PAGE>
reimburse DSC for expenses incurred or advanced by it for the Companies in
connection with its services hereunder.
II. DOCUMENTATION
Section 2.1 Each Company 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 the Companies (or is otherwise
familiar with), the following documents:
A. The Articles of Incorporation or Agreement and
Declaration of Trust or other document, as relevant, evidencing each Company's
form of organization and any current amendments thereto;
B. The By-Laws or Procedural Guidelines of each Company;
C. Any resolution or other action of each Company or the
Board of Directors or Trustees of each Company establishing or affecting the
rights, privileges or other status of any class of shares of a Portfolio, or
altering or abolishing any such class;
D. A certified copy of a resolution of the Board of
Directors or Trustees of each Company appointing DSC as Accounting Agent for
each Portfolio and authorizing the execution of this Agreement or an amendment
to Schedule A of this Agreement;
-3-
<PAGE>
E. A copy of each Company's currently effective
prospectus[es] and Statement[s] of Additional Information under the Securities
Act of 1933, if effective;
F. A certified copy of any resolution of the Board of
Directors or Trustees of each Company 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
G. 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 Each Company and DSC may consult as to forms or documents
that may be required in performing services hereunder.
Section 2.3 Each Company warrants the following:
A. The Company is, or will be, a properly registered
investment company under the Investment Company Act of 1940 (the "1940 Act")
and any and all shares of a Portfolio which it issues will be properly
registered and lawfully issued under applicable federal and state laws.
B. The provisions of this contract do not violate the terms
of any instrument by which the Company or the Company on behalf of a Portfolio
is bound; nor do they violate any law or regulation of any body having
jurisdiction over the Company or its property.
Section 2.4 DSC warrants the following:
-4-
<PAGE>
A. 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. SERVICES TO BE PROVIDED BY DSC
Section 3.1 Daily Net Asset Value ("NAV") Calculation. As Accounting
Agent for each Portfolio of the Companies, DSC will perform all functions
necessary to provide daily Portfolio NAV calculations, including:
A. Maintaining each Portfolio's securities portfolio history
by:
1. recording portfolio purchases and sales;
2. recording corporate actions and capital changes
relating to portfolio securities;
3. accruing interest, dividends and expenses; and
4. maintaining the income history for securities
purchased by a Portfolio.
B. Determining distributions to Portfolio shareholders;
C. Recording and reconciling shareholder activity including:
1. recording subscription, liquidations and
dividend reinvestments;
-5-
<PAGE>
2. recording settlements of shareholder activity;
and
3. reconciling Portfolio shares outstanding to the
records maintained by DSC, as transfer agent of the Portfolio.
Valuing a Portfolio's securities portfolio which
includes determining the NAVs for all classes of the Portfolio;
D. Disseminating Portfolio NAVs and dividends to interested
parties (including the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), the Investment Company Institute ("ICI"),
Morningstar, and Lipper Analytical Services, Inc. ("Lipper")); and
E. Resolving pricing and/or custody discrepancies.
Section 3.2 Financial Reporting. As Accounting Agent, DSC shall
perform financial reporting services for each Portfolio, which shall include:
A. The preparation of semi-annual and annual reports for
shareholders which involves the performance of the following functions:
1. preparing all statements of net assets,
statements of operations and statements of changes in net assets for the
Portfolio;
2. preparing footnotes to financial statements for
the Portfolio;
3. preparing workpapers for each Company's annual
audit by its independent public accountants; and
-6-
<PAGE>
4. coordinating the annual audit by each Company's
independent public accountants.
B. Reporting to the ICI in response to requests for monthly
and other periodic information;
C. Performing statistical reporting, which includes daily,
monthly, quarterly and annual reports for Lipper, Weisenberger and other third
party reporting agencies; and
D. Furnishing financial information for any additional
required SEC reporting, such as the preparation of financial information for
each Company's reporting on Form N-SAR, the furnishing of financial
information for each Company's prospectus[es] and statement[s] of additional
information, and the financial information required for each Company's annual
Rule 24f-2 notice filing;
Section 3.3 Compliance Testing. DSC will monitor, test and prepare
and maintain supporting schedules which evidence compliance with the
definitional and distribution requirements under the Internal Revenue Code of
1986, as amended ("IRC"), including the following:
A. The requirement to be registered at all times during the
taxable year under the 1940 Act (IRC Section 851(a));
B. The annual ninety percent gross income test (IRC Section
851(b)(2));
C. The short/short (thirty percent) gross income test (IRC
Section 851(b)(3));
-7-
<PAGE>
D. The quarterly IRC industry diversification tests (IRC
Sections 851(b)(4) and 817(h)); and
E. The 90% distribution requirements (IRC Section 852(a)).
Section 3.4 Other Services. In addition to the above, DSC, in its
capacity as Accounting Agent for the Company, will perform the following
services:
A. The calculation of required Portfolio monthly yields and
total return calculations in accordance with the prescribed rules of the U.S.
Securities and Exchange Commission;
B. Providing the financial information necessary for the
preparation of all federal and state tax returns and ancillary schedules,
including:
1. year-end excise tax distributions; and
2. compliance with Subchapter M and Section 4982 of
the IRC;
C. Performing special tax reporting to shareholders,
including the preparation of reports which reflect income earned by each
Portfolio by state, exempt income and distributions that qualify for the
corporate dividends received deduction;
D. The preparation of expense and budget figures for each
Portfolio, including the maintenance of detailed records pertaining to expense
accruals and payments and adjusting reports to reflect accrual adjustments;
E. The preparation of reports for Board of Directors' or
Trustees' meetings;
-8-
<PAGE>
F. Coordination of the custody relationships;
G. Facilitating security settlements; H. Performance of
required foreign security accounting functions;
I. Performance of daily cash reconciliations for each
Portfolio;
J. Providing identified reports to portfolio managers
including:
1. providing portfolio holdings and security
valuation reports;
2. preparing cash forecasts and reconciliations as
mutually agreed upon; and
3. preparing income projections.
IV. PERFORMANCE OF DUTIES
Section 4.1 DSC may request or receive instructions from a Company
and may, at a Portfolio's expense, consult with counsel for the Company 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 4.2 DSC shall maintain reasonable insurance coverage for
errors and omissions and reasonable bond coverage for fraud.
-9-
<PAGE>
Section 4.3 Upon notice thereof to a Company, DSC may employ others
to provide services to DSC in its performance of this Agreement.
Section 4.4 Personnel and facilities of DSC used to perform services
hereunder may be used to perform similar services to all Companies of the
Delaware Group and their Portfolios and to others, and may be used to perform
other services for all of the Companies of the Delaware Group and others.
Section 4.5 The Companies and DSC may, from time to time, set forth
in writing at the Companies' expense certain guidelines to be applicable to
the services hereunder.
V. ACCOUNTS AND RECORDS
Section 5.1 The parties hereto agree and acknowledge that the
accounts and records maintained by DSC with respect to a Portfolio shall be
the property of such Portfolio, and shall be made available to the relevant
Company promptly upon request and shall be maintained for the periods
prescribed in Rule 31a-2 under the Investment Company Act of 1940 or such
longer period as shall be agreed to by the parties hereto, at such Portfolio's
expense.
-10-
<PAGE>
VI. COMPENSATION
Section 6.1 The Companies and DSC acknowledge that the compensation
to be paid hereunder to DSC is intended to induce DSC to provide services
under this Agreement of a nature and quality which the Boards of Directors or
Trustees of the Companies, including a majority who are not parties to this
Agreement or interested person of the parties hereto, have determined after
due consideration to be necessary for the conduct of the business of a
Portfolio in the best interests of a Portfolio and its shareholders.
Section 6.2 Compensation by a Portfolio hereunder shall be determined
in accordance with Schedule B hereto as it shall be amended from time to time
as provided for herein and which is incorporated herein as a part hereof.
Section 6.3 Compensation as provided in Schedule B shall be reviewed
and approved for each Portfolio in the manner set forth in Section 8.1 hereof
by the Boards of Directors or Trustees of the Companies at least annually and
may be reviewed and approved more frequently at the request of either party.
The Boards may request and DSC shall provide such information as the Boards
may reasonably require to evaluate the basis of and approve the compensation.
-11-
<PAGE>
VII. STANDARD OF CARE
Section 7.1 The Companies on behalf of each Portfolio acknowledge
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, agree 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 acknowledge that
any risk of loss or damage arising from the conduct of a Portfolio's affairs
in accordance herewith or in accordance with guidelines or instructions given
hereunder, shall be borne by the Portfolio. The indemnification provided for
in this Section 7.1 shall be made Portfolio by Portfolio so that DSC is only
entitled to indemnification from a Company on behalf of a Portfolio for
actions arising from the performance of DSC's duties as to that Portfolio.
VIII. CONTRACTUAL STATUS
Section 8.1 This Agreement shall be executed and become effective as
to a Company with regard to a Portfolio listed on Schedule A as of the date
first written above if approved by a vote of such Company's Board of Directors
or Trustees, including an affirmative vote of a majority of the non-interested
members of the Board of such Company, 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
-12-
<PAGE>
as to a Company on behalf of a Portfolio or DSC, as the case may be, on sixty
(60) days notice by either that Company or DSC, unless earlier terminated or
amended by agreement among the parties. A Company shall be permitted to
terminate this Agreement as to a Portfolio on sixty (60) days notice to DSC.
Compensation under this Agreement by a Portfolio shall require approval by a
majority vote of the Board of Directors or Trustees of such Portfolio's
Company, including an affirmative vote of the majority of the non-interested
members of such Board cast in person at a meeting called for the purpose of
voting such approval.
Section 8.2 This Agreement shall become effective as to any Company
or Portfolio not included on Schedule A as of the date first written above,
but desiring to participate in this Agreement, on such date as an amended
Schedule A adding such new Company or Portfolio to such Schedule is executed
by DSC and such new Company or a Company on behalf of a new Portfolio
following approval by the Company or by the Company on behalf of a new
Portfolio desiring to be included in this Agreement in accordance with the
method specified in Section 8.1. Any such amended Schedule A shall not affect
the validity of this Agreement as between DSC and the other Companies which
have executed this Agreement or any subsequent amendment to Schedule A of this
Agreement.
Section 8.3 This Agreement may not be assigned by DSC without the
approval of all of the Companies.
-13-
<PAGE>
Section 8.4 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
--------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP DELCHESTER HIGH-YIELD
BOND FUND, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/Wayne A. Stork
-------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/Wayne A. Stork
-------------------------------
Wayne A. Stork, Chairman
-14-
<PAGE>
SCHEDULE A
COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
- --------
* Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule
B to that Fund Accounting Agreement between Delaware Service Company, Inc. and
the Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on
behalf of such Portfolio hereof shall be a New Portfolio for purposes of
Schedule B to the Agreement.
-15-
<PAGE>
Delaware Group Delchester High-Yield Bond Fund, Inc.
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
-16-
<PAGE>
Delaware Group Government Fund, Inc.
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: August 19, 1996
-17-
<PAGE>
SCHEDULE B
COMPENSATION
Fee Schedule for The Delaware Group of Funds
Part 1 -- Fees for Existing Portfolios
Existing Portfolios are those so designated on Schedule A to the Fund
Accounting Agreement between Delaware Service Company, Inc. and the Delaware
Group of Funds dated as of August 19, 1996 ("Agreement").
Annual Asset Based Fees
First $10 Billion of Aggregate
Complex Net Assets 2.5 Basis Points
Aggregate Complex Net Assets
over $10 Billion 2.0 Basis Points
Annual asset based fees will be charged at a rate of 2.5 basis points for the
first $10 Billion of Aggregate Complex Net Assets. Aggregate Complex Net
Assets over $10 Billion will be charged at a rate of 2.0 basis points. These
fees will be charged to a Portfolio on an aggregated pro rated basis.
Annual Minimum Fees
Domestic Equity Portfolio $35,000
Domestic Fixed Income Portfolio $45,000
International Series Portfolio $70,000
Per Class of Share Fee $ 4,000
There is an annual minimum fee that will be charged only if the annual asset
based fee is less than the calculation for the minimum fee. This fee is based
on the type and the number of classes per Portfolio. For an equity Portfolio
$35,000 will be charged; for a fixed income Portfolio $45,000 will be charged,
and for an international Portfolio $70,000 will be charged. For each class of
shares, $4,000 will be charged, such amount to be prorated over a period of
less than a year for any classes added after April 30, 1996. A total of all
minimum fees will be compared to the total asset based fee to determine which
fee is higher and, subsequently, will be used to bill the Companies.
-18-
<PAGE>
Part 2 -- Fees for New Portfolios
For each Portfolio designated as a New Portfolio on Schedule A to the
Agreement, there will be a fee of 2.0 basis points, providing that the
Delaware complex net assets are above $10 Billion (the rate would be 2.5 basis
points if under $10 Billion and then 2.0 basis points once the net assets
cross $10 Billion), or an annual minimum fee calculated in the manner
described above, whichever is higher. This new fee would be added to the total
of Existing Portfolio fees and then pro rated. Fees shall not be charged for
New Portfolios included on Schedule A until such Portfolios shall have
commenced operations.
Dated as of: August 19, 1996
-19-
<PAGE>
EX-99.B9CI
AMENDMENT NO. 1 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
DMC Tax-Free Income Trust - Pennsylvania
*Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and
the Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on
behalf of such Portfolio hereof shall be a New Portfolio for purposes of
Schedule B to the Agreement.
Delaware Group Value Fund, Inc.
Delaware Group Global & International Funds, Inc.
<PAGE>
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group DelCap Fund, Inc.
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio The Limited-Term Maturity Portfolio
(New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
-2-
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: September 30, 1996
-3-
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY
FUND,INC.
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST -
PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL &
INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/Wayne A. Stork
-----------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/Wayne A. Stork
-----------------------------
Wayne A. Stork
Chairman
-4-
<PAGE>
EX-99.B9CII
AMENDMENT NO. 2 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds IV, Inc.
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund (New)
Value Fund
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Government Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Emerging Growth Series
Equity/Income Series
Global Bond Series (New)
Growth Series
High Yield Series
International Equity Series
Money Market Series
Multiple Strategy Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
2
<PAGE>
The Real Estate Investment Trust Portfolio
DMC Tax-Free Income Trust - Pennsylvania
Dated as of: November 29, 1996
3
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
David K. Downes
Senior Vice President/
Chief Administrative Officer/
Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman
4
<PAGE>
EX-99.B9CIII
AMENDMENT NO. 3 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Decatur Fund, Inc.
Decatur Income Fund
Decatur Total Return Fund
Delaware Group Delaware Fund, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)
High-Yield Opportunities Fund (New)
- -----------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
DMC Tax-Free Income Trust - Pennsylvania
Delaware Group Value Fund, Inc.
Value Fund
Retirement Income Fund (New)
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Multi-Cap Equity Fund (New)
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)
Delaware Group Government Fund, Inc.
Delaware Group Adviser Funds, Inc.
2
<PAGE>
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
3
<PAGE>
Dated as of: December 27, 1996
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman
4
<PAGE>
EX-99.B9CIV
AMENDMENT NO. 4 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds II, Inc.
Decatur Income Fund
Decatur Total Return Fund
Blue Chip Fund (New)
Quantum Fund (New)
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Tax-Free Fund, Inc.
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Group Trend Fund, Inc.
Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund
High-Yield Opportunities Fund (New)
- -------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement. DMC Tax-Free Income Trust - Pennsylvania
1
<PAGE>
Delaware Group Equity Funds V, Inc.
Value Fund
Retirement Income Fund
Delaware Group Global & International Funds, Inc.
International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Pooled Trust, Inc.
The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio
The Defensive Equity Utility Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio
The Global Fixed Income Portfolio
The International Fixed Income Portfolio
The High-Yield Bond Portfolio
Delaware Group Premium Fund, Inc.
Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series
Delaware Group Government Fund, Inc.
2
<PAGE>
Delaware Group Adviser Funds, Inc.
Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund
Dated as of: FEBRUARY 24, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/David K. Downes
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman
3
<PAGE>
EX-99.B9CV
AMENDMENT NO. 4A
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- --------------------
*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U.S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Decatur Total Return Series
Delaware Series
Delchester Series
DelCap Series
Global Bond Series (New)
International Equity Series
Trend Series
Value Series
2
<PAGE>
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust - Pennsylvania
(doing business as Tax-Free Pennsylvania Fund)
Dated as of: April 14, 1997
3
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
DELAWARE POOLED TRUST, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
President and
Chief Executive Officer
4
<PAGE>
EX-99.B9CVI
AMENDMENT NO. 5
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
2
<PAGE>
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust-Pennsylvania (doing business as Tax-Free Pennsylvania
Fund)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
3
<PAGE>
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
Dated as of May 1, 1997
4
<PAGE>
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
EX-99.B9CVII
AMENDMENT NO. 6
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund
Enterprise Fund
Federal Bond Fund
New Pacific Fund
U.S. Growth Fund
World Growth Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
2
<PAGE>
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group Trend Fund, Inc.
DMC Tax-Free Income Trust-Pennsylvania
(doing business as Tax-Free Pennsylvania Fund)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New) Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of July 21, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
-----------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED -TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX FREE MONEY FUND, INC.
DELAWARE GROUP TREND FUND, INC.
DMC TAX-FREE INCOME TRUST-PENNSYLVANIA
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/Waye A. Stork
-------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
5
<PAGE>
EX-99.B9CVIII
AMENDMENT NO. 7
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Value Fund
Retirement Income Fund (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
1
<PAGE>
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Defensive Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Fixed Income Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust
(formerly DMCT Tax-Free Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New) Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of October 14, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
--------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
-------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
EX-99.B9CIX
AMENDMENT NO. 8
to
SCHEDULE A
of
DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT
Delaware Group Adviser Funds, Inc.
Corporate Income Fund (liquidated September 19, 1997)
Enterprise Fund (liquidated September 19, 1997)
Federal Bond Fund (liquidated September 19, 1997)
New Pacific Fund
U.S. Growth Fund
Overseas Equity Fund (formerly World Growth Fund)
Delaware Group Cash Reserve, Inc.
Delaware Group Equity Funds I, Inc. (formerly Delaware)
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc. (formerly Decatur)
Blue Chip Fund (New)
Decatur Income Fund
Decatur Total Return Fund
Quantum Fund (New)
Delaware Group Equity Funds III, Inc. (formerly Trend)
Trend Fund
Delaware Group Equity Funds IV, Inc. (formerly DelCap)
Capital Appreciation Fund (New)
DelCap Fund
Delaware Group Equity Funds V, Inc. (formerly Value)
Small Cap Value Fund (formerly Value Fund)
Retirement Income Fund (New)
- ------------------
*Except as otherwise noted, all Portfolios included on this Schedule
A are Existing Portfolios for purposes of the compensation described on
Schedule B to that Fund Accounting Agreement between Delaware Service Company,
Inc. and the Delaware Group of Funds dated as of August 19, 1996
("Agreement"). All portfolios added to this Schedule A by amendment executed
by a Company on behalf of such Portfolio hereof shall be a New Portfolio for
purposes of Schedule B to the Agreement.
1
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
Delaware Group Government Fund, Inc.
Government Income Series (U.S. Government Fund )
Delaware Group Global & International Funds, Inc.
Emerging Markets Fund (New)
Global Assets Fund
Global Bond Fund
International Equity Fund
Global Equity Fund (New)
International Small Cap Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Aggressive Growth Portfolio
The Large-Cap Value Equity Portfolio
(formerly The Defensive Equity Portfolio)
The Small/Mid-Cap Value Equity Portfolio (New)
(formerly The Defensive Equity Small/Mid-Cap Portfolio)
The Defensive Equity Utility Portfolio (deregistered January 14, 1997)
The Emerging Markets Portfolio (New)
The Intermediate Fixed Income Portfolio
(formerly The Fixed Income Portfolio)
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio (New)
The International Equity Portfolio
The International Fixed Income Portfolio (New)
The Labor Select International Equity Portfolio
The Limited-Term Maturity Portfolio (New)
The Real Estate Investment Trust Portfolio
The Global Equity Portfolio (New)
The Real Estate Investment Trust Portfolio II (New)
The Diversified Core Fixed Income Portfolio (New)
The Aggregate Fixed Income Portfolio (New)
2
<PAGE>
Delaware Group Premium Fund, Inc.
Capital Reserves Series
Cash Reserve Series
Convertible Securities Series (New)
Decatur Total Return Series
Delaware Series
Delchester Series
Devon Series (New)
Emerging Markets Series (New)
DelCap Series
Global Bond Series (New)
International Equity Series
Quantum Series (New)
Strategic Income Series (New)
Trend Series
Value Series
Delaware Group Tax-Free Fund, Inc.
Tax-Free Insured Fund
Tax-Free USA Fund
Tax-Free USA Intermediate Fund
Delaware Group Tax-Free Money Fund, Inc.
Delaware Group State Tax-Free Income Trust
(formerly DMCT Tax-Free Income Trust-Pennsylvania)
Tax-Free Pennsylvania Fund
Tax-Free New Jersey Fund (New)
Tax-Free Ohio Fund (New)
Voyageur Funds, Inc.
Voyageur U.S. Government Securities Fund (New)
Voyageur Insured Funds, Inc.
Arizona Insured Tax Free Fund (New)
Colorado Insured Fund (New)
Minnesota Insured Fund (New)
National Insured Tax Free Fund (New)
Voyageur Intermediate Tax Free Funds, Inc.
Arizona Limited Term Tax Free Fund (New)
California Limited Term Tax Free Fund (New)
Colorado Limited Term Tax Free Fund (New)
Minnesota Limited Term Tax Free Fund (New)
National Limited Term Tax Free Fund (New)
3
<PAGE>
Voyageur Investment Trust
California Insured Tax Free Fund (New)
Florida Insured Tax Free Fund (New)
Florida Tax Free Fund (New)
Kansas Tax Free Fund (New)
Missouri Insured Tax Free Fund (New)
New Mexico Tax Free Fund (New)
Oregon Insured Tax Free Fund (New)
Utah Tax Free Fund (New)
Washington Insured Tax Free Fund (New)
Voyageur Investment Trust II
Florida Limited Term Tax Free Fund (New)
Voyageur Mutual Funds, Inc.
Arizona Tax Free Fund (New)
California Tax Free Fund (New)
Iowa Tax Free Fund (New)
Idaho Tax Free Fund (New)
Minnesota High Yield Municipal Bond Fund (New)
National High Yield Municipal Bond Fund (New)
National Tax Free Fund (New)
New York Tax Free Fund (New)
Wisconsin Tax Free Fund (New)
Voyageur Mutual Funds II, Inc.
Colorado Tax Free Fund (New)
Voyageur Mutual Funds III, Inc.
Aggressive Growth Fund (New)
Growth Stock Fund (New)
International Equity Fund (New)
Tax Efficient Equity Fund (New)
Voyageur Tax Free Funds, Inc.
Minnesota Tax Free Fund (New)
North Dakota Tax Free Fund (New)
4
<PAGE>
Dated as of December 18, 1997
DELAWARE SERVICE COMPANY, INC.
By: /s/ David K. Downes
--------------------------------
David K. Downes
President, Chief Executive Officer and Chief Financial Officer
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP FOUNDATION FUNDS
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
By: /s/ Wayne A. Stork
---------------------------------
Wayne A. Stork
Chairman
5
<PAGE>
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. 45 to the Registration Statement (Form N-1A) (No.
2-75526) of Delaware Group Limited-Term Government Funds, Inc. - Limited-Term
Government Fund of our report dated February 12, 1998, included in the 1997
Annual Report to shareholders
/s/ Ernst & Young LLP
- --------------------------
Philadelphia, Pennsylvania
February 27, 1998
<PAGE>
ERNST & YOUNG LLP Two Commerce Square Phone: 215 448 5000
Suite 4000 Fax: 215 448 4069
2001 Market Street
Philadelphia
Pennsylvania 19103-7096
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term
Government Fund
We have audited the accompanying statement of net assets of Delaware Group
Limited-Term Government Funds, Inc. - Limited-Term Government Fund as of
December 31, 1997, 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, 1997, 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, 1997, 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.
February 12, 1998 /s/Ernst & Young LLP
---------------------------
Ernst & Young LLP is a member of Ernst & Young
International, Ltd.
<PAGE>
EX-99.B16B
Delaware Limited-Term Government Fund- Class B
Total Return Performance
Average Annual Compounded Rate of Return (With CDSC)
THREE YEARS Ended 12/31/97
- --------------------------------------------------------------------------------
n
P(1 + T) = ERV
THREE
YEARS
- ------------
3
$1000(1 + T) = $1,146.85
T = 4.67%
<PAGE>
Delaware Limited-Term Government Fund- Class B
Total Return Performance
Average Annual Compounded Rate of Return (Without CDSC)
THREE YEARS Ended 12/31/97
- --------------------------------------------------------------------------------
n
P(1 + T) = ERV
THREE
YEARS
- --------
3
$1000(1 + T) = $1,156.44
T = 4.96%
<PAGE>
Delaware Limited-Term Government Fund- Class B
Total Return Performance
Cumulative Total Return (With CDSC)
THREE YEARS Ended 12/31/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $8.99
Initial Shares 111.235
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 111.235 $0.622 7.875 119.110
- --------------------------------------------------------------------------------
1996 119.110 $0.524 7.262 126.372
- --------------------------------------------------------------------------------
1997 126.372 $0.522 7.786 134.158
- --------------------------------------------------------------------------------
Ending Shares 134.158
Ending NAV x $8.62
-----------
$1,156.44
Less CDSC $9.59
-----------
Investment Return $1,146.85
Total Return Performance
- ------------------------
Investment Return $1,146.85
Less Initial Investment $1,000.00
-----------
$146.85 / $1,000.00 x 100
Total Return: 14.69%
<PAGE>
Delaware Limited-Term Government Fund- Class B
Total Return Performance
Cumulative Total Return (Without CDSC)
THREE YEARS Ended 12/31/97
- --------------------------------------------------------------------------------
Initial Investment $1,000.00
Beginning NAV $8.99
Initial Shares 111.235
Fiscal Beginning Dividends Reinvested Cumulative
Year Shares for Period Shares Shares
- --------------------------------------------------------------------------------
1995 111.235 $0.622 7.875 119.110
- --------------------------------------------------------------------------------
1996 119.110 $0.524 7.262 126.372
- --------------------------------------------------------------------------------
1997 126.372 $0.522 7.786 134.158
- --------------------------------------------------------------------------------
134.158
Ending NAV x $8.62
------------
Investment Return $1,156.44
Total Return Performance
- ------------------------
Investment Return $1,156.44
Less Initial Investment $1,000.00
------------
$156.44 / $1,000.00 x 100
Total Return: 15.64%
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 6,685,846
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<ASSETS-OTHER> 149
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<SENIOR-EQUITY> 46,839
<PAID-IN-CAPITAL-COMMON> 542,550,509
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<SHARES-COMMON-PRIOR> 1,477,817
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<NET-ASSETS> 12,119,349
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<EXPENSES-NET> 4,494,452
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<DISTRIBUTIONS-OF-INCOME> 748,542
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 305,510
<NUMBER-OF-SHARES-REDEEMED> 431,069
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<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 12,510,327
<PER-SHARE-NAV-BEGIN> 8.770
<PER-SHARE-NII> 0.522
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<PER-SHARE-NAV-END> 8.620
<EXPENSE-RATIO> 1.83
<AVG-DEBT-OUTSTANDING> 0
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<NAME> LIMITED-TERM GOVERNMENT FUND C CLASS
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<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 399,713,016
<INVESTMENTS-AT-VALUE> 405,438,037
<RECEIVABLES> 1,145,478
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 406,583,664
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<SENIOR-EQUITY> 46,839
<PAID-IN-CAPITAL-COMMON> 542,550,509
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<SHARES-COMMON-PRIOR> 352,341
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<NET-ASSETS> 3,579,911
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<REALIZED-GAINS-CURRENT> (8,298,077)
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<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 204,751
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 205,434
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<SHARES-COMMON-STOCK> 3,817,544
<SHARES-COMMON-PRIOR> 3,460,786
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 32,901,563
<DIVIDEND-INCOME> 0
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<OTHER-INCOME> 0
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<DISTRIBUTIONS-OF-INCOME> 2,015,579
<DISTRIBUTIONS-OF-GAINS> 0
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</TABLE>
<PAGE>
EX-99.B19
POWER OF ATTORNEY
Each of the undersigned, a member of the Boards of Directors/Trustees
of the Delaware Group Funds listed on Exhibit A to this Power of Attorney,
hereby constitutes and appoints on behalf of each of the Funds listed on
Exhibit A, Wayne A. Stork, Jeffrey J. Nick and Walter P. Babich and any one of
them acting singly, his true and lawful attorneys-in-fact, in his name, place,
and stead, to execute and cause to be filed with the Securities and Exchange
Commission and other federal or state government agency or body, such
registration statements, and any and all amendments thereto as either of such
designees may deem to be appropriate under the Securities Act of 1933, as
amended, the Investment Company Act of 1940, as amended, and all other
applicable federal and state securities laws.
IN WITNESS WHEREOF, the undersigned have executed this instrument as
of this 18th day of December, 1997.
/s/ Walter P. Babich /s/ Thomas F. Madison
- ------------------------------ -------------------------------
Walter P. Babich Thomas F. Madison
/s/ Anthony D. Knerr /s/ Jeffrey J. Nick
- ------------------------------ -------------------------------
Anthony D. Knerr Jeffrey J. Nick
/s/ Ann R. Leven /s/ Charles E. Peck
- ------------------------------ -------------------------------
Ann R. Leven Charles E. Peck
/s/ W. Thacher Longstreth /s/ Wayne A. Stork
- ------------------------------ -------------------------------
W. Thacher Longstreth Wayne A. Stork
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE GROUP FUNDS
DELAWARE GROUP EQUITY FUNDS I, INC.
DELAWARE GROUP EQUITY FUNDS II, INC.
DELAWARE GROUP EQUITY FUNDS III, INC.
DELAWARE GROUP EQUITY FUNDS IV, INC.
DELAWARE GROUP EQUITY FUNDS V, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL FUNDS, INC.
DELAWARE GROUP ADVISER FUNDS, INC.
DELAWARE POOLED TRUST, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP STATE TAX-FREE INCOME TRUST
DELAWARE GROUP DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP GLOBAL DIVIDEND AND INCOME FUND, INC.
DELAWARE GROUP FOUNDATION FUNDS
VOYAGEUR FUNDS, INC.
VOYAGEUR INSURED FUNDS, INC.
VOYAGEUR INTERMEDIATE TAX FREE FUNDS, INC.
VOYAGEUR INVESTMENT TRUST
VOYAGEUR INVESTMENT TRUST II
VOYAGEUR MUTUAL FUNDS, INC.
VOYAGEUR MUTUAL FUNDS II, INC.
VOYAGEUR MUTUAL FUNDS III, INC.
VOYAGEUR TAX FREE FUNDS, INC.
VOYAGEUR ARIZONA MUNICIPAL INCOME FUND, INC.
VOYAGEUR COLORADO INSURED MUNICIPAL INCOME FUND, INC.
VOYAGEUR FLORIDA INSURED MUNICIPAL INCOME FUND
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND II, INC.
VOYAGEUR MINNESOTA MUNICIPAL INCOME FUND III, INC.
