<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. 48 [X]
----
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 48
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DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1818 Market Street, Philadelphia, Pennsylvania 19103
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------
George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
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(Name and Address of Agent for Service)
Approximate Date of Public Offering: April 28, 1999
--------------
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b)
_X_ on April 28, 1999 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 amendment
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. 48 to Registration File No. 2-75526
includes the following:
1. Facing Page
2. Contents Page
3. Cross-Reference Sheets
4. Part A - Prospectus
5. Part B - Statement of Additional Information
6. Part C - Other Information
7. Signatures
<PAGE>
CROSS-REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Location in Prospectuses
Limited-Term Limited-Term
Government Fund, Inc. Governement Fund, Inc.
Class A
Class B
Item No. Description Class C Institutional Class
- -------- ----------- ------- -------------------
<S> <C> <C> <C>
1 Front and Back Cover Pages Same Same
2 Risk/Return Summary: Fund profiles Fund profile
Investments, Risks and Performance
3 Risk/ReturnSummary: Fund profiles Fund profile
Fee Table
4 Investment Objectives, Principal How we manage the How we manage the
Investment Strategies, and Related Funds Fund
Risks
5 Management's Discussion of N/A N/A
Performance
6 Management, Organization, and Who manages the Funds Who manages the Fund
Capital Structure
7 Shareholder Information How to buy shares; How to buy shares;
How to redeem shares; How to redeem shares;
Special services; Special services;
Dividends, distributions Dividends, distributions
and taxes all under and taxes all under
About your account About your account
8 Distribution Arrangements Choosing a share class; About your account
How to reduce sales
charges under About
your account
9 Financial Highlights Information Financial highlights Financial highlights
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART B
<TABLE>
<CAPTION>
Location in Statement of Additional
Item No. Description Information
- -------- ----------- -----------
<S> <C> <C>
10 Cover Page and Table of Contents Same
11 Fund History General Information
12 Description of the Fund and Its Investments and Investment Objective and Policies
Risks
13 Management of the Fund Officers and Directors; Purchasing
Shares
14 Control Persons and Principal Holders of Securities Officers and Directors
15 Investment Advisory and Other Services Officers and Directors; Purchasing
Shares); Investment Management
Agreements; General Information;
Financial Statements
16 Brokerage Allocation and Other Practices Trading Practices and Brokerage
17 Capital Stock and Other Securities Capitalization and Noncumulative
Voting (under General Information)
18 Purchase, Redemption, and Pricing of Shares Purchasing Shares; Redemption and
Exchange; Determining Offering Price
and Net Asset Value
19 Taxation of the Fund Accounting and Tax Issues
20 Underwriters Purchasing Shares
21 Calculation of Performance Data Performance Information
22 Financial Statements Financial Statements
</TABLE>
<PAGE>
CROSS-REFERENCE SHEET
PART C
<TABLE>
<CAPTION>
Item No. Description Location in Part C
- -------- ----------- ------------------
<S> <C> <C>
23 Exhibits Item 23
24 Persons Controlled by or under Item 24
Common Control with Registrant
25 Indemnification Item 25
26 Business and Other Connections Item 26
of the Investment Adviser
27 Principal Underwriters Item 27
28 Location of Accounts and Item 28
Records
29 Management Services Item 29
30 Undertakings Item 30
</TABLE>
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Limited-Term Government Fund
Class A o Class B o Class C
Prospectus
April 28, 1999
Current Income Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
3
<PAGE>
Table of contents
Fund profile page
Limited-Term Government Fund
How we manage the Fund page
Our investment strategies
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
Choosing a share class
How to reduce your sales charge
How to buy shares
Retirement plans
How to redeem shares
Account minimum
Special services
Dividends, distributions and taxes
Certain management considerations page
Financial highlights page
4
<PAGE>
Profile: Limited-Term Government Fund
What is the Fund's goal?
Limited-Term Government Fund seeks to provide a high stable level of income,
while attempting to minimize fluctuations in principal and provide maximum
liquidity. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. We may
invest in instruments that use such government securities as collateral. We may
also invest up to 20% of the Fund's net assets in corporate notes and bonds,
certificates of deposit and obligations of U.S. and foreign banks, commercial
paper and certain asset-backed securities.
The level of income the Fund provides will vary depending on current interest
rates and the specific securities in the portfolio. However, since longer term
rates are generally less volatile than short-term rates, the Fund's income may
fluctuate less than a money market fund's income.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by adverse changes in interest rates. When interest
rates rise, the value of bonds in the portfolio will likely decline. For a more
complete discussion of risk, please turn to page ___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with intermediate or long-term financial goals.
o Investors seeking monthly income.
o Investors who would like a relatively conservative income investment to
help balance a growth-oriented long-term portfolio.
o Investors seeking a high quality investment with a measure of capital
preservation.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially, over the short term.
o Investors who want an investment with a fixed share price, such as a money
market fund.
5
<PAGE>
How has Limited-Term Government Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Class A shares have varied over
the past ten calendar years, as well as the average annual returns of all shares
for one, five and ten years and since inception, if applicable. The Fund's past
performance does not necessarily indicate how it will perform in the future.
[GRAPHIC OMITTED: BAR CHART SHOWING TOTAL RETURN (CLASS A) FPO]
Year-by-year total return (Class A)
1998 7.46%
1997 5.23%
1996 3.69%
1995 8.71%
1994 -1.88%
1993 5.31%
1992 5.62%
1991 13.04%
1990 9.32%
1989 9.05%
As of March 31, 1999, the Fund had a year-to-date return of 0.57%. During the
periods illustrated in this bar chart, the Fund's highest return was 4.49% for
the quarter ended December 31, 1998 and its lowest return was -1.45% for the
quarter ended March 31, 1994.
The maximum Class A sales charge of 2.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns above. If this fee were
included, the returns would be less than those shown. The average annual returns
shown in the table on page ___ do include the sales charge.
6
<PAGE>
How has Limited-Term Government Fund performed? (continued)
<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/98
CLASS A B C Merrill Lynch One-to- Three
(if redeemed)* (if redeemed)* Year Treasury Index
(Inception 11/24/85) (Inception 5/2/94) (Inception 11/29/95)
<S> <C> <C> <C> <C>
1 year 4.55% 4.55% 5.56% 7.00%
5 years 3.99% N/A N/A 5.99%
10 years or lifetime** 6.20% 4.48% 4.76% 7.37%
</TABLE>
The table above shows the Fund's average annual returns over various time
periods compared to the performance of the Merrill Lynch One-to-Three Year
Treasury Index. You should remember that unlike the Fund, the index is unmanaged
and doesn't reflect the actual costs of operating a mutual fund, such as the
costs of buying, selling, and holding the securities.
*If redeemed at end of period shown. If shares were not redeemed, the returns
for Class B would be 6.55% and 4.48% for the one-year and lifetime periods,
respectively. Returns for Class C would be 6.56% and 4.76% for the one-year and
lifetime periods, respectively.
**Lifetime returns are shown if the Fund or Class existed for less than 10
years. Index returns are for 10 years. Index returns for Class B and Class C
lifetimes were 6.70% and 6.30%, respectively. Maximum sales charges are included
in the Fund returns above.
What are the Limited Term Government Fund's fees and expenses?
Sales charges are fees paid directly from your investments when you buy or sell
shares of the Fund. The Fund may waive or reduce sales charges; please see the
Statement of Additional Information for details.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
CLASS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases as a percentage of offering price 2.75% none none
- ---------------------------------------------------------------------------------------------
Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 2%(2) 1%(3)
- ---------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
reinvested dividends none none none
- ---------------------------------------------------------------------------------------------
Redemption fees none none none
- ---------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management fees 0.50% 0.50% 0.50%
-------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.15%(4) 1.00% 1.00%
-------------------------------------------------------------------------------------
Other expenses 0.36% 0.36% 0.36%
-------------------------------------------------------------------------------------
Total operating expenses 1.01% 1.86% 1.86%
-------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(5) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
<TABLE>
<CAPTION>
CLASS(6) A B B C C
(if redeemed) (if redeemed)
- ----------------- ------------ ----------- -------------------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
1 year $375 $189 $389 $189 $289
- ----------------- ------------ ----------- -------------------- ----------- -------------------
3 years $588 $585 $685 $585 $585
- ----------------- ------------ ----------- -------------------- ----------- -------------------
5 years $818 $1,006 $1,006 $1,006 $1,006
- ----------------- ------------ ----------- -------------------- ----------- -------------------
10 years $1,477 $1,657 $1,657 $2,180 $2,180
- ----------------- ------------ ----------- -------------------- ----------- -------------------
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is paid a
commission, a contingent deferred sales charge will apply to certain
redemptions. Additional Class A purchase options that involve a contingent
deferred sales charge may be permitted from time to time and will be disclosed
in the prospectus if they are available.
(2) If you redeem Class B shares during the first two years after you buy them,
you will pay a contingent deferred sales charge of 2%, which declines to 1%
during the third year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Directors adopted a formula for calculating 12b-1 plan expenses
for Class A shares that went into effect on June 1, 1992. Under this formula,
12b-1 plan expenses will not be more than 0.15% or less than 0.10%. Each share
class is subject to a separate 12b-1 plan.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show.
(6) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately five years. Information for years six through ten
reflects expenses of the Class A shares.
9
<PAGE>
How we manage the Fund
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for the Limited-Term
Government Fund. Following are descriptions of how the portfolio managers pursue
the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Limited-Term Government Fund
We invest primarily in short- and intermediate-term fixed income securities
including:
o securities issued or guaranteed by the U.S. government such as U.S.
Treasuries,
o securities issued by U.S. government agencies or instrumentalities such
as securities of the Government National Mortgage Association.
We may also invest in securities issued by non-government entities as
long as the securities have U.S. government-backed securities as collateral,
corporate notes and bonds, certificates of deposit and obligations of both U.S.
and foreign banks, commercial paper and certain asset-backed securities.
The Fund's level of income and the stability of its share price will be
directly affected by changes in short- and intermediate term interest rates. We
anticipate that the level of income could be higher and more stable than a money
market fund. However, the Fund's share price will increase and decrease with
changes in interest rates. This makes its risk level greater than that of a
money market fund.
We strive to reduce the effects of interest rate changes on the share
price by keeping the average effective maturity below five years. The average
effective maturity is the average effective maturity of all securities in the
portfolio. If we believe that interest rates are historically low, we may
shorten the average effective maturity to three years or less. Conversely, if we
believe rates are high and therefore likely to go lower, we may increase average
effective maturity to as high as five years. We may purchase individual
securities with a remaining maturity of up to 15 years.
10
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
<TABLE>
<CAPTION>
----------------------------------------------------- --------------------------------------------------------------------------
Securities How we use them
----------------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Direct U.S. Treasury obligations include Treasury We may invest without limit in U.S. Treasury securities, though they
bills, notes and bonds of varying maturities. U.S. are typically not our largest holding because they generally do not
Treasury securities are backed by the "full faith offer as high a level of current income as other fixed income
and credit" of the United States. securities.
----------------------------------------------------- --------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities There is no limit on government-related mortgage-backed securities.
that represent pools of mortgages, with investors
receiving principal and interest payments as the We may invest up to 35% of net assets in mortgage-backed securities
underlying mortgage loans are paid back. Many are issued by private nongovernment companies if they are 100%
issued and guaranteed against default by the U.S. collateralized at the time of issuance by securities or certificates
government or its agencies or instrumentalities, issued or guaranteed by the U.S. government, its agencies or
such as the Federal Home Loan Mortgage Corporation, instrumentalities. These securities must be rated in one of the two
Fannie Mae and the Government National Mortgage highest categories by an NRSRO at the time of purchase.
Association. Others are issued by private financial
institutions, with some fully collateralized by Two of the privately issued securities we often invest in are either
certificates issued or guaranteed by CMOs and REMICs (see below).
the government or its agencies or instrumentalities.
----------------------------------------------------- --------------------------------------------------------------------------
Collateralized mortgage obligations (CMOs): These securities are not government securities and are not directly
Privately issued mortgage-backed bonds whose guaranteed by the U.S. government in any way. They are secured by the
underlying value is the mortgages that are grouped underlying collateral of the private issuer. We will invest in these
into different pools according to their maturity. securities only if they meet the criteria discussed in "Mortgage-backed
securities" above.
----------------------------------------------------- --------------------------------------------------------------------------
Asset-backed securities: Bonds or notes We may invest only in asset-backed securities rated in the highest
backed by accounts receivables including quality category by an NRSRO, such as AAA.
home equity, automobile or credit loans.
We may invest a total of 20% of net assets in asset-backed securities,
corporate notes and bonds, certificates of deposit and commercial paper.
----------------------------------------------------- --------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a short-term investment for
and seller of securities in which the seller agrees the Fund's cash position. In order to enter into these repurchase
to buy the securities back within a specified time agreements, the Fund must have collateral of at least 102% of the
at the same price the buyer paid for repurchase price.
them, plus an amount equal to an agreed upon interest
rate. Repurchase agreements are often viewed as
equivalent to cash.
----------------------------------------------------- --------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------- --------------------------------------------------------------------------
Securities How we use them
----------------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Restricted securities: Privately placed securities We may invest without limitation in privately placed securities that are
whose resale is restricted under securities law. eligible for resale only among certain institutional buyers without
registration. These are commonly known as "Rule 144A Securities."
----------------------------------------------------- --------------------------------------------------------------------------
Illiquid securities: Securities that do not have a We may invest up to 10% of net assets in illiquid securities.
ready market, and cannot be easily sold, if at all,
at approximately the price that the Fund has valued
them.
----------------------------------------------------- --------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including real estate mortgage
investment conduits; certificates of deposit and obligations of both U.S. and
foreign banks; corporate debt and commercial paper; repurchase agreements; and
American Depositary Receipts. Please see the Statement of Additional Information
for additional descriptions on these securities as well as those listed in the
table above.
Lending securities
Limited-Term Government Fund may lend up to 25% of its assets to qualified
brokers, dealers and investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Limited-Term Government Fund may buy or sell securities on a when-issued or
delayed delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Limited-Term Government Fund's annual portfolio turnover will
be less than 100%. A turnover rate of 100% would occur if a Fund sold and
replaced securities valued at 100% of its net assets within one year.
12
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in Limited-Term Government Fund
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in Limited-Term
Government Fund. Please see the Statement of Additional Information for further
discussion of these risks and the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on bonds we
securities in a certain market--like believe will provide a steady income stream regardless of interim
the stock or bond market--will decline in value fluctuations. We do not try to predict overall market
because of factors such market as economic conditions, movements and do not trade for short-term purposes.
future expectations or investor confidence.
- ------------------------------------------------------- -------------------------------------------------------------------
Industry and security risk is the risk that the value We diversify the Fund's assets across a variety of sectors in the
of securities in a particular industry or the value of bond market. We also follow a rigorous selection process before
an individual stock or bond will decline because choosing securities for the portfolio.
of changing expectations for the performance of that
industry or for the individual company issuing the
stock or bond.
- ------------------------------------------------------- -------------------------------------------------------------------
Interest rate risk is the risk that securities, We do not try to increase return by predicting and aggressively
particularly bonds with longer maturities, will capitalizing on interest rate moves. Instead, we aim to maintain
decrease in value if interest rates rise. a short- to intermediate average maturity that helps us reduce
the effects of interest rate volatility.
- ------------------------------------------------------- -------------------------------------------------------------------
Prepayment risk is the risk that homeowners will We take into consideration the likelihood of prepayment when we
prepay mortgages during periods of low interest select mortgages. We may look for mortgage securities that have
rates, forcing an investor to reinvest their money at characteristics that make them less likely to be prepaid, such as
interest rates that might be lower than those on a low outstanding loan balance or below-market interest rates.
the prepaid mortgage. Prepayment risk may also affect
other types of debt securities, but generally to a
lesser extent than mortgage securities.
- ------------------------------------------------------- -------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, if at all, at approximately the
price that the Fund values them.
- ------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
13
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.50% of
average daily net assets for the last fiscal year.
Portfolio managers
Paul A. Grillo and Stephen R. Cianci have day-to-day responsibilities for making
investment decisions for the Fund.
Paul A. Grillo, Vice President/Portfolio Manager of the Fund, holds a BA in
Business Management from North Carolina State University and an MBA in Finance
from Pace University. Mr. Grillo became co-manager of the Fund in January 1999.
Prior to joining Delaware Investments in 1993, Mr. Grillo served as mortgage
strategist and trader at the Dreyfus Corporation. He also served as a mortgage
strategist and portfolio manager for the Chemical Investment Group and as
financial analyst at Chemical Bank. Mr. Grillo is a CFA charterholder.
Stephen R. Cianci, Vice President/Portfolio Manager of the Fund, holds a BS and
an MBA in finance from Widener University. Mr. Cianci became co-manager of the
Fund in January 1999. He joined Delaware Investments in 1992 and assumed
responsibility for maintaining the Fixed Income Department's investment grade
analytical systems. These responsibilities included portfolio analysis and the
analysis of mortgage-backed and asset-backed securities. Mr. Cianci is an
Adjunct Professor of Finance at Widener University and a CFA charterholder.
14
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Board of Directors
Investment manager The Fund
Delaware Management Company Custodian
One Commerce Square The Chase Manhattan Bank
Philadelphia, PA 19103 4 Chase Metrotech Center
Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page __ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to their clients--analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisers are compensated for their services, generally
through sales commissions, and through 12b-1 and/or service fees deducted from
the fund's assets.
15
<PAGE>
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
16
<PAGE>
About your account
Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees, and other features,
you should consult your financial adviser to determine which class best suits
your investment goals and time frame.
Choosing a share class
Class A
o Class A shares have an up-front sales charge of up to 2.75% that you pay
when you buy the shares. The offering price for Class A shares includes
the front-end sales charge.
o If you invest $100,000 or more, your front-end sales charge will be
reduced.
o You may qualify for other reduced sales charges, as described in "How to
reduce your sales charge," and under certain circumstances the sales
charge may be waived; please see the Statement of Additional Information.
o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% (currently 0.15%) of average daily net assets, which is lower than
the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent deferred sales
charge.
Class A Sales Charges
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $100,000 2.75% 2.87% 2.35%
$100,000 but 2.00% 2.07% 1.75%
Under $250,000
$250,000 but 1.00% 1.03% 0.75%
Under $$1 million
</TABLE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you may have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Amount of purchase Sales charge as % Sales charge as % of amount Dealer's commission as %
of offering price invested of offering price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1 million up to $5 none none 0.50%
million
- --------------------------------------------------------------------------------------------------------------------
Amount over $5 million none none 0.25%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Class B
o Class B shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within three
years after you buy them.
o If you redeem Class B shares during the two years after you buy them,
the shares will be subject to a contingent deferred sales charge of 2%.
The contingent deferred sales charge is 1% during the third year, and
0% thereafter.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o For approximately five years after you buy your Class B shares, they
are subject to annual 12b-1 fees no greater than 1% of average daily
net assets, of which 0.25% are service fees paid to the distributor,
dealers or others for providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher expenses
and any dividends paid on these shares are lower than dividends on
Class A shares.
o Approximately five years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee of no more
than 0.30% (currently 0.15%). Conversion may occur as late as three
months after the fifth anniversary of purchase, during which time Class
B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.
Class C
o Class C shares have no up-front sales charge, so the full amount of
your purchase is invested in the Fund. However, you will pay a
contingent deferred sales charge if you redeem your shares within 12
months after you buy them.
o Under certain circumstances the contingent deferred sales charge may be
waived; please see the Statement of Additional Information.
o Class C shares are subject to an annual 12b-1 fee which may not be
greater than 1% of average daily net assets, of which 0.25% are service
fees paid to the distributor, dealers or others for providing services
and maintaining shareholder accounts.
o Because of the higher 12b-1 fees, Class C shares have higher expenses
and pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically convert into
another class.
o You may purchase any amount less than $1,000,000 of Class C shares at
any one time. The limitation on maximum purchases varies for retirement
plans.
Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sales and distribution of its shares. Because
these fees are paid out of the Fund's assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
18
<PAGE>
About your account (continued)
How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the Statement of Additional Information for detailed information
and eligibility requirements. You can also get additional information from your
financial adviser. You or your financial adviser must notify us at the time you
purchase shares if you are eligible for any of these programs.
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------------------------- ------------------------------------------
Program How it works Share class
A B C
- --------------------------------------------- ------------------------------------- ------------------------------------------
<S> <C> <C> <C>
Letter of Intent Through a Letter of Intent you X Although the Letter of
agree to invest a certain Intent and Rights of
amount in Delaware Investment Accumulation do not apply
Funds (except money market to the purchase of Class
funds with no sales charge) B and C shares, you can
over a 13-month period to combine your purchase of
qualify for reduced front-end Class A shares with your
sales charges. purchase of B and C
shares to fulfill your
Letter of Intent or
qualify for Rights of
Accumulation.
- --------------------------------------------- ------------------------------------- --------------
Rights of accumulation You can combine your holdings X
or purchases of all funds in the
Delaware Investments family
(except money market funds with
no sales charge) as well as the
holdings and purchases of your
spouse and children under 21 to
qualify for reduced front-end
sales charges.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
Reinvestment of redeemed shares Up to 12 months after you X Not available.
redeem shares, you can reinvest
the proceeds without paying a
front-end sales charge.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
SIMPLE IRA, SEP IRA, SARSEP, Prototype These investment plans may X There is no reduction in
Profit Sharing, Pension, 401(k), SIMPLE qualify for reduced sales sales charge for group
401(k), 403(b)(7), and 457 Retirement charges by combining the purchases of Class B and
Plans purchases of all members of the Class C shares by
group. Members of these groups retirement plans.
may also qualify to purchase
shares without a front-end sales
charge and a waiver of any
contingent deferred sales
charges.
- --------------------------------------------- ------------------------------------- -------------- ---------------------------
</TABLE>
19
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can purchase or exchange shares through Delaphone, our automated telephone
service, or through our web site, www.delawarefunds.com. For more information
about how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
20
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can generally open an account with
an initial investment of $1,000 and make additional investments at any time for
as little as $100. If you are buying shares in an IRA or Roth IRA, under the
Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act; or through
an Automatic Investing Plan, the minimum purchase is $250, and you can make
additional investments of only $25. The minimum for an Education IRA is $500.
The minimums vary for retirement plans other than IRAs, Roth IRAs or Education
IRAs.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently the Exchange is closed 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. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in the Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
Retirement plans
In addition to being an appropriate investment for your Individual Retirement
Account (IRA), Roth IRA and Education IRA, shares in the Fund may be suitable
for group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial adviser, or call 800.523.1918.
21
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. Signature
guarantees are also required when redemption proceeds are going to an address
other than the address of record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, the First Union Bank fee (currently
$7.50) will be deducted from your proceeds. Bank information must be on file
before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A KEYPAD]
Through automated shareholder services
You can redeem shares through Delaphone, our automated telephone service, or
through our web site, www.delawarefunds.com. For more information about how to
sign up for these services, call our Shareholder Service Center at 800.523.1918.
22
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time), you will receive the net asset value as determined on the
business day we receive your request. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next business day, but no
later than seven days after we receive your request to sell your shares. If you
purchased your shares by check, we will wait until your check has cleared, which
can take up to 15 days, before we send your redemption proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares, not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimum
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for IRAs, Uniform Gift to Minors Act accounts or
accounts with automatic investing plans, $500 for Education IRAs) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.
23
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly investments
directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as Social Security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the CDSC
will also remain the same, with the amount of time you held your original shares
being credited toward the holding period of your new shares. You don't pay sales
charges on shares that you acquired through the reinvestment of dividends. You
may have to pay taxes on your exchange. When you exchange shares, you are
purchasing shares in another fund so you should be sure to get a copy of the
fund's prospectus and read it carefully before buying shares through an
exchange.
24
<PAGE>
About your account (continued)
Special services (continued)
MoneyLineSM On Demand Service
Through our MoneyLineSM On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans, except
for purchases into IRAs. MoneyLine has a minimum transfer of $25 and a maximum
transfer of $50,000.
MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.
Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions and taxes
Dividends are declared daily and paid monthly. Short-term capital gains if any,
may be paid quarterly, but the board of directors may choose to distribute them
less frequently. Long-term capital gains, if any, will be distributed annually.
We automatically reinvest all dividends and capital gains, unless you tell us
otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from the Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from the Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
25
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantees
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
Investments by fund of funds
Limited-Term Government Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the Fund
may experience large investments or redemptions due to allocations or
rebalancings by Foundation Funds. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse effects on
portfolio management. For example, the Fund may be required to sell securities
or invest cash at times when it would not otherwise do so. These transactions
could also have tax consequences if sales of securities result in gains, and
could also increase transaction costs or portfolio turnover. The manager will
monitor transactions by Foundation Funds and will attempt to minimize any
adverse effects on both Limited-Term Government Fund and Foundation Funds as a
result of these transactions.
26
<PAGE>
Financial highlights
The Financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Limited-Term Government Fund A Class
Year Ended 12/31
------------------------------------------------------
1998 1997 1996 1995 1994
------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.620 $8.770 $9.050 $8.990 $9.840
Income (loss) from investment operations
Net investment income 0.540 0.601 0.600 0.699 0.667
Net realized gain (loss) on investments,
futures contracts and written options 0.079 (0.150) (0.280) 0.060 (0.850)
----- ------- ------- ----- -------
Total from investment operations 0.619 0.451 0.320 0.759 (0.183)
----- ----- ----- ----- -------
Less dividends
Dividends from net investment income (0.539) (0.601) (0.600) (0.699) (0.667)
------- ------- ------- ------- -------
Total dividends (0.539) (0.601) (0.600) (0.699) (0.667)
------- ------- ------- ------- -------
Net asset value, end of period $8.700 $8.620 $8.770 $9.050 $8.990
====== ====== ====== ====== ======
Total return (2) 7.46% 5.23% 3.69% 8.71% (1.88%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $317,329 $355,079 $464,649 $653,451 $789,525
Ratio of expenses to average net assets 1.01% 0.98% 0.93% 0.96% 0.91%
Ratio of net investment income to average 6.32% 6.85% 6.80% 7.71% 7.10%
net assets
Portfolio turnover 69% 79% 83% 73% 148%
</TABLE>
(2) Total investment return is based on the charge in net asset value of a share
during the period and assumes reinvestment of distributions of net asset value
and does not reflect the impact of a sales charge.
27
<PAGE>
[Restubbed Table]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Limited-Term Government Fund B Class
Year Ended 12/31 Period
5/2/94(1)
--------------------------------------- through
1998 1997 1996 1995 12/31/94
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.620 $8.770 $9.050 $8.990 $9.430
Income (loss) from investment operations
Net investment income 0.467 0.522 0.524 0.622 0.399
Net realized gain (loss) on investments,
futures contracts and written options 0.079 (0.150) (0.280) 0.060 (0.440)
----- ------- ------- ----- -------
Total from investment operations 0.546 0.372 0.244 0.682 (0.041)
----- ----- ----- ----- -------
Less dividends
Dividends from net investment income (0.466) (0.522) (0.524) (0.622) (0.399)
------- ------- ------- ------- -------
Total dividends (0.466) (0.522) (0.524) (0.622) (0.399)
------- ------- ------- ------- -------
Net asset value, end of period $8.700 $8.620 $8.770 $9.050 $8.990
====== ====== ====== ====== ======
Total return (2) 6.55% 4.35% 2.81% 7.80% (0.44%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $13,900 $12,119 $12,959 $12,313 $6,282
Ratio of expenses to average net assets 1.86% 1.83% 1.78% 1.81% 1.76%
Ratio of net investment income to average 5.47% 5.98% 5.91% 6.86% 6.25%
net assets
Portfolio turnover 69% 79% 83% 73% 148%
</TABLE>
(1) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(2) Total investment return is based on the charge in net asset value of a share
during the period and assumes reinvestment of distributions of net asset value
and does not reflect the impact of a sales charge.
28
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Limited-Term Government Fund C Class
Year Ended 12/31 Period
11/28/95(1)
------------------------------------------ through
1998 1997 1996 12/31/95
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $8.620 $8.770 $9.050 $9.010
Income (loss) from investment operations
Net investment income 0.467 0.524 0.524 0.051
Net realized gain (loss) on investments,
futures contracts and written options 0.079 (0.152) (0.280) 0.040
----- ------- ------- -----
Total from investment operations 0.546 0.372 0.244 0.091
----- ----- ----- -----
Less dividends
Dividends from net investment income (0.466) (0.522) (0.524) (0.051)
------- ------- ------- -------
Total dividends (0.466) (0.522) (0.524) (0.051)
------- ------- ------- -------
Net asset value, end of period $8.700 $8.620 $8.770 $9.050
====== ====== ====== ======
Total return(2) 6.56% 4.34% 2.81% (1)
Ratios and supplemental data
Net assets, end of period (000 omitted) 4,932 $3,580 $3,090 $33
Ratio of expenses to average net assets 1.86% 1.83% 1.78% (1)
Ratio of net investment income to average 5.47% 5.98% 5.78% (1)
net assets
Portfolio turnover 69% 79% 83% (1)
</TABLE>
(1) Date of initial public offering; the ratios of expenses and net investment
income to average net assets, portfolio turnover and total return have been
omitted as management believes that such ratios and return for the relatively
short period are not meaningful.
(2) Total investment return is based on the charge in net asset value of a share
during the period and assumes reinvestment of distributions of net asset value
and does not reflect the impact of a sales charge.
29
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss)
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders, if any,
would appear under "Less dividends and distributions-Distributions from net
realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover rate
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
30
<PAGE>
How to use this glossary
This glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Commission
The fee an investor pays to a financial adviser for investment advice and help
in buying or selling mutual funds, stocks, bonds or other securities.
31
<PAGE>
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years; an alternative method for investors to
compensate a financial adviser for advice and service, rather than an up-front
commission.
Corporate bond
A debt security issued by a corporation. See bond.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
32
<PAGE>
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund's average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
Merrill Lynch One-to-Three Year Treasury Index
An unmanaged index of U.S. Treasury notes and bonds with maturities greater than
or equal to one year and less than three years. It does not include inflation
linked U.S. government bonds.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
33
<PAGE>
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
34
<PAGE>
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Uniform Gift to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide a simple way to transfer property to a minor
with special tax advantages.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments. [end glossary]
35
<PAGE>
Limited-Term Government Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual report to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Shareholder Service Center
800o523o1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 8 p.m. Eastern
time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions and
telephone exchanges.
Delaphone Service
800o362oFUND (800o362o3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a day,
use this Touch-Tone(R) service.
DELAWARE
INVESTMENTS
Philadelphia * London
---------------------
Investment Company Act file number: 811-3363
Fund Symbols
CUSIP NASDAQ
Limited-Term Government Fund Class A 245912308 DTRIX
Limited-Term Government Fund Class B 245912605 DTIBX
Limited-Term Government Fund Class C 245912704 DTICX
<PAGE>
DELAWARE
INVESTMENTS
-----------
Philadelphia * London
Limited-Term Government Fund
Institutional Class
Prospectus
April 28, 1999
Current Income Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
2
<PAGE>
Table of contents
Fund profile page
Limited-Term Government Fund
How we manage the Fund page
Our investment strategies
The securities we typically invest in
The risks of investing in the Fund
Who manages the Fund page
Investment manager
Portfolio managers
Fund administration (Who's who)
About your account page
Investing in the Fund
How to buy shares
How to redeem shares
Account minimum
Exchanges
Dividends, distributions and taxes
Certain management considerations
Financial highlights page
3
<PAGE>
Profile: Limited-Term Government Fund
What are the Fund's goals?
Limited-Term Government Fund seeks to provide a high stable level of income,
while attempting to minimize fluctuations in principal and provide maximum
liquidity. Although the Fund will strive to achieve its goal, there is no
assurance that it will.
What are the Fund's main investment strategies?
We invest primarily in short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. We may
invest in instruments that use such government securities as collateral. We may
also invest up to 20% of the Fund's net assets in corporate notes and bonds,
certificates of deposit and obligations of U.S. and foreign banks, commercial
paper and certain asset-backed securities.
The level of income the Fund provides will vary depending on current interest
rates and the specific securities in the portfolio. However, since longer term
rates are generally less volatile than short-term rates, the Fund's income may
fluctuate less than a money market fund's income.
What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The price of Fund shares will increase and
decrease according to changes in the value of the Fund's investments. This Fund
will be affected primarily by adverse changes in interest rates. When interest
rates rise, the value of bonds in the portfolio will likely decline. For a more
complete discussion of risk, please turn to page ___.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
Who should invest in the Fund
o Investors with intermediate or long-term financial goals.
o Investors seeking monthly income.
o Investors who would like a relatively conservative income investment to
help balance a growth-oriented long-term portfolio.
o Investors seeking a high quality investment with a measure of capital
preservation.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially, over the short term.
o Investors who want an investment with a fixed share price, such as a money
market fund.
4
<PAGE>
How has Limited-Term Government Fund performed?
This bar chart and table can help you evaluate the potential risks of investing
in the Fund. We show how returns for the Fund's Institutional Class shares have
varied over the past ten calendar years, as well as the average annual returns
for one, five and ten years. Limited-Term Government Fund's Institutional Class
commenced operations on June 1, 1992. Return information for the Institutional
Class for the periods prior to the time the Institutional Class commenced
operations is calculated by taking the performance of Limited-Term Government
Fund A Class and eliminating all sales charges that apply to Class A shares.
However, for those periods, no adjustment has been made to eliminate the impact
of 12b-1 plan payments, and performance may have been affected had such an
adjustment been made. The Fund's past performance is not necessarily an
indication of how it will perform in the future.
[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (INSTITUTIONAL
CLASS) FPO]
Year-by-year total return (Institutional Class)
1998 7.62%
1997 5.39%
1996 3.84%
1995 8.87%
1994 -1.74%
1993 5.46%
1992 5.77%
1991 13.23%
1990 9.48%
1989 9.21%
As of March 31, 1999 the Institutional Class had a year-to-date return of 0.61%.
During the ten years illustrated in this bar chart, the Institutional Class'
highest return was 4.53% for the quarter ended December 31, 1998 and its lowest
return was -1.42% for the quarter ended March 31, 1994.
Average annual return as of 12/31/98
Institutional Merrill Lynch One- to-Three Year
Class Treasury Index
1 year 7.62% 7.00%
5 years 5.35% 5.99%
10 years 7.72% 7.37%
5
<PAGE>
What are the Fund's fees and expenses?
You do not pay sales charges directly from your investments when you buy or sell
shares of the Institutional Class.
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on purchases as none
a percentage of offering price
------------------------------------------------------ ----------
Maximum contingent deferred sales charge (load) as a none
percentage of original purchase price or redemption
price, whichever is lower
------------------------------------------------------ ----------
Maximum sales charge (load) imposed on reinvested none
dividends
------------------------------------------------------ ----------
Redemption fees none
------------------------------------------------------ ----------
Exchange Fees(1) none
------------------------------------------------------ ----------
Annual fund operating expenses are deducted from the Fund's assets before it
pays dividends and before its net asset value and total return are calculated.
We will not charge you separately for these expenses. These expenses are based
on amounts incurred during the Fund's most recent fiscal year.
------------------------------------------------------ -----------
Management fees 0.50%
------------------------------------------------------ -----------
Distribution and service (12b-1) fees none
------------------------------------------------------ -----------
Other expenses 0.36%
------------------------------------------------------ -----------
Total operating expenses 0.86%
------------------------------------------------------ -----------
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds with similar investment
objectives. We show the cumulative amount of Fund expenses on a hypothetical
investment of $10,000 with an annual 5% return over the time shown.(2) This is
an example only, and does not represent future expenses, which may be greater or
less than those shown here.
--------------- ------------
1 year $88
--------------- ------------
3 years $274
--------------- ------------
5 years $477
--------------- ------------
10 years $1,061
--------------- ------------
(1) Exchanges are subject to the requirements of each fund in the Delaware
Investments family. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the Fund's
total operating expenses remain unchanged in each of the periods we show.
6
<PAGE>
How we manage the Fund
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we think are the best investments for the Limited-Term
Government Fund. Following are descriptions of how the portfolio managers pursue
the Fund's investment goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Limited-Term Government Fund
We invest primarily in short- and intermediate-term fixed income securities
including:
o securities issued or guaranteed by the U.S. government such as U.S.
Treasuries,
o securities issued by U.S. government agencies or instrumentalities such
as securities of the Government National Mortgage Association.
We may also invest in securities issued by non-government entities as
long as the securities have U.S. government-backed securities as collateral,
corporate notes and bonds, certificates of deposit and obligations of both U.S.
and foreign banks, commercial paper and certain asset-backed securities.
The Fund's level of income and the stability of its share price will be
directly affected by changes in short- and intermediate term interest rates. We
anticipate that the level of income could be higher and more stable than a money
market fund. However, the Fund's share price will increase and decrease with
changes in interest rates. This makes its risk level greater than that of a
money market fund.
We strive to reduce the effects of interest rate changes on the share
price by keeping the average effective maturity below five years. The average
effective maturity is the average effective maturity of all securities in the
portfolio. If we believe that interest rates are historically low, we may
shorten the average effective maturity to three years or less. Conversely, if we
believe rates are high and therefore likely to go lower, we may increase average
effective maturity to as high as five years. We may purchase individual
securities with a remaining maturity of up to 15 years.
7
<PAGE>
The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.
<TABLE>
<CAPTION>
----------------------------------------------------- --------------------------------------------------------------------------
Securities How we use them
----------------------------------------------------- --------------------------------------------------------------------------
----------------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Direct U.S. Treasury obligations include Treasury We may invest without limit in U.S. Treasury securities, though they
bills, notes and bonds of varying maturities. U.S. are typically not our largest holding because they generally do not
Treasury securities are backed by the "full faith offer as high a level of current income as other fixed income
and credit" of the United States. securities.
----------------------------------------------------- --------------------------------------------------------------------------
Mortgage-backed securities: Fixed-income securities There is no limit on government-related mortgage-backed securities.
that represent pools of mortgages, with investors
receiving principal and interest payments as the We may invest up to 35% of net assets in mortgage-backed securities
underlying mortgage loans are paid back. Many are issued by private companies if they are 100% collateralized at the time
issued and guaranteed against default by the U.S. of issuance by securities or certificates issued or guaranteed by the
government or its agencies or instrumentalities, U.S. government, its agencies or instrumentalities. These securities
such as the Federal Home Loan Mortgage Corporation, must be rated in one of the two highest categories by an NRSRO at the
Fannie Mae and the Government National Mortgage time of purchase.
Association. Others are issued by private financial
institutions, with some fully collateralized by Two of the privately issued securities we often invest in are CMOs and
certificates issued or guaranteed by the government REMICs (see below).
or its agencies or instrumentalities.
----------------------------------------------------- --------------------------------------------------------------------------
Collateralized mortgage obligations (CMOs): These securities are not government securities and are not directly
Privately issued mortgage-backed bonds whose guaranteed by the U.S. government in any way. They are secured by the
underlying value is the mortgages that are grouped underlying collateral of the private issuer. We will invest in these
into different pools according to their maturity. securities only if they meet the criteria discussed in "mortgage-backed
securities" above.
----------------------------------------------------- --------------------------------------------------------------------------
Asset-backed securities: Bonds or notes backed by We may invest only in asset-backed securities rated in the highest
accounts receivables including home equity, quality category by an NRSRO, such as AAA.
automobile or credit loans.
We may invest a total of 20% of net assets in non-government securities,
which includes asset-backed securities, corporate notes and bonds,
certificates of deposit and commercial paper.
- ------------------------------------------------------ --------------------------------------------------------------------------
Repurchase agreements: An agreement between a buyer Typically, we use repurchase agreements as a short-term investment for
and seller of securities in which the seller agrees the Fund's cash position. In order to enter into these repurchase
to buy the securities back within a specified time agreements, the Fund must have collateral of at least 102% of the
at the same price the buyer paid for them, plus an repurchase price.
amount equal to an agreed upon interest rate.
Repurchase agreements are often viewed as equivalent
to cash.
- ------------------------------------------------------ --------------------------------------------------------------------------
Restricted securities: Privately placed securities We may invest without limitation in privately placed securities that are
whose resale is restricted under securities law. eligible for resale only among certain institutional buyers without
registration. These are commonly known as "Rule 144A Securities." Other
restricted securities must be limited to 10% of total Fund assets.
- ------------------------------------------------------ --------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------- --------------------------------------------------------------------------
Securities How we use them
----------------------------------------------------- --------------------------------------------------------------------------
<S> <C>
Illiquid securities: Securities that do not have a We may invest up to 10% of total assets in illiquid securities.
ready market, and cannot be easily sold, if at all,
at approximately the price that the Fund has valued
them.
- ------------------------------------------------------ --------------------------------------------------------------------------
</TABLE>
The Fund may also invest in other securities including real estate mortgage
investment conduits; certificates of deposit and obligations of both U.S. and
foreign banks; corporate debt and commercial paper; repurchase agreements; and
American Depositary Receipts. Please see the Statement of Additional Information
for additional descriptions on these securities as well as those listed in the
table above.
Lending securities
Limited-Term Government Fund may lend up to 25% of its assets to qualified
brokers, dealers and investors for their use in security transactions.
Purchasing securities on a when-issued or delayed delivery basis
Limited-Term Government Fund may buy or sell securities on a when-issued or
delayed delivery basis; that is, paying for securities before delivery or taking
delivery at a later date.
Portfolio turnover
We anticipate that Limited-Term Government Fund's annual portfolio turnover will
be less than 100%. A turnover rate of 100% would occur if a Fund sold and
replaced securities valued at 100% of its net assets within one year.
9
<PAGE>
The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund you should
carefully evaluate the risks. An investment in Limited-Term Government Fund
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in Limited-Term
Government Fund. Please see the Statement of Additional Information for further
discussion of these risks and the other risks not discussed here.
<TABLE>
<CAPTION>
- ------------------------------------------------------- -------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------- -------------------------------------------------------------------
- ------------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on bonds we
securities in a certain market--like the stock or bond believe will provide a steady income stream regardless of interim
market--will decline in value because of factors such marketfluctuations. We do not try to predict overall market
as economic conditions, future expectations or movements and do not trade for short-term purposes.
investor confidence.
- ------------------------------------------------------- -------------------------------------------------------------------
Industry and security risk is the risk that the value We diversify the Fund's assets across a variety of sectors in the
of securities in a particular industry or the value bond market. We also follow a rigorous selection process before
ofan individual stock or bond will decline because choosing securities for the portfolio.
of changing expectations for the performance of that
industry or for the individual company issuing the
stock or bond.
- ------------------------------------------------------- -------------------------------------------------------------------
Interest rate risk is the risk that securities, We do not try to increase return by predicting and aggressively
particularly bonds with longer maturities, will capitalizing on interest rate moves. Instead, we aim to maintain
decrease in value if interest rates rise. a short- to intermediate average maturity that helps us reduce
the effects of interest rate volatility.
- ------------------------------------------------------- -------------------------------------------------------------------
Prepayment risk is the risk that homeowners will We take into consideration the likelihood of prepayment when we
prepay mortgages during periods of low interest select mortgages. We may look for mortgage securities that have
rates, forcing an investor to reinvest their money at characteristics that make them less likely to be prepaid, such as
interest rates that might be lower than those on the a low outstanding loan balance or below-market interest rates.
prepaid mortgage. Prepayment risk may also affect other
types of debt securities, but generally to a lesser
extent than mortgage securities.
- ------------------------------------------------------- -------------------------------------------------------------------
Liquidity risk is the possibility that securities We limit exposure to illiquid securities.
cannot be readily sold, if at all, at approximately the
price that the Fund values them.
- ------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
10
<PAGE>
Who manages the Fund
Investment manager
The Fund is managed by Delaware Management Company, a series of Delaware
Management Business Trust which is an indirect, wholly owned subsidiary of
Delaware Management Holdings, Inc. Delaware Management Company makes investment
decisions for the Fund, manages the Fund's business affairs and provides daily
administrative services. For these services, the manager was paid 0.50% of
average daily net assets for the last fiscal year.
Portfolio managers
Paul A. Grillo and Stephen R. Cianci have day-to-day responsibilities for making
investment decisions for the Fund.
Paul A. Grillo, Vice President/Portfolio Manager of the Fund, holds a BA in
Business Management from North Carolina State University and an MBA in Finance
from Pace University. Mr. Grillo became co-manager of the Fund in January 1999.
Prior to joining Delaware Investments in 1993, Mr. Grillo served as mortgage
strategist and trader at the Dreyfus Corporation. He also served as a mortgage
strategist and portfolio manager for the Chemical Investment Group and as
financial analyst at Chemical Bank. Mr. Grillo is a CFA charterholder.
Stephen R. Cianci, Vice President/Portfolio Manager of the Fund, holds a BS and
an MBA in finance from Widener University. Mr. Cianci became co-manager of the
Fund in January 1999. He joined Delaware Investments in 1992 and assumed
responsibility for maintaining the Fixed Income Department's investment grade
analytical systems. These responsibilities included portfolio analysis and the
analysis of mortgage-backed and asset-backed securities. Mr. Cianci is an
Adjunct Professor of Finance at Widener University and a CFA charterholder.
11
<PAGE>
Who's who?
This diagram shows the various organizations involved with managing,
administering, and servicing the Delaware Investments funds.
[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED
WITH MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS
FUNDS]
<TABLE>
<CAPTION>
Board of Directors
<S> <C> <C> <C>
Investment manager The Fund Custodian
Delaware Management Company The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Portfolio managers Distributor Service agent
(see page ___ for details) Delaware Distributors, L.P. Delaware Service Company, Inc.
1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Shareholders
</TABLE>
Board of directors A mutual fund is governed by a board of directors which has
oversight responsibility for the management of the fund's business affairs.
Directors establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of directors must be independent of the fund's
investment manager or distributor. These independent fund directors, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and typically place them with a qualified bank custodian who
segregates fund securities from other bank assets.
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to
National Association of Securities Dealers, Inc. (NASD) rules governing mutual
fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect directors. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
12
<PAGE>
About your account
Investing in the Fund
Institutional Class shares are available for purchase only by the following:
o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans
o tax-exempt employee benefit plans of the manager or its affiliates and
securities dealer firms with a selling agreement with the distributor
o institutional advisory accounts of the manager, or its affiliates and those
having client relationships with Delaware Investment Advisers, an affiliate
of the manager, or its affiliates and their corporate sponsors, as well as
subsidiaries and related employee benefit plans and rollover individual
retirement accounts from such institutional advisory accounts
o a bank, trust company 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
o registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the adviser for investment purposes, but only if
the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services
13
<PAGE>
How to buy shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014128934013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us at 800.510.4015 so we can assign you an
account number.
[GRAPHIC OMITTED: ILLUSTRATION OF AN EXCHANGE SYMBOL]
By exchange
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that you may not exchange your shares for Class B or Class C
shares. To open an account by exchange, call your Client Services Representative
at 800.510.4015.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
14
<PAGE>
About your account (continued)
How to buy shares (continued)
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a business day,
you will pay that day's closing share price which is based on the Fund's net
asset value. If we receive your order after the close of trading, you will pay
the next business day's price. A business day is any day that the New York Stock
Exchange is open for business. Currently, the Exchange is closed 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. We reserve the right to reject any purchase
order.
We determine the Fund's net asset value (NAV) per share at the close of trading
of the New York Stock Exchange each business day that the Exchange is open. We
calculate this value by adding the market value of all the securities and assets
in a Fund's portfolio, deducting all liabilities, and dividing the resulting
number by the number of shares outstanding. The result is the net asset value
per share. We price securities and other assets for which market quotations are
available at their market value. We price fixed-income securities on the basis
of valuations provided to us by an independent pricing service that uses methods
approved by the board of directors. Any fixed-income securities that have a
maturity of less than 60 days we price at amortized cost. We price all other
securities at their fair market value using a method approved by the board of
directors.
15
<PAGE>
How to redeem shares
[GRAPHIC OMITTED: ILLUSTRATION OF AN ENVELOPE]
By mail
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of $50,000 or
more, you must include a signature guarantee for each owner. You can also fax
your written request to 215.255.8864. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on an account.
[GRAPHIC OMITTED: ILLUSTRATION OF A TELEPHONE]
By telephone
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A JAGGED LINE]
By wire
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. Bank information must be on file before you request a wire redemption.
[GRAPHIC OMITTED: ILLUSTRATION OF A PERSON]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
16
<PAGE>
About your account (continued)
How to redeem shares (cont.)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) you will receive the net asset value as determined on the business
day we receive your request. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund. If you exchange shares to a fund that has a
sales charge you will pay any applicable sales charges on your new shares. You
don't pay sales charges on shares that are acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. You may not exchange your shares for Class B and Class C shares of the
funds in the Delaware Investments family.
Dividends, distributions and taxes
Dividends are declared daily and paid monthly. Short-term capital gains if any,
may be paid quarterly, but the board of directors may choose to distribute them
less frequently. Long-term capital gains, if any, will be distributed annually.
We automatically reinvest all dividends and capital gains.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your dividends from this Fund is the same whether you reinvest
your dividends or receive them in cash. Distributions from a Fund's long-term
capital gains are taxable as capital gains, while distributions from short-term
capital gains and net investment income are generally taxable as ordinary
income. Any capital gains may be taxable at different rates depending on the
length of time the Fund held the assets. In addition, you may be subject to
state and local taxes on distributions.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year.
17
<PAGE>
Certain management considerations
Year 2000
As with other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by its service providers do not properly process and calculate date-related
information from and after January 1, 2000. This is commonly known as the "Year
2000 Problem." The Fund is taking steps to obtain satisfactory assurances that
its major service providers are taking steps reasonably designed to address the
Year 2000 Problem on the computer systems that the service providers use.
However, there can be no assurance that these steps will be sufficient to avoid
any adverse impact on the business of the Fund. The portfolio managers and
investment professionals of the Fund consider Year 2000 compliance in the
securities selection and investment process. However, there can be no guarantees
that, even with their due diligence efforts, they will be able to predict the
effect of Year 2000 on any company or the performance of its securities.
Investments by fund of funds
Limited-Term Government Fund accepts investments from the series portfolios of
Delaware Group Foundation Funds, a fund of funds. From time to time, the Fund
may experience large investments or redemptions due to allocations or
rebalancings by Foundation Funds. While it is impossible to predict the overall
impact of these transactions over time, there could be adverse effects on
portfolio management. For example, the Fund may be required to sell securities
or invest cash at times when it would not otherwise do so. These transactions
could also have tax consequences if sales of securities result in gains, and
could also increase transaction costs or portfolio turnover. The manager will
monitor transactions by Foundation Funds and will attempt to minimize any
adverse effects on both Limited-Term Government Fund and Foundation Funds as a
result of these transactions.
18
<PAGE>
Financial highlights
The Financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800.523.1918.
<TABLE>
<CAPTION>
- ------------------------------------------------- -------------------------------------------------------
Limited Term Government Fund Institutional Class
Year Ended 12/31
-------------------------------------------------------
1998 1997 1996 1995 1994
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $8.620 $8.770 $9.050 $8.990 $9.840
Income (loss) from investment operations
Net investment income 0.553 0.605 0.613 0.712 0.681
Net realized gain (loss) on investments,
futures contracts and written options 0.079 (0.150) (0.280) 0.060 (0.850)
----- ------- ------- ----- -------
Total from investment operations 0.632 0.455 0.333 0.772 (0.169)
----- ----- ----- ----- -------
Less dividends
Dividends from net investment income (0.552) (0.605) (0.613) (0.712) (0.681)
------- ------- ------- ------- -------
Total dividends (0.552) (0.605) (0.613) (0.712) (0.681)
------- ------- ------- ------- -------
Net asset value, end of year $8.700 $8.620 $8.770 $9.050 $8.990
====== ====== ====== ====== ======
Total return 7.62% 5.39% 3.84% 8.87% (1.74%)
Ratios and supplemental data
Net assets, end of period (000 omitted) $21,201 $32,902 $30,349 $37,460 $37,238
Ratio of expenses to average net assets 0.86% 0.83% 0.78% 0.81% 0.76%
Ratio of net investment income to
average net assets 6.47% 6.98% 6.92% 7.86% 7.25%
Portfolio turnover 69% 79% 83% 73% 148%
</TABLE>
19
<PAGE>
How to read the financial highlights
Net investment income
Net investment income includes dividend and interest income earned from the
Fund's securities; it is after expenses have been deducted.
Net realized and unrealized gain (loss)
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share that we pay to shareholders, if any,
would appear under "Less dividends and distributions-Distributions from net
realized gain on investments."
Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.
Total return
This represents the rate that an investor would have earned or lost on an
investment in the Fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.
Net assets
Net assets represent the total value of all the assets in the Fund's portfolio,
less any liabilities, that are attributable to that class of the Fund.
Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.
Ratio of net investment income to average net assets
We determine this ratio by dividing net investment income by average net assets.
Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. For
example, a fund with a 50% turnover has bought and sold half of the value of its
total investment portfolio during the stated period.
20
<PAGE>
[begin glossary]
Glossary
This glossary includes definitions of investment terms used throughout the
Prospectus. If you would like to know the meaning of an investment term that is
not explained in the text please check the glossary.
Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.
Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.
Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and is
inversely related to current interest rates. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise. See also Nationally
recognized statistical rating organization.
Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical rating organization. See also
Nationally recognized statistical rating organization.
Capital
The amount of money you invest.
Capital appreciation
An increase in the value of an investment.
Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.
Compounding
Earnings on an investment's previous earnings.
Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.
21
<PAGE>
Corporate bond
A debt security issued by a corporation. See bond.
Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.
Depreciation
A decline in an investment's value.
Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.
Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.
Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.
Financial adviser
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.
Fixed-income securities
With fixed-income securities, the money you originally invested is paid back at
a pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bonds.
Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).
22
<PAGE>
Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.
Management fee
The amount paid by a mutual fund to the investment adviser for management
services, expressed as an annual percentage of the fund' s average daily net
assets.
Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.
Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.
Merrill Lynch One-to-Three Year Treasury Index
An unmanaged index of U.S. Treasury notes and bonds with maturities greater than
or equal to one year and less than three years. It does not include inflation
linked U.S. government bonds.
National Association of Securities Dealers (NASD)
A self-regulating organization, consisting of brokerage firms (including
distributors of mutual funds), that is responsible for overseeing the actions of
its members.
Nationally recognized statistical rating organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service
(Moody's), Standard & Poor's Corporation (S&P), Duff & Phelps, Inc. (Duff), and
Fitch Investor Services, Inc. (Fitch).
Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.
Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pays dividends at a fixed
rate and is sometimes convertible into common stock.
Price/earnings ratio
A measure of a stock's value calculated by dividing the current market price of
a share of stock by its annual earnings per share. A stock selling for $100 per
share with annual earnings per share of $5 has a P/E of 20.
23
<PAGE>
Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.
Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.
Redeem
To cash in your shares by selling them back to the mutual fund.
Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.
Sales charge
Charge on the purchase or redemption of fund shares sold through financial
advisers. May vary with the amount invested. Typically used to compensate
advisers for advice and service provided.
SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual fund companies.
Share classes
Different classifications of shares; mutual fund share classes offer a variety
of sales charge choices.
Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid; signature guarantees can be provided by members
of the STAMP program.
Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.
Statement of Additional Information (SAI)
The document serving as "Part B" of a fund's prospectus that provides more
detailed information about the fund's organization, investments, policies and
risks.
Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as "equities."
24
<PAGE>
Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.
Volatility
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.
[end glossary]
25
<PAGE>
[back cover]
Limited-Term Government Fund
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual report to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the report
period. You can find more detailed information about the Fund in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in the Fund, you can write to us at 1818 Market Street, Philadelphia, PA 19103,
or call toll-free 800.523.1918. You may also obtain additional information about
the Fund from your financial adviser.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information, after payment
of a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009. Information about the Fund, including its Statement
of Additional Information, can be reviewed and copied at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get
information on the public reference room by calling the SEC at 1.800.SEC.0330.
Web site
www.delawarefunds.com
E-mail
[email protected]
Client Services Representative
800.510.4015
Delaphone Service
800-362-FUND (800.362.3863)
For convenient access to account information or current performance information
on all Delaware Investments Funds seven days a week, 24 hours a day, use this
Touch-Tone service.
DELAWARE
INVESTMENTS
Philadelphia * London
---------------------
Investment Company Act file number: 811-3363
Fund Symbols
CUSIP NASDAQ
Limited-Term Government Fund Institutional Class 245912506 DTINX
P-002 [--] PP 1/99
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
APRIL 28, 1999
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
Limited-Term Government Fund
1818 Market Street
Philadelphia, PA 19103
For more information about Institutional Classes:
800-510-4015
For Prospectus, Performance and Information
on Existing Accounts of Class A Shares,
Class B Shares and Class C Shares:
Nationwide 800-523-1918
Dealer Services:
(BROKER/DEALERS ONLY) Nationwide 800-362-7500
Delaware Group Limited-Term Government Funds, Inc. ("Limited-Term
Funds, Inc.") is a professionally-managed mutual fund of the series type which
currently offers one series of shares: Limited-Term Government Fund (the
"Fund").
The Fund offers Class A Shares, Class B Shares, Class C Shares (Class A
Shares, Class B Shares and Class C Shares together referred to as the "Fund
Classes"), and Institutional Class shares ("Institutional Class"). All
references to "shares" in this Part B refer to all Classes of shares of
Limited-Term Funds, Inc, except where noted.
This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus for
the Fund Classes dated April 28, 1998 and the current Prospectus for the
Institutional Class dated April 28, 1999, as they may be amended from time to
time. Part B should be read in conjunction with the respective Class'
Prospectus. Part B is not itself a prospectus but is, in its entirety,
incorporated by reference into each Class' Prospectus. A prospectus relating to
the Fund Classes and a prospectus relating to the Institutional Class may be
obtained by writing or calling your investment dealer or by contacting the
Fund's national distributor, Delaware Distributors, L.P. (the "Distributor"), at
the above address or by calling the above phone numbers. The Fund's financial
statements, the notes relating thereto, the financial highlights and the report
of independent auditors are incorporated by reference from the Annual Report
into this Part B. The Annual Report will accompany any request for Part B. The
Annual Report can be obtained, without charge, by calling 800-523-1918.
<PAGE>
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
Appendix A - Ratings
Appendix B - Investment Objectives of the Other Funds in the Delaware
Investments Family
-2-
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund will invest in securities for income earnings rather than
trading for profit. The Fund will not vary portfolio investments, except to:
1. eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of the Fund;
2. honor redemption orders, meet anticipated redemption requirements,
and negate gains from discount purchases;
3. reinvest the earnings from securities in like securities; or
4. defray normal administrative expenses.
Investment Restrictions
Limited-Term Funds, Inc. has adopted the following restrictions for the
Fund which, along with its investment objective, cannot be changed without
approval by the holders of a "majority" of the Fund's outstanding shares, which
is a vote by the holders of the lesser of: (a) 67% or more of the voting
securities of the Fund present in person or by proxy at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy; or (b) more than 50% of the Fund's outstanding voting
securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.
The Limited-Term Government Fund series shall not:
1. Invest more than 5% of the market or other fair value of its assets
in the securities of any one issuer (other than obligations of, or guaranteed
by, the U.S. government, its agencies or instrumentalities).
2. Invest in securities of other investment companies except as part of
a merger, consolidation or other acquisition, and except to the extent that an
issuer of mortgage-backed securities may be deemed to be an investment company,
provided that any such investment in securities of an issuer of a
mortgage-backed security which is deemed to be an investment company will be
subject to the limits set forth in Section 12(d)(1)(A) of the Investment Company
Act of 1940 (the "1940 Act"), as amended.
The Fund has been advised by the staff of the Securities and Exchange
Commission (the "Commission") that it is the staff's position that, under the
1940 Act, the Fund may invest (a) no more than 10% of its assets in the
aggregate in certain CMOs and REMICs which are deemed to be investment companies
under the 1940 Act and issue their securities pursuant to an exemptive order
from the Commission, and (b) no more than 5% of its assets in any single issue
of such CMOs or REMICs.
-3-
<PAGE>
3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with the Fund's investment
objective and policies are considered loans and except that the Fund may loan up
to 25% of its assets to qualified broker/dealers or institutional investors for
their use relating to short sales or other security transactions.
4. Purchase or sell real estate but this shall not prevent the Fund
from investing in securities secured by real estate or interests therein.
5. Purchase more than 10% of the outstanding voting or nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.
6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Fund may be deemed to
be an "underwriter" as that term is defined in the Securities Act of 1933.
7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
8. Write, purchase or sell options, puts, calls or combinations
thereof, except that the Fund may: (a) write covered call options with respect
to any part or all of its portfolio securities; (b) purchase call options to the
extent that the premiums paid on all outstanding call options do not exceed 2%
of the Fund's total assets; (c) write secured put options; (d) purchase put
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.
-4-
<PAGE>
15. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing exceeds 5% of the value of the Fund's net assets, asset coverage of at
least 300% is required. In the event that such asset coverage shall at any time
fall below 300%, the Fund shall, within three days thereafter (not including
Sunday or holidays) or such longer period as the Commission may prescribe by
rules and regulations, reduce the amount of its borrowings to such an extent
that the asset coverage of such borrowings shall be at least 300%. The Fund will
not pledge more than 10% of its net assets. The Fund will not issue senior
securities as defined in the 1940 Act, except for notes to banks. Securities
will not be purchased while the Fund has an outstanding borrowing.
Although not a fundamental investment restriction, the Fund currently
does not invest its assets in real estate limited partnerships.
Average Effective Maturity
The Fund limits its average effective dollar weighted portfolio
maturity to no more than three to five years. However, many of the securities in
which the Fund invests will have remaining maturities in excess of five years.
Some of the securities in the Fund's portfolio may have periodic
interest rate adjustments based upon an index such as the 91-day Treasury Bill
rate. This periodic interest rate adjustment tends to lessen the volatility of
the security's price. With respect to securities with an interest rate
adjustment period of one year or less, the Fund will, when determining average
weighted maturity, treat such a security's maturity as the amount of time
remaining until the next interest rate adjustment.
Instruments such as GNMA, FNMA, FHLMC securities and similar securities
backed by amortizing loans generally have shorter effective maturities than
their stated maturities. This is due to changes in amortization caused by
demographic and economic forces such as interest rate movements. These effective
maturities are calculated based upon historical payment patterns. For purposes
of determining the Fund's average effective maturity, the maturities of such
securities will be calculated based upon the issuing agency's payment factors
using industry-accepted valuation models.
Mortgage-Backed Securities--In addition to mortgage-backed securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
the Fund may also invest up to 35% of its assets in securities issued by certain
private, nongovernment corporations, such as financial institutions, if the
securities are fully collateralized at the time of issuance by securities or
certificates 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).
-5-
<PAGE>
CMOs are debt securities issued by U.S. government agencies or by
financial institutions and other mortgage lenders and collateralized by a pool
of mortgages held under an indenture. CMOs are issued in a number of classes or
series with different maturities. The classes or series are retired in sequence
as the underlying mortgages are repaid. Prepayment may shorten the stated
maturity of the obligation and can result in a loss of premium, if any has been
paid. Certain of these securities may have variable or floating interest rates
and others may be stripped (securities which provide only the principal or
interest feature of the underlying security).
Stripped mortgage securities are usually structured with two classes
that receive different proportions of the interest and principal distributions
on a pool of mortgage assets. A common type of stripped mortgage security will
have one class receiving some of the interest and most of the principal from the
mortgage assets, while the other class will receive most of the interest and the
remainder of the principal. In the most extreme case, one class will receive all
of the interest (the "interest-only" class), while the other class will receive
all of the principal (the "principal-only" class). The yield to maturity on an
interest-only class is extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the Fund's yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may fail to fully recoup its initial
investment in these securities even if the securities are rated in the highest
rating categories.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not yet been fully developed and, accordingly,
these securities are generally illiquid and to such extent, together with any
other illiquid investments, will not exceed 10% of the Fund's net assets.
REMICs, which were authorized under the Tax Reform Act of 1986, are
private entities formed for the purpose of holding a fixed pool of mortgages
secured by an interest in real property. REMICs are similar to CMOs in that they
issue multiple classes of securities and certain REMICs also may be stripped.
CMOs and REMICs issued by private entities are not government
securities and are not directly guaranteed by any government agency. They are
secured by the underlying collateral of the private issuer. The Fund will invest
in such private-backed securities only if they are 100% collateralized at the
time of issuance by securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities. The Fund currently invests in privately-issued
CMOs and REMICs only if they are rated at the time of purchase in the two
highest grades by a nationally-recognized rating agency.
Asset-Backed Securities-- The Fund may invest in securities which are backed by
assets such as receivables on home equity and credit loans, receivables
regarding automobile, mobile home and recreational vehicle loans, wholesale
dealer floor plans and leases or other loans or financial receivables currently
available or which may be developed in the future.
Such receivables are securitized in either a pass-through or a
pay-through structure. Pass-through securities provide investors with an income
stream consisting of both principal and interest payments in respect of the
receivables in the underlying pool. Pay-through asset-backed securities are debt
obligations issued usually by a special purpose entity, which are collateralized
by the various receivables and in which the payments on the underlying
receivables provide the funds to pay the debt service on the debt obligations
issued.
The rate of principal payment on asset-backed securities generally
depends on the rate of principal payments received on the underlying assets.
Such rate of payments may be affected by economic and various other factors such
as changes in interest rates or the concentration of collateral in a particular
geographic area. Therefore, the yield may be difficult to predict and actual
yield to maturity may be more or less than the anticipated yield to maturity.
Due to the shorter maturity of the collateral backing such securities, there
tends to be less of a risk of substantial prepayment than with mortgage-backed
securities but the risk of such a prepayment does exist. Such asset-backed
securities do, however, involve certain risks not associated with
mortgage-backed securities, including the risk that security interests cannot be
adequately or in many cases ever established, and other risks which may be
peculiar to particular classes of collateral. For example, with respect to
credit card receivables, a number of state and federal consumer credit laws give
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the outstanding balance. In the case of automobile receivables, there
is a risk that the holders may not have either a proper or first security
interest in all of the obligations backing such receivables due to the large
number of vehicles involved in a typical issuance and technical requirements
under state laws. Therefore recoveries on repossessed collateral may not always
be available to support payments on the securities.
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Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Fund will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.
Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.
Options--The Fund may purchase call options, write call options on a
covered basis, write secured put options and purchase put options on a covered
basis only, and will not engage in option writing strategies for speculative
purposes.
The Fund may invest in options that are either Exchange listed or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close option positions and this may have an adverse
impact on the Fund's ability to effectively hedge its securities. The Fund will
not, however, invest more than 10% of its assets in illiquid securities.
A. Covered Call Writing--The Fund may write covered call options from
time to time on such portion of its portfolio, without limit, as Delaware
Management Company (the "Manager") determines is appropriate in seeking to
obtain the Fund's investment objective. A call option gives the purchaser of
such option the right to buy, and the writer, in this case the Fund, has the
obligation to sell the underlying security at the exercise price during the
option period. The advantage to the Fund of writing covered calls is that the
Fund receives a premium which is additional income. However, if the security
rises in value, the Fund may not fully participate in the market appreciation.
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During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction cannot be effected with respect to
an option once the option writer has received an exercise notice for such
option.
With respect to options on actual portfolio securities owned by the
Fund, the Fund may enter into closing purchase transactions. A closing purchase
transaction is one in which the Fund, when obligated as a writer of an option,
terminates its obligation by purchasing an option of the same series as the
option previously written.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirety offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.
The Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold.
Options written by the Fund will normally have expiration dates between one and
nine months from the date written. The exercise price of a call option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.
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B. Purchasing Call Options--The Fund may purchase call options to the
extent that premiums paid by the Fund do not aggregate more than 2% of the
Fund's total assets. The advantage of purchasing call options is that the Fund
may alter portfolio characteristics, and modify portfolio maturities without
incurring the cost associated with portfolio transactions.
The Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same Fund as the option previously purchased. The Fund
will realize a profit from a closing sale transaction if the price received on
the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.
Although the Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on a
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the results that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund.
C. Purchasing Put Options-- The Fund will only purchase put options to
the extent that the premiums on all outstanding put options do not exceed 2% of
the Fund's total assets. A put option purchased by the Fund gives it the right
to sell one of its securities for an agreed price up to an agreed date. However,
the Fund must pay a premium for this right, whether it exercises it or not. The
Fund will, at all times during which it holds a put option, own the security
covered by such option.
The Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Fund to protect an unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, the Fund will lose the value of the premium
paid. The Fund may sell a put option which it has previously purchased prior to
the sale of the securities underlying such option. Such sales will result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.
The Fund may sell a put option purchased on individual portfolio
securities. Additionally, the Fund may enter into closing sale transactions. A
closing sale transaction is one in which the Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
D. Writing Put Options--The Fund may also write put options on a
secured basis which means that the Fund will maintain in a segregated account
with its custodian, cash or U.S. government securities in an amount not less
than the exercise price of the option at all times during the option period. The
amount of cash or U.S. government securities held in the segregated account will
be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Secured put options
will generally be written in circumstances where the Manager wishes to purchase
the underlying security for the Fund's portfolio at a price lower than the
current market price of the security. In such event, the Fund would write a
secured put option at an exercise price which, reduced by the premium received
on the option, reflects the lower price it is willing to pay.
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Following the writing of a put option, the Fund may wish to terminate
the obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
Futures--Futures contracts are agreements for the purchase or sale for future
delivery of securities. While futures contracts provide for the delivery of
securities, deliveries usually do not occur. A purchase of a futures contract
means the acquisition of a contractual right to obtain delivery to the Fund of
the securities called for by the contract at a specified price during a
specified future month. The Fund will not enter into futures contracts to the
extent that more than 5% of the Fund's assets are required as futures contract
margin deposits and will not engage in such transactions to the extent that
obligations relating to such transactions exceed 20% of the Fund's assets.
Contracts are generally terminated by entering into an offsetting
transaction. When the Fund enters into a futures transaction, it must deliver to
the futures commission merchant selected by the Fund an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in an account at the Fund's custodian bank. Thereafter, a "variation margin" may
be paid by the Fund to, or drawn by the Fund from, such account in accordance
with controls set for such account, depending upon changes in the price of the
underlying securities subject to the futures contract.
In addition, when the Fund engages in futures transactions, to the
extent required by the Securities and Exchange Commission, it will maintain with
its custodian, assets in a segregated account to cover its obligations with
respect to such contracts, which assets will consist of cash, cash equivalents
or high quality debt securities from its portfolio in an amount equal to the
difference between the fluctuating market value of such futures contracts and
the aggregate value of the margin payments made by the Fund with respect to such
futures contracts.
The Fund may enter into such futures contracts to protect against the
adverse effects of fluctuations in interest rates without actually buying or
selling such securities. Similarly, when it is expected that interest rates may
decline, futures contracts may be purchased to hedge in anticipation of
subsequent purchases of government securities at higher prices.
With respect to options on futures contracts, when the Fund is not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The writing of a call
option on a futures contract constitutes a partial hedge against declining
prices of the securities which are deliverable upon exercise of the futures
contract. If the futures price at the expiration of the option is below the
exercise price, the Fund will retain the full amount of the option premium which
provides a partial hedge against any decline that may have occurred in the
portfolio holdings. The writing of a put option on a futures contract
constitutes a partial hedge against increasing prices of the securities which
are deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Fund will retain
the full amount of the option premium which provides a partial hedge against any
increase in the price of government securities which the Fund intends to
purchase.
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If a put or call option the Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between the value of its
portfolio securities and changes in the value of its futures positions, the
Fund's losses from existing options on futures may, to some extent, be reduced
or increased by changes in the value of portfolio securities. The Fund will
purchase a put option on a futures contract to hedge the Fund's portfolio
against the risk of rising interest rates.
To the extent that interest rates move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or options on
futures contracts or may realize a loss. For example, if the Fund is hedged
against the possibility of an increase in interest rates which would adversely
affect the price of government securities held in its portfolio and interest
rates decrease instead, the Fund will lose part or all of the benefit of the
increased value of its government securities which it has because it will have
offsetting losses in its futures position. In addition, in such situations, if
the Fund had insufficient cash, it may be required to sell government securities
from its portfolio to meet daily variation margin requirements. Such sales of
government securities may, but will not necessarily, be at increased prices
which reflect the rising market. The Fund may be required to sell securities at
a time when it may be disadvantageous to do so.
Further, with respect to options on futures contracts, the Fund may
seek to close out an option position by writing or buying an offsetting position
covering the same securities or contracts and have the same exercise price and
expiration date. The ability to establish and close out positions on options
will be subject to the maintenance of a liquid secondary market, which cannot be
assured.
Corporate Debt--The Fund may invest in corporate notes and bonds rated
A or above. Excerpts from Moody's Investors Service, Inc. ("Moody's")
description of those categories of bond ratings: Aaa--judged to be the best
quality. They carry the smallest degree of investment risk; Aa--judged to be of
high quality by all standards; A--possess favorable attributes and are
considered "upper medium" grade obligations.
Excerpts from Standard & Poor's Ratings Group ("S&P") description of
those categories of bond ratings: AAA--highest grade obligations. They possess
the ultimate degree of protection as to principal and interest; AA--also qualify
as high grade obligations, and in the majority of instances differ from AAA
issues only in a small degree; A--strong ability to pay interest and repay
principal although more susceptible to changes in circumstances.
Commercial Paper--The Fund may invest in short-term promissory notes
issued by corporations which at the time of purchase are rated P-1 and/or A-1.
Commercial paper ratings P-1 by Moody's and A-1 by S&P are the highest
investment grade category.
Bank Obligations--The Fund may invest in certificates of deposit,
bankers' acceptances and other short-term obligations of U.S. commercial banks
and their overseas branches and foreign banks of comparable quality, provided
each such bank combined with its branches has total assets of at least one
billion dollars. Any obligations of foreign banks shall be denominated in U.S.
dollars. Obligations of foreign banks and obligations of overseas branches of
U.S. banks are subject to somewhat different regulations and risks than those of
U.S. domestic banks. In particular, a foreign country could impose exchange
controls which might delay the release of proceeds from that country. Such
deposits are not covered by the Federal Deposit Insurance Corporation. Because
of conflicting laws and regulations, an issuing bank could maintain that
liability for an investment is solely that of the overseas branch which could
expose the Fund to 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.
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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.
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.
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Restricted Securities
While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's 10% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).
If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund's 10% limit on investment
in such securities, the Manager will determine what action to take to ensure
that the Fund continues to adhere to such limitation.
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ACCOUNTING AND TAX ISSUES
The following supplements the information in the Classes' Prospectuses
under the heading Dividends, distributions and taxes.
When the Fund writes a call option, an amount equal to the premium
received by it is included in the Fund's assets and liabilities as an asset and
as an equivalent liability. The amount of the liability is subsequently "marked
to market" to reflect the current market value of the option written. The
current market value of a written option is the last sale price on the principal
Exchange on which such option is traded or, in the absence of a sale, the mean
between the last bid and asked prices. If an option which the Fund has written
expires on its stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a 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.
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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.
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 Fund 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.
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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.
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.
-16-
<PAGE>
Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to Class A Shares and that all distributions
are reinvested at net asset value, and, with respect to Class B Shares and Class
C Shares, reflects the deduction of the CDSC that would be applicable upon
complete redemption of such shares. In addition, the Fund may present total
return information that does not reflect the deduction of the maximum front-end
sales charge or any applicable CDSC.
The average annual total return performance is shown below for each
Class through December 31, 1998, 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. The average annual total return for Class B Shares and
Class C Shares including deferred sales charge reflects the deduction of the
applicable CDSC that would be paid if the shares were redeemed on December 31,
1998. The average annual total return for Class B Shares and Class C Shares
excluding deferred sales charge assumes the shares were not redeemed on December
31, 1998 and therefore does not reflect the deduction of a CDSC.
Securities prices fluctuated during the periods covered and past
results should not be considered as representative of future performance.
-17-
<PAGE>
Average Annual Total Return
<TABLE>
<CAPTION>
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
1 year ended 3 years ended 5 years ended 10 years ended Life of Fund
12/31/98 12/31/98 12/31/98 12/31/98
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Class A Shares(1) (2)At Offer
(Inception 11/24/85) 4.55% 4.46% 3.99% 6.20% 6.34%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
Class A Shares(1) At NAV
(Inception 11/24/85) 7.46% 5.45% 4.58% 6.49% 6.57%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
Institutional Class Shares(1)
(Inception 6/1/92) 7.62% 5.61% 4.73% 6.64% 6.70%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
Class B Shares Including CDSC
(Inception 5/2/94) 4.55% 4.27% N/A N/A 4.48%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
Class B Shares Excluding CDSC
(Inception 5/2/94) 6.55% 4.56% N/A N/A 4.48%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
Class C Shares Including CDSC
(Inception 11/29/95) 5.56% 4.56% N/A N/A 4.76%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
Class C Shares Excluding CDSC
(Inception 11/29/95) 6.56% 4.56% N/A N/A 4.76%
- ------------------------------------ --------------- ------------------ ---------------- ----------------- ----------------
</TABLE>
(1) The Manager elected to waive voluntarily the portion of its annual
compensation under its Investment Management Agreement with
Limited-Term Funds, Inc. on behalf of the Fund to limit operating
expenses to 1.00% from the date of the initial public offering through
July 31, 1986 and of each class to 0.75% (exclusive of 12b-1 payments
with respect to Class A Shares) from February 25, 1991 until December
30, 1992. In the absence of such voluntary waivers, performance would
have been affected negatively.
(2) 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.
-18-
<PAGE>
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, 1998 using this formula are shown below.
Yield assumes the maximum front-end sales charge, if any, and does not reflect
the deduction of any CDSC or Limited CDSC. Actual yield may be affected by
variations in front-end sales charges on investments. Past performance, such as
is reflected in quoted yields, should not be considered as a representation of
the results which may be realized from an investment in any class of the Fund in
the future.
Class A Shares 5.00%
-------------------------------------------
Class B Shares 4.30%
-------------------------------------------
Class C Shares 4.30%
-------------------------------------------
Institutional Shares 5.29%
-------------------------------------------
On December 31, 1998, the average effective weighted average portfolio
maturity was 4 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.
-19-
<PAGE>
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.
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.
-20-
<PAGE>
The Fund may include discussions or illustrations of the potential
investment goals of a prospective investor (including materials that describe
general principles of investing, such as asset allocation, diversification, risk
tolerance, and goal setting, questionnaires designed to help create a personal
financial profile, worksheets used to project savings needs based on assumed
rates of inflation and hypothetical rates of return and action plans offering
investment alternatives), investment management techniques, policies or
investment suitability of the Fund (such as value investing, market timing,
dollar cost averaging, asset allocation, constant ratio transfer, automatic
account rebalancing, the advantages and disadvantages of investing in
tax-deferred and taxable investments), economic and political conditions, the
relationship between sectors of the economy and the economy as a whole, the
effects of inflation and historical performance of various asset classes,
including but not limited to, stocks, bonds and Treasury bills. From time to
time advertisements, sales literature, communications to shareholders or other
materials may summarize the substance of information contained in shareholder
reports (including the investment composition of the Fund), as well as the views
as to current market, economic, trade and interest rate trends, legislative,
regulatory and monetary developments, investment strategies and related matters
believed to be of relevance to the Fund. In addition, selected indices may be
used to illustrate historic performance of selected asset classes. The Fund may
also include in advertisements, sales literature, communications to shareholders
or other materials, charts, graphs or drawings which illustrate the potential
risks and rewards of investment in various investment vehicles, including but
not limited to, domestic stocks, and/or bonds, treasury bills and shares of the
Fund. In addition, advertisements, sales literature, communications to
shareholders or other materials may include a discussion of certain attributes
or benefits to be derived by an investment in the Fund and/or other mutual
funds, shareholder profiles and hypothetical investor scenarios, timely
information on financial management, tax and retirement planning (such as
information on Roth IRAs and 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.
-21-
<PAGE>
The following table is an example, for purposes of illustration only,
of cumulative total return performance for each Class through December 31, 1998.
For these purposes, the calculations assume the reinvestment of any realized
securities profits distributions and income dividends paid during the indicated
periods. In addition, these calculations, as shown below, reflect maximum sales
charges, if any, paid on the purchase or redemption of shares, as applicable,
but not any income taxes payable by shareholders on the reinvested distributions
included in the calculations. The performance of Class A Shares may be shown
without reflecting the impact of any front-end sales charge. The performance of
Class B Shares and Class C Shares is calculated both with the applicable CDSC
included and excluded. Pursuant to applicable regulation, total return shown for
the Institutional Class for the periods prior to the commencement of operations
of such Class is calculated by taking the performance of Class A Shares and
adjusting it to reflect the elimination of all sales charges. However, for those
periods, no adjustment has been made to eliminate the impact of 12b-1 payments,
and performance may have been affected had such an adjustment been made.
The net asset value of a Class fluctuates so shares, when redeemed, may
be worth more or less than the original investment, and a Class' results should
not be considered as representative of future performance.
Cumulative Total Return
<TABLE>
<CAPTION>
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
3 months 6 months 9 months 1 year 3 years 5 years 10 years Life of
ended ended ended ended ended ended ended Fund
12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Shares(1) (2)
At Offer
(Inception 11/24/85) 1.61% 2.04% 3.08% 4.55% 13.98% 21.62% 82.43% 123.87%
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
Class A Shares(1)
At NAV
(Inception 11/24/85) 4.49% 4.90% 5.96% 7.46% 17.25% 25.08% 87.49% 130.13%
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
Institutional Class
Shares(1)
(Inception 6/1/92) 4.53% 4.98% 6.08% 7.62% 17.78% 26.01% 90.27% 133.82%
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
Class B Shares
Including CDSC
(Inception 5/2/94) 2.27% 2.46% 3.29% 4.55% 13.35% N/A N/A 22.68%
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
Class B Shares
Excluding CDSC
(Inception 5/2/94) 4.27% 4.46% 5.29% 6.55% 14.31% N/A N/A 22.68%
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
Class C Shares
Including CDSC
(Inception 11/29/95) 3.27% 3.46% 4.29% 5.56% 14.31% N/A N/A 15.46%
- ----------------------- ------------ ----------- ------------- ----------- -------------- -------------- ------------ ------------
Class C Shares
Excluding CDSC
(Inception 11/29/95) 4.27% 4.46% 5.29% 6.56% 14.31% N/A N/A 15.46%
</TABLE>
-22-
<PAGE>
(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.
Because every investor's goals and risk threshold are different, the
Distributor, as distributor for the Fund and other mutual funds in the Delaware
Investments family of funds, will provide general information about investment
alternatives and scenarios that will allow investors to assess their personal
goals. This information will include general material about investing as well as
materials reinforcing various industry-accepted principles of prudent and
responsible financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Fund's investment disciplines,
and investment disciplines of the funds in the Delaware Investments family,
employed in seeking their objectives. The Distributor may also from time to time
cite general or specific information about the institutional clients of the
Manager's affiliates, including the number of such clients serviced by the
Manager's affiliates.
Dollar-Cost Averaging
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.
-23-
<PAGE>
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.
-24-
<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. The Fund may
include illustrations showing the power of compounding in advertisements and
other types of literature.
-25-
<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
-26-
<PAGE>
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.
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, 1997 and 1998, the
Fund's portfolio turnover rates were 79% and 69%, respectively.
-27-
<PAGE>
PURCHASING SHARES
The Distributor serves as the national distributor for the Fund's
shares and has agreed to use its best efforts to sell shares of the Fund. See
the Prospectuses for information on how to invest. Shares of the Fund are
offered on a continuous basis and may be purchased through authorized investment
dealers or directly by contacting Limited-Term Funds, 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 investment minimums
for Class A Shares will be waived for purchases by officers, directors and
employees of any Delaware Investments fund, the Manager or any of the Manager's
affiliates if the purchases are made pursuant to a payroll deduction program.
Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Investments Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for 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 for 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 $50,000 or
more in Class A Shares, and that Class A Shares are subject to lower annual
12b-1 Plan expenses than Class B Shares and Class C Shares and generally are not
subject to a CDSC.
Selling dealers are responsible for transmitting orders promptly.
Limited-Term Funds, Inc. reserves the right to reject any order for the purchase
of its shares of the Fund if in the opinion of management such rejection is in
the Fund's best interest. If a purchase is canceled because your check is
returned unpaid, you are responsible for any loss incurred. The Fund can redeem
shares from your account(s) to reimburse itself for any loss, and you may be
restricted from making future purchases in any of the funds in the Delaware
Investments family. The Fund reserves the right to reject purchase orders paid
by third-party checks or checks that are not drawn on a domestic branch of a
United States financial institution. If a check drawn on a foreign financial
institution is accepted, you may be subject to additional bank charges for
clearance and currency conversion.
The Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that, as a result of
redemption, have remained below the minimum stated account balance for a period
of three or more consecutive months. Holders of such accounts may be notified of
their insufficient account balance and advised that they have until the end of
the current calendar quarter to raise their balance to the stated minimum. If
the account has not reached the minimum balance requirement by that time, the
Fund will charge a $9 fee for that quarter and each subsequent calendar quarter
until the account is brought up to the minimum balance. The service fee will be
deducted from the account during the first week of each calendar quarter for the
previous quarter, and will be used to help defray the cost of maintaining
low-balance accounts. No fees will be charged without proper notice, and no CDSC
will apply to such assessments.
-28-
<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.
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 2.75%; however, lower front-end sales charges
apply for larger purchases. See the table in the Fund Classes' Prospectus. Class
A Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment.
Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 2% 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
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 below.
Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.
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 Plans Under Rule 12b-1 for the Fund Classes under
Purchasing Shares, and Determining Offering Price and Net Asset Value 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
account including self-directed IRAs. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing full
share denominations purchased by sending a letter signed by each owner of the
account to the Transfer Agent requesting the certificate. No charge is assessed
by Limited-Term Funds, Inc. for any certificate issued. A shareholder may be
subject to fees for replacement of a lost or stolen certificate, under certain
conditions, including the cost of obtaining a bond covering the lost or stolen
certificate. Please contact the Fund for further information. Investors who hold
certificates representing any of their shares may only redeem those shares by
written request. The investor's certificate(s) must accompany such request.
-29-
<PAGE>
Alternative Purchase Arrangements
The alternative purchase arrangements of Class A Shares, Class B Shares
and Class C Shares permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares and incur a
front-end sales charge and annual 12b-1 Plan expenses of up to a maximum of
0.30% (currently, no more than 0.15% pursuant to Board action) of the average
daily net assets of Class A Shares, or to purchase either Class B or Class C
Shares and have the entire initial purchase amount invested in the Fund with the
investment thereafter subject to a CDSC and annual 12b-1 Plan expenses. Class B
Shares are subject to a CDSC if the shares are redeemed within three years of
purchase, and Class C Shares are subject to a CDSC if the shares are redeemed
within 12 months of purchase. Class B and Class C Shares are each subject to
annual 12b-1 Plan expenses of up to a maximum of 1% (0.25% of which are service
fees to be paid to the Distributor, dealers or others for providing personal
service and/or maintaining shareholder accounts) of average daily net assets of
the respective Class. Class B Shares will automatically convert to Class A
Shares at the end of approximately five years after purchase and, thereafter, be
subject to annual 12b-1 Plan expenses of up to a maximum of 0.30% (currently, no
more than 0.15% pursuant to Board action) of average daily net assets of such
shares. Unlike Class B Shares, Class C Shares do not convert to another Class.
The higher 12b-1 Plan expenses on Class B Shares and Class C Shares
will be offset to the extent a return is realized on the additional money
initially invested upon the purchase of such shares. However, there can be no
assurance as to the return, if any, that will be realized on such additional
money. In addition, the effect of any return earned on such additional money
will diminish over time. In comparing Class B Shares to Class C Shares,
investors should also consider the duration of the annual 12b-1 Plan expenses to
which each of the classes is subject and the desirability of an automatic
conversion feature, which is available only for Class B Shares.
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 Shares, Class B Shares and Class C Shares. Investors should understand
that the purpose and function of the respective 12b-1 Plans and the CDSCs
applicable to Class B Shares and Class C Shares are the same as those of the
12b-1 Plan and the front-end sales charge applicable to Class A Shares in that
such fees and charges are used to finance the distribution of the respective
Classes. See Plans Under Rule 12b-1 for the Fund Classes.
Dividends, if any, paid on Class A Shares, Class B Shares and Class C
Shares will be calculated in the same manner, at the same time and on the same
day and will be in the same amount, except that the additional amount of 12b-1
Plan expenses relating to Class B Shares and Class C Shares will be borne
exclusively by such shares. See Determining Offering Price and Net Asset Value.
Class A Shares
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the table in the Fund Classes'
Prospectus, and may include a series of purchases over a 13-month period under a
Letter of Intention signed by the purchaser. See Special Purchase Features -
Class A
-30-
<PAGE>
Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during which the
Distributor may reallow to dealers up to the full amount of the front-end sales.
In addition, certain dealers who enter into an agreement to provide extra
training and information on Delaware Investments products and services and who
increase sales of Delaware Investments funds may receive an additional
commission of up to 0.15% of the offering price in connection with sales of
Class A Shares. Such dealers must meet certain requirements in terms of
organization and distribution capabilities and their ability to increase sales.
The Distributor should be contacted for further information on these
requirements as well as the basis and circumstances upon which the additional
commission will be paid. Participating dealers may be deemed to have additional
responsibilities under the securities laws. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the 1933 Act.
Dealer's Commission
As described in the Prospectus, for initial purchases of Class A Shares
of $1,000,000 or more, a dealer's commission may be paid by the Distributor to
financial advisers through whom such purchases are effected.
For accounts with assets over $1 million, the dealer commission resets
annually to the highest incremental commission rate on the anniversary of the
first purchase. In determining a financial 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 (see Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange) may be aggregated with those of the Class A Shares of
the Fund. Financial 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.
Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares and Class C Shares are purchased without a front-end
sales charge. Class B Shares redeemed within three years of purchase may be
subject to a CDSC at the rates set forth above, and Class C Shares redeemed
within 12 months of purchase may be subject to a CDSC of 1%. CDSCs are charged
as a percentage of the dollar amount subject to the CDSC. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
purchase of the shares being redeemed or the net asset value of those shares at
the time of redemption. No CDSC will be imposed on increases in net asset value
above the initial purchase price, nor will a CDSC be assessed on redemptions of
shares acquired through reinvestment of dividends or capital gains
distributions. For purposes of this formula, the "net asset value at the time of
purchase" will be the net asset value at purchase of Class B Shares or Class C
Shares of the Fund, even if those shares are later exchanged for shares of
another Delaware Investments fund. In the event of an exchange of the shares,
the "net asset value of such shares at the time of redemption" will be the net
asset value of the shares that were acquired in the exchange. See Waiver of
Contingent Deferred Sales Charge--Class B Shares and Class C
-31-
<PAGE>
Shares under Redemption and Exchange for the Fund Classes for a list of the
instances in which the CDSC is waived.
During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately five years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the Fund.
See Automatic Conversion of Class B Shares under Classes of Shares in the Fund
Classes' Prospectus. Such conversion will constitute a tax-free exchange for
federal income tax purposes. See Taxes. Investors are reminded that the Class A
Shares into which Class B Shares will convert are subject to ongoing annual
12b-1 Plan expenses of up to a maximum of 0.30% (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.
Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 2% of the dollar
amount purchased. In addition, from time to time, upon written notice to all of
its dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, Class B Shares are subject to annual 12b-1 Plan expenses and, if
redeemed within three years of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class B Shares. These
payments support the compensation paid to dealers or brokers for selling Class B
Shares. Payments to the Distributor and others under the Class B 12b-1 Plan may
be in an amount equal to no more than 1% annually. The combination of the CDSC
and the proceeds of the 12b-1 Plan fees makes it possible for the Fund to sell
Class B Shares without deducting a front-end sales charge at the time of
purchase.
Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class B Shares as
described in this Part B, even after the exchange. See Redemption and Exchange.
Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for five years after purchase are eligible for automatic
conversion into Class A
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<PAGE>
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 the Fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, 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 compensates
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, Class C Shares are subject to annual 12b-1 Plan expenses
and, if redeemed within 12 months of purchase, a CDSC.
Proceeds from the CDSC and the annual 12b-1 Plan fees are paid to the
Distributor and others for providing distribution and related services, and
bearing related expenses, in connection with the sale of Class C Shares. These
payments support the compensation paid to dealers or brokers for selling Class C
Shares. Payments to the Distributor and others under the Class C 12b-1 Plan may
be in an amount equal to no more than 1% annually.
Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for Class C Shares as
described in this Part B. See Redemption and Exchange.
Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Limited-Term Funds, 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
-33-
<PAGE>
and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.
In addition, the Fund may make payments out of the assets of Class A,
Class B and Class C Shares directly to other unaffiliated parties, such as
banks, who either aid in the distribution of shares of, or provide services to,
such classes.
The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis up to 0.30% of Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets for the year.
Limited-Term Funds, Inc.'s Board of Directors may reduce these amounts at any
time. The Distributor has agreed to waive these distribution fees to the extent
such fees for any day exceeds the net investment income realized by the Fund
Classes for such day.
On May 21, 1987, the Board of Directors set the fee for Class A Shares,
pursuant to its Plan, at 0.15% of average daily net assets. This fee was
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors has
determined that the annual fee, payable on a monthly basis, under the Plan, will
be equal to the sum of: (i) the amount obtained by multiplying 0.10% by the
average daily net assets represented by Class A Shares which were originally
purchased prior to June 1, 1992 in the Investors Series I class (which was
converted into what is now referred to as Class A Shares) on June 1, 1992
pursuant to a Plan of Recapitalization approved by shareholders of the Investors
Series I class), and (ii) the amount obtained by multiplying 0.15% by the
average daily net assets represented by all other Class A Shares. While this is
the method to be used to calculate the 12b-1 fees to be paid by Class A Shares,
the fee is a Class expense so that all shareholders regardless of whether they
originally purchased or received shares in the Investors Series I class, or in
one of the other classes that is now known as Class A Shares will bear 12b-1
expenses at the same rate. While this describes the current formula for
calculating the fees which will be payable under the Class A Shares' Plan
beginning June 1, 1992, the Plan permits a full 0.30% on all assets of Class A
Shares to be paid at any time following appropriate Board approval.
All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best price and
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.
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.
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<PAGE>
Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable likelihood of
the Plan relating to the Fund Class providing a benefit to that Class. The Plans
and the Distribution Agreement, as amended, may be terminated at any time
without penalty by a majority of those 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, 1998, payments from the Class A
Shares, Class B Shares and Class C Shares amounted to $494,115, $123,904 and
$29,172, 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 $10,851 --- ---
- ------------------------------------------------------------------------------------------------------------
Annual/Semi-Annual Reports $8,157 --- ---
- ------------------------------------------------------------------------------------------------------------
Broker Trails $432,502 $18,419 $17,987
- ------------------------------------------------------------------------------------------------------------
Broker Sales Charges --- $83,217 $7,018
- ------------------------------------------------------------------------------------------------------------
Dealer Service Expenses --- $1,010 ---
- ------------------------------------------------------------------------------------------------------------
Interest on Broker Sales
Charges --- $3,513 $535
- ------------------------------------------------------------------------------------------------------------
Commissions to Wholesalers $17,126 $9,086 $2,697
- ------------------------------------------------------------------------------------------------------------
Promotional-Broker Meetings --- $453 $270
- ------------------------------------------------------------------------------------------------------------
Promotional-Other $12,104 --- ---
- ------------------------------------------------------------------------------------------------------------
Prospectus Printing $13,375 --- ---
- ------------------------------------------------------------------------------------------------------------
Telephone --- $275 ---
- ------------------------------------------------------------------------------------------------------------
Wholesaler Expenses --- $7,931 $665
- ------------------------------------------------------------------------------------------------------------
Other --- --- ---
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
Other Payments to Dealers - Class A Shares, Class B Shares and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to 0.25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Investments family of funds. In some instances, these
incentives or payments may be offered only to certain dealers who maintain, have
sold or may sell certain amounts of shares. The Distributor may also pay a
portion of the expense of preapproved dealer advertisements promoting the sale
of Delaware Investments fund shares.
Subject to pending amendments to the NASD's Conduct Rules, in connection
with the promotion of Delaware Investments fund shares, the Distributor may,
from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. 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.
Special Purchase Features - Class A Shares
Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under the
Delaware Investments Dividend Reinvestment Plan and, under certain
circumstances, the Exchange Privilege and the 12-Month Reinvestment Privilege.
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. 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.
-36-
<PAGE>
Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of funds in the
Delaware Investments family. Officers, directors and key employees of
institutional clients of the Manager or any of its affiliates may purchase Class
A Shares at net asset value. Moreover, purchases may be effected at net asset
value for the benefit of the clients of brokers, dealers and registered
investment 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 Retirement Financial Services, Inc. (formerly known as
Delaware Investment & Retirement Services, Inc.) proprietary record keeping
system that (i) has in excess of $500,000 of plan assets invested in Class A
Shares of funds in the Delaware Investments family and any stable value account
available to investment advisory clients of the Manager or its affiliates; or
(ii) is sponsored by an employer that has at any point after May 1, 1997 had
more than 100 employees while such plan has held Class A Shares of a fund in the
Delaware Investments family and such employer has properly represented to, and
received written confirmation back from, Retirement Financial Services, Inc. in
writing that it has the requisite number of employees. See Group Investment
Plans for information regarding the applicability of the Limited CDSC.
Purchases of Class A Shares at net asset value may also be made by bank
sponsored retirement plans that are no longer eligible to purchase Institutional
Class Shares or purchase interests in a collective trust as a result of a change
in distribution arrangements.
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 the Delaware Investments family 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 fund account
in connection with loans originated from accounts previously maintained by
another investment firm will also be invested at net asset value.
Limited-Term Funds, Inc. must be notified in advance that the trade
qualifies for purchase at net asset value.
Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Investments funds ("eligible Delaware Investments
fund shares"), as well as shares of designated classes of non-Delaware
Investments funds ("eligible non-Delaware Investments fund shares"). Class B
Shares and Class C Shares are not eligible for purchase by Allied Plans.
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With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Investments and eligible non-Delaware Investments
fund shares held by the Allied Plan may be combined with the dollar amount of
new purchases by that Allied Plan to obtain a reduced front-end sales charge on
additional purchases of eligible Delaware Investments fund shares. See Combined
Purchases Privilege, below.
Participants in Allied Plans may exchange all or part of their eligible
Delaware Investments fund shares for other eligible Delaware Investments fund
shares or for eligible non-Delaware Investments fund shares at net asset value
without payment of a front-end sales charge. However, exchanges of eligible fund
shares, both Delaware Investments and non-Delaware Investments, which were not
subject to a front end sales charge, will be subject to the applicable sales
charge if exchanged for eligible Delaware Investments fund shares to which a
sales charge applies. No sales charge will apply if the eligible fund shares
were previously acquired through the exchange of eligible shares on which a
sales charge was already paid or through the reinvestment of dividends. See
Investing by Exchange.
A dealer's commission may be payable on purchases of eligible Delaware
Investments fund shares under an Allied Plan. In determining a financial
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. See Class A Shares,
above.
The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Investments and non-Delaware Investments fund shares.
When eligible Delaware Investments fund shares are exchanged into eligible
non-Delaware Investments fund shares, the Limited CDSC will be imposed at the
time of the exchange, unless the joint venture agreement specifies that the
amount of the Limited CDSC will be paid by the financial adviser or selling
dealer. See Contingent Deferred Sales Charge for Certain Redemptions of Class A
Shares Purchased at Net Asset Value under Redemption and Exchange.
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 Delaware Investments (except shares of any
Delaware Investments fund which do not carry a front-end sales charge, CDSC or
Limited CDSC other than shares of Delaware Group Premium Fund, Inc. beneficially
owned in connection with the ownership of variable insurance products, unless
they were acquired through an exchange from a Delaware Investments fund which
carried a front-end sales charge, CDSC or Limited CDSC) previously purchased and
still held as of the date of their Letter of Intention toward the completion of
such Letter.
Employers offering a Delaware Investments retirement plan may also
complete a Letter of Intention to obtain a reduced front-end sales charge on
investments of Class A Shares made by the plan. The aggregate
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investment level of the Letter of Intention will be determined and accepted by
the Transfer Agent at the point of plan establishment. The level and any
reduction in front-end sales charge will be based on actual plan participation
and the projected investments in Delaware Investments funds that are offered
with a front-end sales charge, CDSC or Limited CDSC for a 13-month period. The
Transfer Agent reserves the right to adjust the signed Letter of Intention based
on this acceptance criteria. The 13-month period will begin on the date this
Letter of Intention is accepted by the Transfer Agent. If actual investments
exceed the anticipated level and equal an amount that would qualify the plan for
further discounts, any front-end sales charges will be automatically adjusted.
In the event this Letter of Intention is not fulfilled within the 13-month
period, the plan level will be adjusted (without completing another Letter of
Intention) and the employer will be billed for the difference in front-end sales
charges due, based on the plan's assets under management at that time. Employers
may also include the value (at offering price at the level designated in their
Letter of Intention) of all their shares intended for purchase that are offered
with a front-end sales charge, CDSC or Limited CDSC of any class. Class B Shares
and Class C Shares of the Fund and other Delaware Investments funds which offer
corresponding classes of shares may also be aggregated for this purpose.
Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of Class A Shares, Class B Shares and/or Class C
Shares of the Fund, as well as shares of any other class of any of the other
Delaware Investments funds (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). In addition, assets held by investment advisory
clients of the Manager or its affiliates in a stable value account may be
combined with other Delaware Investments fund holdings.
The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).
Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to the Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of the Fund, as
well as shares of any other class of any of the other Delaware Investments funds
which offer such classes (except shares of any Delaware Investments fund which
do not carry a front-end sales charge, CDSC or Limited CDSC, other than shares
of Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Investments fund which carried a front-end sales
charge, CDSC or Limited CDSC). If, for example, any such purchaser has
previously purchased and still holds Class A Shares and/or shares of any other
of the classes described in the previous sentence with a value of $40,000 and
subsequently purchases $60,000 at offering price of additional shares of Class A
Shares, the charge applicable to the $60,000 purchase would currently be 2.00%.
For the purpose of this calculation, the shares presently held shall be valued
at the public offering price that would have been in effect were the shares
purchased simultaneously with the current purchase. Investors should refer to
the table of sales charges for Class A Shares to determine the applicability of
the Right of Accumulation to their particular circumstances.
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12-Month Reinvestment Privilege
Holders of Class A Shares of the Fund (and of Institutional Class
holding shares which were acquired through an exchange from one of the other
mutual funds in Delaware Investments offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of the Fund or in Class A
Shares of any of the other funds in the Delaware Investments family, subject to
applicable eligibility and minimum purchase requirements, in states where shares
of such other funds may be sold, at net asset value without the payment of a
front-end sales charge. This privilege does not extend to Class A Shares where
the redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware 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 connection with the features described above.
Group Investment Plans
Group Investment Plans which are not eligible to purchase shares of the
Institutional Class may also benefit from the reduced front-end sales charges
for investments in Class A Shares described in the Prospectus, based on total
plan assets. If a company has more than one plan investing in the Delaware
Investments family of funds, then the total amount invested in all plans would
be used in determining the applicable front-end sales charge reduction upon each
purchase, both initial and subsequent, upon notification to the Fund in which
the investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Investments investment accounts
if they so notify the Fund in which they are investing in connection with each
purchase. See Retirement Plans for the Fund Classes under Investment Plans for
information about Retirement Plans.
The Limited CDSC is 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 a fund in the Delaware Investments family.
See Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange.
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Institutional Class
The Institutional Class is available for purchase only by: (a)
retirement plans introduced by persons not associated with brokers or dealers
that are primarily engaged in the retail securities business and rollover
individual retirement accounts from such plans; (b) tax-exempt employee benefit
plans of the Manager or its affiliates and securities dealer firms with a
selling agreement with the Distributor; (c) institutional advisory accounts of
the Manager or its affiliates and those having client relationships with
Delaware Investment Advisers, an affiliate of the Manager, or its other
affiliates and their corporate sponsors, as well as subsidiaries and related
employee benefit plans and rollover individual retirement accounts from such
institutional advisory accounts; (d) a bank, trust company and similar financial
institution investing for its own account or for the account of its trust
customers for whom such financial institution is exercising investment
discretion in purchasing shares of the Class, except where the investment is
part of a program that requires payment of the financial institution of a Rule
12b-1 Plan fee; and (e) registered investment advisers investing on behalf of
clients that consist solely of institutions and high net-worth individuals
having at least $1,000,000 entrusted to the adviser for investment purposes, but
only if the adviser is not affiliated or associated with a broker or dealer and
derives compensation for its services exclusively from its clients for such
advisory services.
Shares of Institutional Class are available for purchase at net asset
value, without the imposition of a front-end or contingent deferred sales charge
and are not subject to Rule 12b-1 expenses.
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INVESTMENT PLANS
Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares in which an investor
has an account (based on the net asset value in effect on the reinvestment date)
and will be credited to the shareholder's account on that date. All dividends
and distributions of the Institutional Class are reinvested in the accounts of
the holders of such shares (based on the net asset value in effect on the
reinvestment date). Confirmations of any distributions from realized securities
profits will be mailed to shareholders in the first quarter of each fiscal year.
Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the Fund and
Class in which shares are being purchased. Such purchases, which must meet the
minimum subsequent purchase requirements set forth in the Prospectuses and this
Part B, are made for Class A Shares at the public offering price, and for the
Class B Shares and Class C Shares and the Institutional Classes at the net asset
value, at the end of the day of receipt. A reinvestment plan may be terminated
at any time. This plan does not assure a profit nor protect against depreciation
in a declining market.
Reinvestment of Dividends in Other Delaware Investments Family of Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A Shares,
Class B Shares and Class C Shares may automatically reinvest dividends and/or
distributions in any of the mutual funds in the Delaware Investments, including
the Fund, in states where their shares may be sold. Such investments will be at
net asset value at the close of business on the reinvestment date without any
front-end sales charge or service fee. The shareholder must notify the Transfer
Agent in writing and must have established an account in the fund into which the
dividends and/or distributions are to be invested. Any reinvestment directed to
a fund in which the investor does not then have an account will be treated like
all other initial purchases of a fund's shares. Consequently, an investor should
obtain and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses.
Subject to the following limitations, dividends and/or distributions
from other funds in Delaware Investments may be invested in shares of the Fund,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares 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 for participants in the
following retirement plans are automatically reinvested into the same Delaware
Investments fund in which their investments are held: SAR/SEP, SEP/IRA, SIMPLE
IRA, SIMPLE 401(k), Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, or 403(b)(7) or 457 Deferred Compensation Plans.
Investing by Exchange
If you have an investment in another mutual fund in the Delaware
Investments family, you may write and authorize an exchange of part or all of
your investment into shares of the Fund. If you wish to open an account by
exchange, call the Shareholder Service Center for more information. All
exchanges are subject to
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the eligibility and minimum purchase requirements set forth in the Fund's
prospectus. See Redemption and Exchange for more complete information concerning
your exchange privileges.
Holders of Class A Shares of the Fund may exchange all or part of their
shares for certain of the shares of other funds in the Delaware Investments
family, including other Class A Shares, but may not exchange their Class A
Shares for Class B Shares or Class C Shares of the Fund or of any other fund in
the Delaware Investments family. Holders of Class B Shares of the Fund are
permitted to exchange all or part of their Class B Shares only into Class B
Shares of other Delaware Investments funds. Similarly, holders of Class C Shares
of the Fund are permitted to exchange all or part of their Class C Shares only
into Class C Shares of other Delaware Investments funds. Class B Shares of the
Fund and Class C Shares of the Fund acquired by exchange will continue to carry
the CDSC and, in the case of Class B Shares, the automatic conversion schedule
of the fund from which the exchange is made. The holding period of Class B
Shares of the Fund acquired by exchange will be added to that of the shares that
were exchanged for purposes of determining the time of the automatic conversion
into Class A Shares of the Fund.
Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.
Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan--Investors may arrange for the Fund to
accept for investment in Class A Shares, Class B Shares or Class C Shares,
through an agent bank, preauthorized government or private recurring payments.
This method of investment assures the timely credit to the shareholder's account
of payments such as social security, veterans' pension or compensation benefits,
federal salaries, Railroad Retirement benefits, private payroll checks,
dividends, and disability or pension fund benefits. It also eliminates lost,
stolen and delayed checks.
Automatic Investing Plan--Shareholders of Class A Shares, Class B Shares
and Class C Shares may make automatic investments by authorizing, in advance,
monthly 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.
* * *
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Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.
Payments to the Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
the Fund may liquidate sufficient shares from a shareholder's account to
reimburse the government or the private source. In the event there are
insufficient shares in the shareholder's account, the shareholder is expected to
reimburse the Fund.
Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer, to
make investments directly to their Fund accounts. The Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Limited-Term Funds, Inc. for
proper instructions.
MoneyLine (SM) On Demand
You or your investment dealer may request purchases of Fund Class shares
by phone using MoneyLine (SM) On Demand. When you authorize the Fund to accept
such requests from you or your investment dealer, funds will be withdrawn from
(for share purchases) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions.
It may take up to four business days for the transactions to be
completed. You can initiate this service by completing an Account Services form.
If your name and address are not identical to the name and address on your Fund
account, you must have your signature guaranteed. The Fund does not charge a fee
for this service; however, your bank may charge a fee.
Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Investments family. Shareholders of the Fund Classes may
elect to invest in one or more of the other mutual funds in Delaware Investments
family through the Wealth Builder Option. If in connection with the election of
the Wealth Builder Option, you wish to open a new account to receive the
automatic investment, such new account must meet the minimum initial purchase
requirements described in the prospectus of the fund that you select. All
investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above.
Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Investments family, subject to the conditions and limitations set forth in the
Fund Classes' Prospectus. The investment will be made on the 20th day of each
month (or, if the fund selected is not open that day, the next business day) at
the public offering price or net asset value, as applicable, of the fund
selected on the date of investment. No investment will be made for any month if
the value of the shareholder's account
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is less than the amount specified for investment.
Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Redemption and Exchange for a brief summary of the tax consequences
of exchanges. Shareholders can terminate their participation in Wealth Builder
at any time by giving written notice to the fund from which exchanges are made.
This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, SIMPLE IRA, SIMPLE 401(k), Profit Sharing and Money Purchase
Pension Plans, 401(k) Defined Contribution Plans, or 403(b)(7) or 457 Deferred
Compensation Plans. This option also is not available to shareholders of the
Institutional Classes.
Asset Planner
To invest in Delaware Investments funds using the Asset Planner asset
allocation service, you should complete an Asset Planner Account Registration
Form, which is available only from a financial 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. Also see
Buying Class A Shares at Net Asset Value. The minimum initial investment per
Strategy is $2,000; subsequent investments must be at least $100. Individual
fund minimums do not apply to investments made using the Asset Planner service.
Class A, Class B and Class C Shares are available through the Asset Planner
service. Generally, only shares within the same class may be used within the
same Strategy. However, Class A Shares of the Fund and of other funds in the
Delaware Investments family may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Investments funds.
An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30 of each subsequent year. The fee,
payable to Delaware Service Company, Inc. to defray extra costs associated with
administering the Asset Planner service, will be deducted automatically from one
of the funds within your Asset Planner account if not paid by September 30.
However, effective November 1, 1996, the annual maintenance fee is waived until
further notice. Investors who utilize the Asset Planner for an IRA will continue
to pay an annual IRA fee of $15 per Social Security number. Investors will
receive a customized quarterly Strategy Report summarizing all Asset Planner
investment performance and account activity during the prior period.
Confirmation statements will be sent following all transactions other than those
involving a reinvestment of distributions.
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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 the Fund may be suitable for tax-deferred retirement
plans. Delaware Investments offers a full spectrum of retirement plans,
including the 401(k) Defined Contribution Plan, Individual Retirement Account
("IRA") and the new Roth IRA and Education IRA.
Among the retirement plans that Delaware Investments offers, Class B
Shares are available only by Individual Retirement Accounts, SIMPLE IRAs, Roth
IRAs, Education IRAs, Simplified Employee Pension Plans, Salary Reduction
Simplified Employee Pension Plans, and 403(b)(7) and 457 Deferred Compensation
Plans. The CDSC may be waived on certain redemptions of Class B Shares and Class
C Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange for a list of the instances in
which the CDSC is waived.
Purchases of Class B Shares are subject to a maximum purchase limitation
of $250,000 for retirement plans. Purchases of Class C Shares must be in an
amount that is less than $1,000,000 for such plans. The maximum purchase
limitations apply only to the initial purchase of shares by the retirement plan.
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
shares. See Institutional Class, above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.
It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.
Taxable distributions from the retirement plans described below may be
subject to withholding.
Please contact your investment dealer or the Distributor for the special
application forms required for the Plans described below.
Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships, corporations and other eligible forms of organizations. These
plans can be maintained as Section 401(k), profit sharing or money purchase
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pension plans. Contributions may be invested only in Class A Shares 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; however, participation
may be restricted based on certain income limits.
IRA Disclosures
The Taxpayer Relief Act of 1997 provides new opportunities for
investors. Individuals have five types of tax-favored IRA accounts that can be
utilized depending on the individual's circumstances. A new Roth IRA and
Education IRA are available in addition to the existing deductible IRA and
non-deductible IRA.
Deductible and Non-deductible IRAs
An individual can contribute up to $2,000 in his or her IRA each year.
Contributions may or may not be deductible depending upon the taxpayer's
adjusted gross income ("AGI") and whether the taxpayer is an active participant
in an employer sponsored retirement plan. Even if a taxpayer is an active
participant in an employer sponsored retirement plan, the full $2,000 is still
available if the taxpayer's AGI is below $30,000 ($50,000 for taxpayers filing
joint returns) for years beginning after December 31, 1997. A partial deduction
is allowed for married couples with income between $50,000 and $60,000, and for
single individuals with incomes between $30,000 and $40,000. These income
phase-out limits reach $80,000-$100,000 in 2007 for joint filers and
$50,000-$60,000 in 2005 for single filers. No deductions are available for
contributions to IRAs by taxpayers whose AGI after IRA deductions exceeds the
maximum income limit established for each year and who are active participants
in an employer sponsored retirement plan.
Taxpayers who are not allowed deductions on IRA contributions still can
make non-deductible IRA contributions of as much as $2,000 for each working
spouse and defer taxes on interest or other earnings from the IRAs.
Under the new law, a married individual is not considered an active
participant in an employer sponsored retirement plan merely because the
individual's spouse is an active participant if the couple's combined AGI is
below $150,000. The maximum deductible IRA contribution for a married individual
who is not an active participant, but whose spouse is, is phased out for
combined AGI between $150,000 and $160,000.
Conduit (Rollover) IRAs
Certain individuals who have received or are about to receive eligible
rollover distributions from an employer-sponsored retirement plan or another IRA
may rollover the distribution tax-free to a Conduit IRA. The rollover of the
eligible distribution must be completed by the 60th day after receipt of the
distribution; however, if the rollover is in the form of a direct
trustee-to-trustee transfer without going through the distributee's hand, the
60-day limit does not apply.
A distribution qualifies as an "eligible rollover distribution" if it is
made from a qualified retirement plan, a 403(b) plan or another IRA and does not
constitute one of the following:
(1) Substantially equal periodic payments over the employee's life or
life expectancy or the joint lives or life expectancies of the
employee and his/her designated beneficiary;
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(2) Substantially equal installment payments for a period certain of
10 or more years;
(3) A distribution, all of which represents a required minimum
distribution after attaining age 70 1/2;
(4) A distribution due to a Qualified Domestic Relations Order to an
alternate payee who is not the spouse (or former spouse) of the
employee; and
(5) A distribution of after-tax contributions which is not includable
in income.
Roth IRAs
For taxable years beginning after December 31, 1997, non-deductible
contributions of up to $2,000 per year can be made to a new Roth IRA. As a
result of the Internal Revenue Service Restructuring and Reform Act of 1998 (the
"1998 Act"), the $2,000 annual limit will not be reduced by any contributions to
a deductible or nondeductible IRA for the same year. The maximum contribution
that can be made to a Roth IRA is phased out for single filers with AGI between
$95,000 and $110,000, and for couples filing jointly with AGI between $150,000
and $160,000. Qualified distributions from a Roth IRA would be exempt from
federal taxes. Qualified distributions are distributions (1) made after the
five-taxable year period beginning with the first taxable year for which a
contribution was made to a Roth IRA and (2) that are (a) made on or after the
date on which the individual attains age 59 1/2, (b) made to a beneficiary on or
after the death of the individual, (c) attributed to the individual being
disabled, or (d) for a qualified special purpose (e.g., first time homebuyer
expenses).
Distributions that are not qualified distributions would always be
tax-free if the taxpayer is withdrawing contributions, not accumulated earnings.
Taxpayers with AGI of $100,000 or less are eligible to convert an
existing IRA (deductible, nondeductible and conduit) to a Roth IRA. Earnings and
contributions from a deductible IRA are subject to a tax upon conversion;
however, no 10% excise tax for early withdrawal would apply. If the conversion
is done prior to January 1, 1999, then the income from the conversion can be
included in income ratably over a four-year period beginning with the year of
conversion.
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Education IRAs
For taxable years beginning after December 31, 1997, an Education IRA
has been created exclusively for the purpose of paying qualified higher
education expenses. Taxpayers can make non-deductible contributions up to $500
per year per beneficiary. The $500 annual limit is in addition to the $2,000
annual contribution limit applicable to IRAs and Roth IRAs. Eligible
contributions must be in cash and made prior to the date the beneficiary reaches
age 18. Similar to the Roth IRA, earnings would accumulate tax-free. There is no
requirement that the contributor be related to the beneficiary, and there is no
limit on the number of beneficiaries for whom one contributor can establish
Education IRAs. In addition, multiple Education IRAs can be created for the same
beneficiaries, however, the contribution limit of all contributions for a single
beneficiary cannot exceed $500 annually.
This $500 annual contribution limit for Education IRAs is phased out
ratably for single contributors with modified AGI between $95,000 and $110,000,
and for couples filing jointly with modified AGI of between $150,000 and
$160,000. Individuals with modified AGI above the phase-out range are not
allowed to make contributions to an Education IRA established on behalf of any
other individual.
Distributions from an Education IRA are excludable from gross income to
the extent that the distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year the distribution is made
regardless of whether the beneficiary is enrolled at an eligible educational
institution on a full-time, half-time, or less than half-time basis.
Any balance remaining in an Education IRA at the time a beneficiary
becomes 30 years old must be distributed, and the earnings portion of such a
distribution will be includable in gross income of the beneficiary and subject
to an additional 10% penalty tax if the distribution is not for qualified higher
education expenses. Tax-free (and penalty-free) transfers and rollovers of
account balances from one Education IRA benefiting one beneficiary to another
Education IRA benefiting a different beneficiary (as well as redesignations of
the named beneficiary) is permitted, provided that the new beneficiary is a
member of the family of the old beneficiary and that the transfer or rollover is
made before the time the old beneficiary reaches age 30 and the new beneficiary
reaches age 18.
A company or association may establish a Group IRA or Group Roth IRA for
employees or members who want to purchase shares of the Fund.
Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. For information concerning the applicability of a CDSC upon
redemption of Class B
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Shares and Class C Shares, see Contingent Deferred Sales Charge - Class B Shares
and Class C Shares.
Effective January 1, 1997, the 10% premature distribution penalty will
not apply to distributions from an IRA that are used to pay medical expenses in
excess of 7.5% of adjusted gross income or to pay health insurance premiums by
an individual who has received unemployment compensation for 12 consecutive
weeks. In addition, effective January 1, 1998, the new law allows for premature
distribution without a 10% penalty if (i) the amounts are used to pay qualified
higher education expenses (including graduate level courses) of the taxpayer,
the taxpayer's spouse or any child or grandchild of the taxpayer or the
taxpayer's spouse, or (ii) used to pay acquisition costs of a principle
residence for the purchase of a first-time home by the taxpayer, taxpayer's
spouse or any child or grandchild of the taxpayer or the taxpayer's spouse. A
qualified first-time homebuyer is someone who has had no ownership interest in a
residence during the past two years. The aggregate amount of distribution for
first-time home purchases cannot exceed a lifetime cap of $10,000.
Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.
Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Although new SAR/SEP plans may not be established after December 31,
1996, existing plans may continue to be maintained by employers having 25 or
fewer employees. An employer may elect to make additional contributions to such
existing plans.
Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Effective January 1, 1997,
non-governmental tax-exempt organizations may establish 401(k) plans. Plan
documents are available to enable employers to establish a plan. An employer may
also elect to make profit sharing contributions and/or matching contributions
with investments in only Class A Shares 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 the Prospectus for the Fund Classes.
Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase shares
of any of the Classes in conjunction with such an arrangement. Purchases under
the Plan may be combined for purposes of computing the reduced front-end sales
charge applicable to Class A Shares as set forth in the table the Prospectus for
the Fund Classes.
Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other
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entities to establish a deferred compensation plan for their employees who wish
to participate. This enables employees to defer a portion of their salaries and
any federal (and possibly state) taxes thereon. Such plans may invest in shares
of the Fund. Although investors may use their own plan, there is available a
Delaware Investments 457 Deferred Compensation Plan. Interested investors should
contact the Distributor or their investment dealers to obtain further
information. Purchases under the Plan may be combined for purposes of computing
the reduced front-end sales charge applicable to Class A Shares as set forth in
the table in the Prospectus for the Fund Classes.
SIMPLE IRA
A SIMPLE IRA combines many of the features of an IRA and a 401(k) Plan
but is easier to administer than a typical 401(k) Plan. It requires employers to
make contributions on behalf of their employees and also has a salary deferral
feature that permits employees to defer a portion of their salary into the plan
on a pre-tax basis. A SIMPLE IRA is available only to plan sponsors with 100 or
fewer employees.
SIMPLE 401(k)
A SIMPLE 401(k) is like a regular 401(k) except that it is available
only to plan sponsors 100 or fewer employees and, in exchange for mandatory plan
sponsor contributions, discrimination testing is no longer required. Class B
Shares are not available for purchase by such plans.
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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.
REDEMPTION AND EXCHANGE
You can redeem or exchange your shares in a number of different ways.
Exchanges are subject to the requirements of the Fund and all exchanges of
shares constitute taxable events. Further, in order
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for an exchange to be processed, shares of the fund being acquired must be
registered in the state where the acquiring shareholder resides. You may want to
consult your financial adviser or investment dealer to discuss which funds in
Delaware Investments will best meet your changing objectives, and the
consequences of any exchange transaction. You may also call the Delaware
Investments directly for fund information.
Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
For example, redemption or exchange requests received in good order after the
time the offering price and net asset value of shares are determined will be
processed on the next business day. A shareholder submitting a redemption
request may indicate that he or she wishes to receive redemption proceeds of a
specific dollar amount. In the case of such a request, and in the case of
certain redemptions from retirement plan accounts, the Fund will redeem the
number of shares necessary to deduct the applicable CDSC in the case of Class B
Shares 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.
In addition to redemption of Fund shares, 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 respective Fund,
its agent, or certain authorized persons, subject to 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.
Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order by the Fund or certain other authorized persons
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(see Distribution and Service under Investment Management Agreement); provided,
however, that each commitment to mail or wire redemption proceeds by a certain
time, as described below, is modified by the qualifications described in the
next paragraph.
The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the purchase check has cleared, which may take
up to 15 days from the purchase date. You can avoid this potential delay if you
purchase shares by wiring Federal Funds. The Fund reserves the right to reject a
written or telephone redemption request or delay payment of redemption proceeds
if there has been a recent change to the shareholder's address of record.
If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Fund or to the Distributor.
In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practical, or it is not reasonably practical for the Fund fairly to value its
assets, or in the event that the SEC has provided for such suspension for the
protection of shareholders, the Fund may postpone payment or suspend the right
of redemption or repurchase. In such case, the shareholder may withdraw the
request for redemption or leave it standing as a request for redemption at the
net asset value next determined after the suspension has been terminated.
Payment for shares redeemed or repurchased may be made either in cash or
kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Limited-Term
Funds, 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.
Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value below.
Redemptions of Class B Shares made within three years of purchase are subject to
a CDSC of 2% 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 Purchasing Shares 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.
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Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds available from Delaware
Investments (in each case, "New Shares") in a permitted exchanged, will not be
subject to a CDSC that might otherwise be due upon redemption of the Original
Shares. However, such shareholders will continue to be subject to the CDSC and,
in the case of Class B Shares, the automatic conversion schedule of the Original
Shares as described in this Part B and any CDSC assessed upon redemption will be
charged by the fund from which the Original Shares were exchanged. For purposes
of computing the CDSC that may be payable upon a disposition of the New Shares,
the period of time that an investor held the Original Shares is added to the
period of time that an investor held the New Shares.
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 require a signature by all owners of the account and a
signature guarantee for each owner. A signature guarantee can be obtained from a
commercial bank, a trust company or a member of a Securities Transfer
Association Medallion Program ("STAMP"). The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.
Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate(s) must accompany your request and also be in good order.
Certificates are issued for Class A Shares only if a shareholder submits a
specific request. Certificates are not issued for Class B Shares or Class C
Shares.
Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in 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
certificates.
The Telephone Redemption - Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.
Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal
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identification) as, if it does not, the Fund or the Transfer Agent may be liable
for any losses due to unauthorized or fraudulent transactions. Telephone
instructions received by the Fund Classes are generally tape recorded, and a
written confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone. By exchanging shares by telephone, you are
acknowledging prior receipt of a prospectus for the fund into which your shares
are being exchanged.
Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$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. 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. First Union National Bank's fee
(currently $7.50) will be deducted from Fund Class redemption proceeds. If you
ask for a check, it will normally be mailed the next business day after receipt
of your redemption request to your predesignated bank account. There are no
separate fees for this redemption method, but the mail time may delay getting
funds into your bank account. Simply call the Shareholder Service Center prior
to the time the offering price and net asset value are determined, as noted
above.
Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in Delaware Investments under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of the Fund, as described above. Telephone exchanges may be subject
to limitations as to amounts or frequency.
The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Investments family. Telephone exchanges may be subject to
limitations as to amounts or frequency. The Transfer Agent and the Fund reserve
the right to record exchange instructions received by telephone and to reject
exchange requests at any time in the future.
MoneyLine (SM) On Demand
You or your investment dealer may request redemptions of Fund shares by
phone using MoneyLine (SM) On Demand. When you authorize the Fund to accept such
requests from you or your investment dealer, funds will be deposited to (for
share redemptions) your predesignated bank account. Your request will be
processed the same day if you call prior to 4 p.m., Eastern time. There is a $25
minimum and $50,000 maximum limit for MoneyLine (SM) On Demand transactions. See
MoneyLine (SM) On Demand under Investment Plans.
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Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), the Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Investments funds from Timing Firms. The Fund reserves the right to temporarily
or permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.
Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Investments funds: (1)
Decatur Equity Income Fund, (2) Growth and Income Fund, (3) Delaware Fund, (4)
Limited-Term Government Fund, (5) USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware
Investments funds are available for timed exchanges. Assets redeemed or
exchanged out of Timing Accounts in Delaware Investments funds not listed above
may not be reinvested back into that Timing Account. The Fund reserves the right
to apply these same restrictions to the account(s) of any person whose
transactions seem to follow a time pattern (as described above).
The Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if the
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to the Fund and therefore may be
refused.
Except as noted above, only shareholders and their authorized brokers of
record will be permitted to make exchanges or redemptions.
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 is particularly useful to shareholders
living on fixed incomes, since it can provide them with a stable supplemental
amount. This $5,000 minimum does not apply for the Fund's prototype retirement
plans. Shares purchased with the initial investment and through reinvestment of
cash dividends and realized securities profits distributions will be credited to
the shareholder's account and sufficient full and fractional shares will be
redeemed at the net asset value calculated on the third business day preceding
the mailing date.
Checks are dated either the 1st or the 15th of the month, as selected by
the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares
-57-
<PAGE>
of the Class at net asset value. This plan is not recommended for all investors
and should be started only after careful consideration of its operation and
effect upon the investor's savings and investment program. To the extent that
withdrawal payments from the plan exceed any dividends and/or realized
securities profits distributions paid on shares held under the plan, the
withdrawal payments will represent a return of capital, and the share balance
may in time be depleted, particularly in a declining market. Shareholders should
not purchase additional shares while participating in a Systematic Withdrawal
Plan.
The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.
Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in 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 Delaware Investments funds which do not
carry a sales charge. Redemptions of Class A Shares pursuant to a Systematic
Withdrawal Plan may be subject to a Limited CDSC if the purchase was made at net
asset value and a dealer's commission has been paid on that purchase. The
applicable CDSC for Class B Shares and Class C Shares redeemed via a Systematic
Withdrawal Plan will be waived if, on the date that the Plan is established, the
annual amount selected to be withdrawn is less than 12% of the account balance.
If the annual amount selected to be withdrawn exceeds 12% of the account balance
on the date that the Systematic Withdrawal Plan is established, all redemptions
under the Plan will be subject to the applicable CDSC. Whether a waiver of the
CDSC is available or not, the first shares to be redeemed for each Systematic
Withdrawal Plan payment will be those not subject to a CDSC because they have
either satisfied the required holding period or were acquired through the
reinvestment of distributions. The 12% annual limit will be reset on the date
that any Systematic Withdrawal Plan is modified (for example, a change in the
amount selected to be withdrawn or the frequency or date of withdrawals), based
on the balance in the account on that date. See Waiver of Contingent Deferred
Sales Charge - Class B Shares and Class C Shares, below.
An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.
Systematic Withdrawal Plan payments are normally made by check. In the
alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine (SM) Direct
Deposit Service. Your funds will normally be credited to your bank account up to
four business days after the payment date. There are no separate fees for this
redemption method. It may take up to four business days for the transactions to
be completed. You can initiate this service by completing an Account Services
form. If your name and address are not identical to the name and address on your
Fund account, you must have your signature guaranteed. The Fund does not charge
a fee for any this service; however, your bank may charge a fee. This service is
not available for retirement plans.
The Systematic Withdrawal Plan is not available to any Class of
Diversified Value Fund
-58-
<PAGE>
or to the Institutional Classes of the other Funds. Shareholders should consult
with their financial advisers to determine whether a Systematic Withdrawal Plan
would be suitable for them.
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
For purchases of $1,000,000, a Limited CDSC of 1% will be imposed on
certain redemptions of Class A Shares (or shares into which such Class A Shares
are exchanged) if shares are redeemed during the first year after the purchase,
if such purchases were made at net asset value and triggered the payment by the
Distributor of the dealer's commission described above.
The Limited CDSC will be paid to the Distributor and will be assessed on
an amount equal to the lesser of : (1) the net asset value at the time of
purchase of the Class A Shares being redeemed or (2) the net asset value of such
Class A Shares at the time of redemption. For purposes of this formula, the "net
asset value at the time of purchase" will be the net asset value at purchase of
the Class A Shares even if those shares are later exchanged for shares of
another Delaware Investments fund and, in the event of an exchange of Class A
Shares, the "net asset value of such shares at the time of redemption" will be
the net asset value of the shares acquired in the exchange.
Redemptions of such Class A Shares held for more than one year will not
be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Investments fund will not trigger the imposition of the Limited
CDSC at the time of such exchange. The period a shareholder owns shares into
which Class A Shares are exchanged will count towards satisfying the one-year
holding period. The Limited CDSC is assessed if such one year period is not
satisfied irrespective of whether the redemption triggering its payment is of
Class A Shares of the Fund or Class A Shares acquired in the exchange.
In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. 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 Internal Revenue Code; (v) returns of excess contributions to an IRA;
(vi) distributions by other employee benefit plans to pay benefits; (vii)
distributions described in (ii), (iv), and (vi) above pursuant to a systematic
withdrawal plan; 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 Purchasing Shares).
-59-
<PAGE>
Waiver of Contingent Deferred Sales Charge - Class B Shares and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA, SIMPLE IRA,
SEP/IRA, or 403(b)(7) or 457 Deferred Compensation Plan; (iii) periodic
distributions from an IRA, SIMPLE IRA, SAR/SEP, SEP/IRA, or 403(b)(7) or 457
Deferred Compensation Plan due to death, disability or attainment of age 59 1/2,
and IRA distributions qualifying under Section 72(t) of the Internal Revenue
Code; and (iv) distributions from an account if the redemption results from the
death of 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 Internal
Revenue Code; (iv) distributions from a 403(b)(7) or 457 Deferred Compensation
Plan, Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) or 457 Deferred
Compensation Plan, Profit Sharing Plan, Money Purchase Pension Plan or a 401(k)
Defined Contribution Plan upon attainment of normal retirement age under the
plan or upon separation from service; (vi) periodic distributions from an IRA or
SIMPLE IRA on or after attainment of age 59 1/2; and (vii) distributions from an
account if the redemption results from the death of 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 Shares 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.
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. 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
-60-
<PAGE>
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 1997 Act, as revised by the 1998 Act and the Omnibus
Consolidated and Emergency Supplemental Appropriations 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:
-61-
<PAGE>
"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%. This category of gains applied only to gains
and distributions in 1997.
"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. As revised by the 1998 Act,
this rate applies to securities held for more than 12 months and sold in
tax years beginning after December 1, 1997. 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. The Omnibus
Consolidated and Emergency Supplemental Appropriations Act passed in
October of 1998 included technical corrections to the 1998 Act. The
effect of this correction is that essentially all capital gain
distributions paid to shareholders during 1998 will be taxed at a
maximum rate of 20%.
"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 when sold after the five year
holding period.
The Fund has qualified as regulated investment companies under
Subchapter M of the Code. As such, the Fund will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are distributed as
provided in the Code and it satisfies other requirements relating to the sources
of its income and diversification of its assets. In order to qualify as a
regulated investment company for federal income tax purposes, the Fund must meet
certain specific requirements that are described under Accounting and Tax
Issues-- Other Tax Requirements.
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, 1998, the Manager and
its affiliates within Delaware Investments, including Delaware International
Advisers Ltd., were managing in the aggregate more than $45 billion in assets in
the various institutional or separately managed (approximately $26,429,550,000)
and investment company (approximately $18,817,530,000) accounts.
-62-
<PAGE>
The Investment Management Agreement for the Fund is dated April 3, 1995
and was approved by shareholders on March 29, 1995. The Agreement had an initial
term of two years. The Agreement may be renewed each year only so long as such
renewal and continuance are specifically approved at least annually by the Board
of Directors or by vote of a majority of the outstanding voting securities of
the Fund, and only if the terms and the renewal thereof have been approved by
the vote of a majority of the directors of Limited-Term Funds, Inc. who are not
parties thereto or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval. The Agreement is
terminable without penalty on 60 days' notice by the directors of Limited-Term
Funds, Inc. or by the Manager. The Agreement will terminate automatically in the
event of its assignment.
The 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,
1998, the Fund's total net assets were $357,361,998. Investment management fees
paid by the Fund for the fiscal years ended December 31, 1996, 1997 and 1998
amounted to $2,987,753, $2,233,564 and $1,818,527, 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., located at 1818 Market
Street, Philadelphia, PA 19103, serves as the national distributor of the Fund's
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 Class A Shares, Class B Shares and Class C Shares under their
respective 12b-1 Plan. The Distributor is an indirect, wholly owned subsidiary
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 as of June 29, 1988. The Transfer Agent
also provides accounting services to the Fund pursuant to the terms of a
separate Fund Accounting Agreement. The Transfer Agent is also an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
The Fund has authorized one or more brokers to accept on its behalf
purchase and redemption orders in addition to the Transfer Agent. Such brokers
are authorized to designate other intermediaries to accept purchase and
redemption orders on the behalf of the Fund. For purposes of pricing, the Fund
will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Investors may be charged a fee when effecting transactions through a
broker or agent.
OFFICERS AND 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 March 31, 1999, Limited-Term Funds, Inc.'s officers and directors
owned less than 1% of the outstanding shares of each Class of the Fund.
As of March 31, 1999, management believes the following shareholders
held of record 5% or more of the outstanding shares of a Class. Management does
not have knowledge of beneficial owners.
<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Limited-Term Merrill Lynch, Pierce, Fenner & Smith 2,509,863.380 7.00%
Government Fund For the Sole Benefit of its Customers
A Class Attn: Fund Administration
2629 Highland Ave.
Williamsport, PA 17702-6759
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Limited-Term Merrill Lynch, Pierce, Fenner & Smith 206,964.090 12.52%
Government Fund For the Sole Benefit of its Customers
B Class Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Class Name and Address of Account Share Amount Percentage
Limited-Term Donaldson Lufkin Jenrette 101,027.990 14.21%
Government Fund Securities Corporation, Inc.
C Class P.O. Box 2052
Jersey City, NJ 07303-2052
Terry G. Burton 48,646.510 6.84%
15802 Caminito Cantaras
Del Mar, CA 92014-3965
Merrill Lynch, Pierce, Fenner & Smith 44,936.400 6.32%
For the Sole Benefit of its Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246-6484
Family Ltd. Partnership 41,376.720 5.82%
Alo Family Limited
4512 Teas Street
Bellaire, TX 77401-4223
Limited-Term RS 401(k) Plan 1,911,853.240 77.85%
Government Fund PriceWaterhouseCopers, LLP
Institutional Class Savings Plan
c/o Delpac 16th Floor
1818 Market St.
Philadelphia, PA 19103-3638
RS DMTC 401(k) Plan 136,057.730 5.54%
Long John Silver, Inc. 401(k) Plan
c/o Delpac 16th Floor
1818 Market St.
Philadelphia, PA 19103-3638
</TABLE>
DMH Corp., Delvoy, Inc., Delaware Management Business Trust, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), 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
-64-
<PAGE>
Management, Inc. and Retirement Financial 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. DMH and the Manager are
now indirect, wholly owned subsidiaries, and subject to the ultimate control, of
Lincoln National. Lincoln National, with headquarters currently located 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 trustees 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.
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------------------------------------------------
Director/Officer Business Experience
- ------------------------------------------- -------------------------------------------------------------------------------
<S> <C> <C>
* Jeffrey J. Nick (46) Chairman of the Board, President, Chief Executive Officer and Director and/or
Trustee of Limited-Term Funds, Inc., each of the other 33 investment
companies in the Delaware Investments family, Delaware Management Business
Trust, Delvoy, Inc., DMH Corp. and Founders Holdings, Inc.
Chairman of the Board, Chief Executive Officer and Director of Delaware Management
Company, Inc., Delaware Distributors, Inc., Delaware International Holdings Ltd.,
Delaware International Advisers Ltd.
Chairman of the Board and Chief Executive Officer of Delaware Management
Company (a series of Delaware Management Business Trust)
Chairman of the Board and Director of Delaware Capital Management, Inc.
Chairman of Delaware Investment Advisers (a series of Delaware Management Business
Trust) and Delaware Distributors, L.P.
President, Chief Executive Officer and Director of Delaware Management
Holdings, Inc. and Retirement Financial Services, Inc.
Director of Delaware Service Company, Inc.
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.
</TABLE>
- ----------------------
* Director affiliated with the Fund's investment manager and considered an
"interested person" as defined in the 1940 Act.
-65-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------------------------------------------------
<S> <C>
*Wayne A. Stork (61) Director and/or Trustee of Limited-Term Funds, Inc. and each of the other 33
investment companies in the Delaware Investments family.
Chairman and Director of Delaware Management Holdings, Inc.
Prior to January 1, 1999, Mr. Stork was Chairman and Director and/or Trustee of
Limited-Term Funds, Inc. and each of the other 33 investment companies in the Delaware
Investments family 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/Trustee of Delaware Management Company, Inc. and Delaware Management
Business Trust; Chairman, President, Chief Executive Officer and Chief Investment
Officer of Delaware Management Company (a series of Delaware Management Business Trust);
Chairman, Chief Executive Officer and Chief Investment Officer of Delaware Investment
Advisers (a series of Delaware Management Business Trust); Chairman, Chief Executive
Officer and Director of Delaware International Advisers Ltd., Delaware International
Holdings Ltd. and Delaware Management Holdings, Inc.; President and Chief Executive
Officer of Delvoy, Inc.; Chairman of Delaware Distributors, L.P.; Director of Delaware
Service Company, Inc. and Retirement Financial Services, Inc.
In addition, during the five years prior to January 1, 1999, Mr. Stork 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 1940 Act.
-66-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------------------------------------------------
<S> <C>
- ------------------------------------------- -------------------------------------------------------------------------------
Richard G. Unruh, Jr. (59) Executive Vice President and Chief Investment Officer, Equities of
Limited-Term Funds, Inc., each of the other 33 investment companies in the
Delaware Investments family and Delaware Management Company (a series of
Delaware Management Business Trust)
Executive Vice President and Director of Delaware Management Business Trust.
Executive Vice President of Delaware Management Holdings, Inc. and Delaware Capital
Management, Inc.
Executive Vice President/Chief Investment Officer, Equities and Director of Delaware
Management Company, Inc.
Chief Executive Officer/Chief Investment Officer, Equities of Delaware Investment
Advisers (a series of Delaware Management Business Trust);
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>
-67-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------------------------------------------------
<S> <C>
David K. Downes (59) Executive Vice President, Chief Operating Officer and Chief Financial Officer
of Limited-Term Funds, Inc. and each of the other 33 investment companies in
the Delaware Investments family, Delaware Management Holdings, Inc., Founders
CBO Corporation, Delaware Investment Advisers (a series of Delaware
Management Business Trust) and Delaware Distributors, L.P.
Executive Vice President, Chief Operating Officer, Chief Financial Officer and Director
of DMH Corp, Delaware Distributors, Inc., Founders Holdings, Inc. and Delvoy, Inc.
Executive Vice President, Chief Financial Officer, Chief Administrative Officer and
Trustee of Delaware Management Business Trust. President, Chief Executive Officer,
Chairman and Director of Delaware Service Company, Inc.
President, Chief Executive Officer, Chairman and Director of Delaware Service Company,
Inc.
President, Chief Operating Officer, Chief Financial Officer and Director of Delaware
International Holdings Ltd.
President and Director of Delaware Management Company, Inc.
President of Delaware Management Company (a series of Delaware Management
Business Trust).
President, Chief Executive Officer and Director of Delaware Capital
Management, Inc.
Chairman and Director of Retirement Financial Services, Inc.
Chairman and Director of Delaware Management Trust Company.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Downes has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------- -------------------------------------------------------------------------------
</TABLE>
-68-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------- -------------------------------------------------------------------------------
<S> <C> <C>
Richard J. Flannery (41) Executive Vice President of Limited-Term Funds, Inc. and each of the other 33
investment companies in the Delaware Investments family
Executive Vice President and General Counsel of Delaware Management Holdings, Inc.,
Delaware Distributors, L.P., Delaware Capital Management, Inc., Delaware Service
Company, Inc., Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business Trust)
and Founders CBO Corporation
Executive Vice President/General Counsel and Director of DMH Corp., Delaware Management
Company, Inc., Delaware Management Business Trust, Delaware Distributors, Inc., Delaware
Service Company, Inc., Delaware International Holdings Ltd., Founders Holdings, Inc.,
Delvoy, Inc., Retirement Financial Services, Inc., Delaware Capital Management, Inc. and
Delaware Management Trust Company.
Director of Delaware International Advisers Ltd.
Director, HYPPCO Finance Company Ltd.
During the past five years, Mr. Flannery has served in various executive capacities at
different times within the Delaware organization.
- ------------------------------------------- -------------------------------------------------------------------------------
Walter P. Babich (71) Director and/or Trustee of Limited-Term Funds, Inc. and each of the other 33 investment
companies in the Delaware Investments family
460 North Gulph Road, King of Prussia, PA 19406
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and from 1988 to 1991,
he was a partner of I&L Investors.
- ------------------------------------------- -------------------------------------------------------------------------------
John H. Durham (61) Director and/or Trustee of Limited-Term Funds, Inc. and 18 other investment
companies in the Delaware Investments family.
Partner, Complete Care Services.
120 Gilbraltar Road, Horsham, PA 19044.
Mr. Durham served as Chairman of the Board of each fund in the Delaware Investments
family from 1986 to 1991; President of each fund from 1977 to 1990; and Chief Executive
Officer of each fund from 1984 to 1990. Prior to 1992, with respect to Delaware
Management Holdings, Inc., Delaware Management Company, Delaware Distributors, Inc. and
Delaware Service Company, Inc., Mr. Durham served as a director and in various executive
capacities at different times.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Anthony D. Knerr (60) Director and/or Trustee of Limited-Term Funds, Inc. and each of the 33 other
investment companies in the Delaware Investments family.
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 (58) Director and/or Trustee of Limited-Term Funds, Inc. and each of the other 33
other investment companies in the Delaware Investments family
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.
- ------------------------------------------- -------------------------------------------------------------------------------
Thomas F. Madison (63) Director and/or Trustee of Limited-Term Funds, Inc. and each of the other 33
investment companies in the Delaware Investments family
200 South Fifth Street, Suite 2100, Minneapolis, Minnesota 55402
President and Chief Executive Officer, MLM Partners, Inc.
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.
- ------------------------------------------- -------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Charles E. Peck (73) Director and/or Trustee of Limited-Term Funds, Inc. and each of the other 33
investment companies in the Delaware Investments family
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.
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Jan L. Yeomans (50) Director and/or Trustee of Limited-Term Funds, Inc. and 25 other investment
companies in the Delaware Investments family.
Building 220-13W-37, St. Paul, MN 55144
Vice President and Treasurer, 3M Corporation.
From 1987-1994, Ms. Yeomans was Director of Benefit Funds and Financial Markets for the
3M Corporation; Manager of Benefit Fund Investments for the 3M Corporation, 1985-1987;
Manager of Pension Funds for the 3M Corporation, 1983-1985; Consultant--Investment
Technology Group of Chase Econometrics, 1982-1983; Consultant for Data Resources,
1980-1982; Programmer for the Federal Reserve Bank of Chicago, 1970-1974.
- ------------------------------------------- -------------------------------------------------------------------------------
George M. Chamberlain, Jr. (52) Senior Vice President, Secretary and General Counsel of Limited-Term Funds,
Inc. and each of the other 33 investment companies in the Delaware
Investments family.
Senior Vice President and Secretary of Delaware Distributors, L.P., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment Advisers
(a series of Delaware Management Business Trust), Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Distributors, Inc., Delaware
Service Company, Inc., Retirement Financial Services, Inc., Delaware Capital Management,
Inc., Delvoy, Inc. and Delaware Management Business Trust
Senior Vice President, Secretary and Director of Founders Holdings, Inc.
Executive Vice President, Secretary and Director of Delaware Management Trust Company
Senior Vice President of Delaware International Holdings Ltd.
During the past five years, Mr. Chamberlain has served in various executive capacities
at different times within the Delaware organization.
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</TABLE>
-71-
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
Joseph H. Hastings (49) Senior Vice President/Corporate Controller of Limited-Term Funds, Inc. and
each of the other 33 investment companies in the Delaware Investments family
and Founders Holdings, Inc.
Senior Vice President/Corporate Controller and Treasurer of Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Capital Management, Inc., Delaware International
Holdings Ltd., Delvoy, Inc. and Delaware Management Business Trust
Chief Financial Officer/Treasurer of Retirement Financial Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company
Senior Vice President/Assistant Treasurer of Founders CBO Corporation
During the past five years, Mr. Hastings has served in various executive capacities at
different times within the Delaware organization.
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Michael P. Bishof (36) Senior Vice President and Treasurer of Limited-Term Funds, Inc. and each of
the other 33 investment companies in the Delaware Investments family and
Founders Holdings, Inc.
Senior Vice President/Investment Accounting of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust) and
Delaware Service Company, Inc.;
Senior Vice President and Treasurer/Manager, Investment Accounting of
Delaware Distributors, L.P. and Delaware Investment Advisers (a series of
Delaware Management Business Trust)
Senior Vice President and Assistant Treasurer of Founders CBO Corporation
Senior Vice President and Manager of Investment Accounting of Delaware
International Holdings Ltd.
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.
- ------------------------------------------- -------------------------------------------------------------------------------
</TABLE>
-72-
<PAGE>
The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Limited-Term Funds, Inc. during its fiscal year and the total compensation
received from all investment companies in the Delaware Investments family for
which he or she serves as a director or trustee during Limited-Term Funds,
Inc.'s fiscal year and an estimate of annual benefits to be received upon
retirement under the Delaware Group Retirement Plan for Directors/Trustees as of
December 31, 1998. Only the independent directors of Limited-Term Funds, Inc.
receive compensation from Limited-Term Funds, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Pension Retirement
Benefits Accrued as Total Compensation
Part of Limited-Term from Delaware
Aggregate Funds, Inc. Expenses Estimated Annual Investments
Compensation for Benefits Upon Investment
Limited-Term Funds, Retirement(1) Companies(2)
Inc.
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter B. Babich $1,694 None $38,500 $62,768
- ------------------------------------------------------------------------------------------------------------
John H. Durham(3) $1,313 None $31,180 $34,854
- ------------------------------------------------------------------------------------------------------------
Anthony D. Knerr $1,694 None $38,500 $62,768
- ------------------------------------------------------------------------------------------------------------
Ann R. Leven $1,718 None $38,500 $63,726
- ------------------------------------------------------------------------------------------------------------
W. Thacher Longstreth $1,563 None $38,500 $57,599
- ------------------------------------------------------------------------------------------------------------
Thomas F. Madison $1,643 None $38,500 $60,771
- ------------------------------------------------------------------------------------------------------------
Charles E. Peck $1,574 None $38,500 $57,973
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) (1) Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director/trustee who, at the time of
his or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each investment company in the Delaware Investments family for
which he or she serves as a director or trustee for a period equal to the
lesser of the number of years that such person served as a director or
trustee 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/trustees of each investment company at the time of such
person's retirement. If an eligible director/trustee retired as of December
31, 1998, he or she would be entitled to annual payments totaling the
amounts noted above, in the aggregate, from all of the investment companies
in the Delaware Investments family for which he or she serves as a director
or trustee, based on the number of investment companies in the Delaware
Investments family as of that date.
(2) (2) Each independent director/trustee (other than John H. Durham) currently
receives a total annual retainer fee of $38,500 for serving as a director or
trustee for all 34 investment companies in Delaware Investments, plus $3,145
for each Board Meeting attended. John H. Durham currently receives a total
annual retainer fee of $31,180 for serving as a director or trustee for 19
investment companies in Delaware Investments, plus $1,810 for each Board
Meeting attended. Ann R. Leven, Walter P. Babich, Anthony D. Knerr and
Thomas F. Madison serve on the Fund's audit committee; Ms. Leven is the
chairperson. Members of the audit committee currently receive additional
annual compensation of $5,000 from all investment companies, in the
aggregate, with the exception of the chairperson, who receives $6,000.
(3) (3) John H. Durham joined the Board of Directors of Limited-Term Funds, Inc.
and 18 other investment companies in Delaware Investments on April 16, 1998.
-73-
<PAGE>
GENERAL INFORMATION
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").
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.,
manages the investment options for Delaware-Lincoln Choice Plus and Delaware
Medallion(sm) III Variable Annuities. Medallion is issued by Allmerica Financial
Life Insurance and Annuity Company (First Allmerica Financial Life Insurance
Company in New York and Hawaii). Delaware Medallion offers various investment
series ranging from domestic equity funds, international equity and bond funds
and domestic fixed income funds. Each investment series available through
Medallion utilizes an investment strategy and discipline the same as or similar
to one of the Delaware Investments mutual funds available outside the annuity.
The Manager or Delaware International Advisers also manage many of the
investment options for the Delaware-Lincoln Choice Plus Variable Annuity. Choice
Plus is issued and distributed by Lincoln National Life Insurance Company.
Choice Plus offers a variety of different investment styles managed by ten
leading money managers. See Delaware Group Premium Fund, Inc. in Appendix B.
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.
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<PAGE>
The Distributor received Limited CDSC payments with respect to Class A Shares
of the Fund as follows:
Limited CDSC Payments
Fiscal
Year Limited-Term
Ended Government Fund A Class
----- -----------------------
12/31/98 none
12/31/97 none
12/31/96 $3,838
The Distributor received 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
----- ----------------------- -----------------------
12/31/98 $17,518.62 $2,130.42
12/31/97 $35,439 $2,431
12/31/96 32,704 1,016
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
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<PAGE>
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.
The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245, is custodian of the Fund's securities and cash. As custodian for the
Fund, Chase 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.
Capitalization
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. 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 the Fund will be paid by the Fund. General
expenses of the Fund will be allocated on a pro-rata basis according to asset
size. Where matters must be submitted to a vote of shareholders, the holders of
a majority of shares of the Fund affected must vote affirmatively for that class
to be affected.
Each Class of the Fund represents a proportionate interest in the assets
of the Fund and each has the same voting and other rights and preferences as the
other classes except that shares of the Institutional Class may not vote on
matters affecting the Fund's Classes' Plans under Rule 12b-1. Similarly, as a
general matter, shareholders of Class A Shares, Class B Shares 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.
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<PAGE>
All shares have equal voting rights, no preemptive rights, are fully
transferable and, when issued, are fully paid. All shares of the Fund
participate equally in dividends, and upon liquidation would share equally.
Noncumulative Voting
Limited-Term Funds, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Limited-Term Funds,
Inc. voting for the election of directors can elect all the directors if they
choose to do so, and, in such event, the holders of the remaining shares will
not be able to elect any directors.
This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.
-77-
<PAGE>
FINANCIAL STATEMENTS
Ernst & Young LLP serves as the independent auditors for Delaware Group
Limited-Term Government Funds, Inc. and, in its capacity as such, audits the
annual financial statements of the Fund. The 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 year ended December 31, 1998 are
included in Delaware Group Limited-Term Government Funds, Inc.'s Annual Report
to shareholders. The financial statements and financial highlights, the notes
relating thereto and the report of Ernst & Young LLP, described above are
incorporated by reference from the Annual Report into this Part B.
-78-
<PAGE>
APPENDIX A--RATINGS
Bonds
Excerpts from Moody's Investors Service, Inc. ("Moody's") description of
its bond ratings: Aaa--judged to be the best quality. They carry the smallest
degree of investment risk; Aa--judged to be of high quality by all standards;
A--possess favorable attributes and are considered "upper medium" grade
obligations; Baa--considered as medium grade obligations. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time; Ba--judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and principal
payments may be very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class; B--generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small; Caa--are of poor
standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest; Ca--represent obligations which
are speculative in a high degree. Such issues are often in default or have other
marked shortcomings; C--the lowest rated class of bonds and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Excerpts from Standard & Poor's Rating Group ("S&P") description of its
bond ratings: AAA--highest grade obligations. They possess the ultimate degree
of protection as to principal and interest; AA--also qualify as high grade
obligations, and in the majority of instances differ from AAA issues only in a
small degree; A--strong ability to pay interest and repay principal although
more susceptible to changes in circumstances; BBB--regarded as having an
adequate capacity to pay interest and repay principal; BB, B, CCC, CC--regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions; C--reserved for income bonds on which no
interest is being paid; D--in default, and payment of interest and/or repayment
of principal is in arrears.
<PAGE>
APPENDIX B - INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
Delaware Balanced Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.
Trend Fund seeks long-term growth by investing in common stocks issued
by emerging growth companies exhibiting strong capital appreciation potential.
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 Equity 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. Growth and Income 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.
Corporate Bond Fund seeks to provide investors with total return by investing
primarily in corporate bonds. Extended Duration Bond Fund seeks to provide
investors with total return by investing primarily in corporate bonds
<PAGE>
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.
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 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.
Foundation Funds are "fund of funds" which invest in other funds in the
Delaware Investments family (referred to as "Underlying Funds"). Foundation
Funds Income Portfolio seeks a combination of current income and preservation of
capital with capital appreciation by investing primarily in a mix of fixed
income and domestic equity securities, including fixed income and domestic
equity Underlying Funds. Foundation Funds Balanced Portfolio seeks capital
appreciation with current income as a secondary objective by investing primarily
in domestic equity and fixed income securities, including domestic equity and
fixed income Underlying Funds. Foundation Funds Growth Portfolio seeks long term
capital growth by investing primarily in equity securities, including equity
Underlying Funds, and, to a lesser extent, in fixed income securities, including
fixed-income Underlying Funds.
<PAGE>
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 Equity Fund seeks to achieve
long-term total return by investing in global securities that provide the
potential for capital appreciation and income. 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 17 funds available exclusively
as funding vehicles for certain insurance company separate accounts. Growth and
Income Series seeks the highest possible total rate of return by selecting
issues that exhibit the potential for capital appreciation while providing
higher than average dividend income. 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 Balanced 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. Small Cap Value
Series seeks capital appreciation by investing primarily in small-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 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.
<PAGE>
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. Social Awareness 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. REIT Series seeks to achieve maximum long-term total return,
with capital appreciation as a secondary objective, by investing in securities
of companies primarily engaged in the real estate industry. Aggressive Growth
Series seeks long-term capital appreciation. The Series attempts to achieve its
investment objective by investing primarily in equity securities of companies
which the manager believes have the potential for high earnings growth.
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.
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.
<PAGE>
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.
<PAGE>
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).
<PAGE>
Delaware Investments includes 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 800-523-1918, and shareholders
of the Institutional Class should contact Delaware Investments at 800-510-4015.
INVESTMENT MANAGER
Delaware Management Company
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
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245
LIMITED-TERM GOVERNMENT FUND
- -----------------------------------------
A CLASS
B CLASS
C CLASS
- -----------------------------------------
INSTITUTIONAL CLASS
- -----------------------------------------
CLASSES OF DELAWARE GROUP
LIMITED-TERM GOVERNMENT FUNDS, INC.
- -----------------------------------------
PART B
STATEMENT OF
ADDITIONAL INFORMATION
- -----------------------------------------
APRIL 28, 1999
- -------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- -------------------------------------------------------------------------------
<PAGE>
PART C - Other Information
(Continued)
Item 23. Exhibits
(a) Articles of Incorporation.
(1) 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.
(2) Executed Articles Supplementary (November 28, 1995)
incorporated into this filing by reference to Post-Effective
Amendment No. 43 filed February 29, 1996.
(b) 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.
(c) Copies of All Instruments Defining the Rights of Holders.
(1) 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.
(2) 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.
(d) Investment Management Agreement. Form of Investment Management
Agreement (April 1999) between Delaware Management Company and the
Registrant attached as Exhibit.
(e) (1) Distribution Agreements.
(i) Distribution Agreement (April 1995) between Delaware
Distributors, L.P. and the Registrant on behalf of the
Fund attached as Exhibit.
(ii) Amendment No. 1 to Distribution Agreement (November 1995)
between Delaware Distributors, L.P. and the Registrant on
behalf of the Fund attached as Exhibit.
(2) 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.
(3) 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.
(4) 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>
PART C - Other Information
(Continued)
(f) Bonus, Profit Sharing, Pension Contracts.
(1) Amended and Restated Profit Sharing Plan incorporated into this
filing by reference to Post-Effective Amendment No. 42 filed
November 22, 1995.
(2) 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
(g) Custodian Agreements.
(1) Custodian Agreement between Registrant and Chase Manhatten Bank
included as a module and attached as Exhibit.
(2) Amendment to Custodian Agreement attached as Exhibit.
(3) Form of Letter adding Limited-Term Government Fund to the
Custodian Agreement attached as Exhibit.
(h) Other Material Contracts.
(1) 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.
(2) Executed Delaware Group of Funds Fund Accounting Agreement
between Delaware Service Company, Inc. and the Registrant
(August 19, 1996) incorporated into this filing by reference to
Post-Effective Amendment No. 45 filed March 2, 1998.
(i) Executed Amendment No. 9 (March 31, 1998) to Delaware
Group of Funds Fund Accounting Agreement attached as
Exhibit.
(ii) Executed Amendment No. 10 (August 31, 1998) to Delaware
Group of Funds Fund Accounting Agreement attached as
Exhibit.
(iii) Executed Amendment No. 11 (September 14, 1998) to
Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(iv) Executed Amendment No. 12 (September 14, 1998) to
Delaware Group of Funds Fund Accounting Agreement
attached as Exhibit.
(v) Executed Amendment No. 13 (December 18, 1998) to Delaware
Group of Funds Fund Accounting Agreement attached as
Exhibit.
(i) Opinion of Counsel. Incorporated into this filing by reference to
Post-Effective Amendment No. 47 filed February 26, 1999.
(j) Consent of Auditors. Attached as Exhibit.
<PAGE>
PART C - Other Information
(Continued)
(k-l) Inapplicable.
(m) Plans under Rule 12b-1.
(1) Plan under Rule 12b-1 for Class A of Limited-Term Government
Fund (November 1995) attached as Exhibit.
(2) Plan under Rule 12b-1 for Class B of Limited-Term Government
Fund (November 1995) attached as Exhibit.
(3) Plan under Rule 12b-1 for Class C of Limited-Term Government
Fund (November 1995) attached as Exhibit.
(n) Financial Data Schedules. Attached as Exhibit.
(o) Inapplicable.
(p) Other: Directors' Power of Attorney.
(1) Incorporated into this filing by reference to Post-Effective
Amendment No. 45 filed March 2, 1998.
(2) Power of Attorney for John H. Durham. Incorporated into this
filing by reference to Post-Effective Amendment No. 47 filed
February 26, 1999.
(3) Power of Attorney for Jan L. Yeomans attached as Exhibit.
Item 24. Persons Controlled by or under Common Control with Registrant. None.
Item 25. Indemnification. Incorporated into this filing by reference to
Post-Effective Amendment No. 22 filed February 28, 1997.
Item 26. Business and Other Connections of Investment Adviser.
(a) Delaware Management Company, a series of Delaware Management
Business Trust, (the "Manager") serves as investment manager to the Registrant
and also serves 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 Limited-Term Government 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 Intermediate Tax-Free Funds, Inc., Voyageur Tax-Free
Funds, Inc., Voyageur 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.). In addition, certain officers 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 indirectly owned by the Manager's indirect parent company acts as
principal underwriter to the mutual funds in the Delaware Investments family
(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 the Delaware Investments family.
<PAGE>
PART C - Other Information
(Continued)
The following persons serving as officers of the Manager have held the
following positions during the past two years:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Jeffrey J. Nick(1) Chairman of the Board, President, Chief Executive Officer and
Director/Trustee of the Registrant and each of the other investment companies in
the Delaware Investments family, Delaware Management Company, Inc., Delaware
Management Business Trust, Delvoy, Inc., DMH Corp. and Founders Holdings, Inc.;
Chairman and Chief Executive Officer and Director of Delaware Management Company
(a series of Delaware Management Business Trust); Chairman and Director of
Delaware Capital Management, Inc. and Retirement Financial Services, Inc.;
Chairman of Delaware Investment Advisers (a series of Delaware Management
Business Trust) and Delaware Distributors, L.P.; Director of Delaware Service
Company, Inc.,
President, Chief Executive Officer and Director of Lincoln National Investment
Companies, Inc. and Delaware Management Holdings, Inc.; Director of Vantage
Global Advisors, Inc. and Lynch & Mayer Inc.
David K. Downes 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., Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) 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., Founders Holdings, Inc. and Delvoy, Inc.; Executive Vice President, Chief
Financial Officer, Chief Administrative Officer and Trustee of Delaware
Management Business Trust; 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
Retirement Financial Services, Inc.; Chairman and Director of Delaware
Management Trust Company; and Director of Delaware International Advisers Ltd.
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Richard G. Unruh, Jr. Executive Vice President and Chief Investment Officer, Equities of the
Registrant, each of the other funds in the Delaware Investments family and
Delaware Management Company (a series of Delaware Management Business Trust);
Executive Vice President of Delaware Management Holdings, Inc. and Delaware
Capital Management, Inc. and Delaware Management Business Trust; Executive Vice
President/Chief Investment Officer, Equities and Director/Trustee of Delaware
Management Company, Inc.; Chief Executive Officer/Chief Investment Officer,
Equities of Delaware Investment Advisers (a series of Delaware Management
Business Trust); 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
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Richard J. Flannery Executive Vice President and General Counsel of Delaware Management Holdings,
Inc., Delaware Distributors, L.P., Delaware Management Trust Company, Delaware
Capital Management, Inc., Delaware Service Company, Inc., Delaware Management
Company (a series of Delaware Management Business Trust), Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Founders CBO
Corporation; Executive Vice President/General Counsel and Director of DMH Corp.,
Delaware Management Company, Inc., Delaware Distributors, Inc., Delaware
International Holdings Ltd., Founders Holdings, Inc., Delvoy, Inc. and
Retirement Financial Services, Inc.; Executive Vice President of the Registrant
and each of the other funds in the Delaware Investments family; 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
George M. Senior Vice President/Secretary and General Counsel of the Registrant and each
Chamberlain, Jr. of the investment companies in the Delaware Investments family;
Senior Vice President and Secretary of Delaware Distributors, L.P., Delaware
Management Company (a series of Delaware Management Business Trust) and Delaware
Management Holdings, Inc., DMH Corp., Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Retirement
Financial Services, Inc., Delaware Capital Management, Inc. and Delvoy, Inc.;
Executive Vice President, Secretary and Director of Delaware Management Trust
Company; Senior Vice President and Director of Founders Holdings, Inc.; Senior
Vice President of Delaware International Holdings Ltd.
Michael P. Bishof Senior Vice President/Investment Accounting of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management Business
Trust) and Delaware Service Company, Inc.; 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 and Treasurer/Manager,
Investment Accounting of Delaware Distributors, L.P. and Delaware Investment
Advisers (a series of Delaware Management Business Trust); Senior Vice President
and Assistant Treasurer of Founders CBO Corporation; and Senior Vice President
and Manager of Investment Accounting of Delaware International Holdings Ltd.
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
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.,
Delaware Management Company (a series of Delaware Management Business Trust) 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.; Chief Financial Officer and Treasurer of Retirement Financial Services,
Inc.; and Senior Vice President/Assistant Treasurer of Founders CBO Corporation
Joanne O. Hutcheson Senior Vice President/Human Resources of Delaware Management Company, Inc.,
Delaware Management Holdings, Inc., Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Distributors, Inc., Delaware
Distributors, L.P., Delaware Service Company, Inc., the Registrant, each of the
other funds in the Delaware Investments family, Delvoy, Inc. and Delaware
Management Company (a series of Delaware Management Business Trust)
Robert J. DiBraccio Senior Vice President/Head of Equity Trading of Delaware Management Company (a
series of Delaware Management Business Trust), Delaware Investment Advisers (a
series of Delaware Management Business Trust) and Delaware Capital Management,
Inc.
John B. Fields Senior Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., Delaware Management Company (a series of Delaware Management Business
Trust), Delaware Investment Advisers (a series of Delaware Management Business
Trust), Delaware Capital Management, Inc. and each of the equity investment
companies in the Delaware Investments family, and Trustee of Delaware Management
Business Trust
Susan L. Hanson Senior Vice President/Global Marketing & Client Services of Delaware Management
Company (a series of Delaware Management Business Trust) and Delaware Investment
Advisers (a series of Delaware Management Business Trust).
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Douglas L. Anderson Senior Vice President/Operations of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Retirement
Financial 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 Management Company (a series of Delaware Management Business
Trust), Delaware Service Company, Inc. and Retirement Financial Services, Inc.
Eric E. Miller Senior 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 Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust), Delaware Management Holdings, Inc., DMH
Corp., Delaware Distributors, L.P., Delaware Distributors Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware Capital Management, Inc. and
Retirement Financial Services, Inc.; and Senior Vice President, Assistant
Secretary and Deputy General Counsel of Delvoy, Inc.
Richelle S. Maestro Senior Vice President, Assistant Secretary and Deputy General Counsel of the
Registrant, each of the other funds in the Delaware Investments family, Delaware
Management Company, Inc., Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Investment Advisers (a series of Delaware
Management Business Trust), Delaware Management Holdings, Inc., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
DMH Corp., Delaware Capital Management, Inc., Retirement Financial Services,
Inc., Founders Holdings, Inc. and Delvoy, Inc.; Senior Vice President, Deputy
General Counsel and Secretary of Delaware International Holdings Ltd.; and
Secretary of Founders CBO Corporation
General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Lane,
Philadelphia, PA.
Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc. and Delaware Management Company (a series of Delaware
Management Business Trust)
Richard Salus Vice President/Assistant Controller of Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and Delaware Management Trust Company
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Bruce A. Ulmer Vice President/Year 2000 of the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management Company (a series of Delaware
Management Business Trust), Delaware Management Holdings, Inc. and Retirement
Financial Services, Inc., Delvoy, Inc. and Delaware Management Trust Company
Joel A. Ettinger(2) Vice President/Taxation of the Registrant, each of the other funds in the
Delaware Investments family, Delaware Management Company, Inc., Delaware
Investment Advisers (a series of Delaware Management Business Trust), Delaware
Management Company (a series of Delaware Management Business Trust) and Delaware
Management Holdings, Inc., Founders Holdings, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc., Retirement
Financial Services, Inc., Delaware Capital Management, Inc., Delvoy, Inc. and
Founders CBO Corporation
Christopher Adams Vice President/Business Manager, Equity Department of Delaware Investment
Advisers (a series of Delaware Management Business Trust) and Delaware
Management Company (a series of Delaware Management Business Trust)
Scott Metzger Vice President/Business Development of Delaware Distributors, L.P. and Delaware
Service Company, Inc.
Lisa O. Brinkley Vice President/Compliance Director of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Investments family, Delaware
Management Company (a series of Delaware Management Business Trust), DMH Corp.,
Delaware Distributors, L.P., Delaware Distributors, Inc., Delaware Service
Company, Inc., Delaware Capital Management, Inc., Delvoy, Inc., Retirement
Financial Services, Inc. and Delaware Management Business Trust; and Vice
President/Compliance Director and Assistant Secretary of Delaware Management
Trust Company
Mary Ellen Carrozza Vice President/Client Services of Delaware Management Company (a series of
Delaware Management Business Trust), Delaware Investment Advisers (a series of
Delaware Management Business Trust) and each of the other investment companies
in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
the Registrant, and of the fixed-income investment companies 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.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
and of the fixed-income investment companies 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.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
Delaware Capital Management, Inc. and of the fixed-income investment companies
in the Delaware Investments family
Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
Delaware Capital Management, Inc. and of the fixed-income investment companies
in the Delaware Investments family
Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
the Registrant, and of the fixed-income investment companies in the Delaware
Investments family
Mitchell L. Conery(3) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust),
Delaware Capital Management, Inc. and of the fixed-income investment companies
in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Gerald S. Frey Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the equity investment companies in the Delaware Investments family
Christopher Beck(4) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the investment companies in the Delaware Investments family
Trustee of New Castle County Pension Board since October 1992, Wilmington DE.
Elizabeth H. Howell(5) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the fixed-income investment companies in the Delaware Investments
family
Andrew M. McCullagh, Jr.(6) Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust) the
Registrant and each of the fixed-income investment companies in the Delaware
Investments family
Babak Zenouzi Vice President/Senior Portfolio Manager of Delaware Management Company, Inc.,
Delaware Management Company (a series of Delaware Management Business Trust),
Delaware Investment Advisers (a series of Delaware Management Business Trust)
and each of the equity investment companies in the Delaware Investments family
J. Paul Dokas(7) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust) and each of
the equity investment companies in the Delaware Investments family
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Cynthia Isom Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust) and of the
fixed-income investment companies in the Delaware Investments family; and Vice
President/Senior Trader of Delaware Investment Advisers (a series of Delaware
Management Business Trust)
Paul Grillo Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), and the
fixed-income investment companies in the Delaware Investments family
Marshall T. Bassett(8) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust), Delaware
Investment Advisers (a series of Delaware Management Business Trust), and each
of the equity investment companies in the Delaware Investments family
John A. Heffern(9) Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust) and each of
the funds in the Delaware Investments family
Lori P. Wachs Vice President/Portfolio Manager of Delaware Management Company, Inc., Delaware
Management Company (a series of Delaware Management Business Trust) and each of
the equity investment companies in the Delaware Investments family
Richard E. Beister Vice President/Trading Operations of and Delaware Management Company (a series
of Delaware Management Business Trust)
Jeffrey W. Hynoski Vice President/Research Analyst of Delaware Management Company (a series of
Delaware Management Business Trust)
Audrey E. Kohart Vice President/Assistant Controller/Corporate Accounting of Delaware Management
Company (a series of Delaware Management Business Trust)
Steven T. Lampe Vice President/Research Analyst of Delaware Management Company (a series of
Delaware Management Business Trust)
Richard D. Seidel Vice President/Assistant Controller/Manager, Payroll of Delaware Management
Company (a series of Delaware Management Business Trust)
Karina J. Istvan Vice President/Strategic Planning of Delaware Management Company (a series of
Delaware Management Business Trust)
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices with the Manager and its
Business Address * Affiliates and Other Positions and Offices Held
- -------------------- -----------------------------------------------
<S> <C>
Steven R. Cianci Vice President/Portfolio Manager of the fixed income investment
companies in the Delaware Investments family.
Michael D. Mabry(10) Vice President/Associate General Counsel/Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business Trust)
David P. O'Connor Vice President/Associate General Counsel/Assistant Secretary of
Delaware Management Company (a series of Delaware Management Business Trust)
Philip Y. Lin Vice President/Associate General Counsel/Assistant Secretary of Delaware
Management Company (a series of Delaware Management Business Trust)
</TABLE>
(1) MANAGING DIRECTOR, Lincoln National UK plc prior to 1996.
(2) TAX PRINCIPAL, Ernst & Young LLP prior to April 1998.
(3) INVESTMENT OFFICER, Travelers Insurance prior to January 1997.
(4) SENIOR PORTFOLIO MANAGER, Pitcairn Trust Company prior to May 1997.
(5) SENIOR PORTFOLIO MANAGER, Voyageur Fund Managers, Inc. prior to May 1997.
(6) SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER, Voyageur Asset Management
LLC prior to May 1997.
(7) DIRECTOR OF TRUST INVESTMENTS, Bell Atlantic Corporation prior to February
1997.
(8) VICE PRESIDENT, Morgan Stanley Asset Management prior to March 1997.
(9) SENIOR VICE PRESIDENT, EQUITY RESEARCH, NatWest Securities Corporation
prior to March 1997.
(10) ATTORNEY, Ballard, Spahr, Andrews & Ingersoll prior to January 1997.
<PAGE>
PART C - Other Information
(Continued)
Item 27. 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 Investment
Advisers Limited Partner None
Delaware Capital
Management, Inc. Limited Partner None
Jeffrey J. Nick Chairman Chairman, President, Chief
Executive Officer and
Director/Trustee
Bruce D. Barton President and Chief Executive None
Officer
David K. Downes Executive Vice President, Executive Vice President, Chief
Chief Operating Officer Operating Officer and Chief
and Chief Financial Officer Financial Officer
Richard J. Flannery Executive Vice President/ Executive Vice President
General Counsel
George M. Chamberlain, Jr. Senior Vice President/Secretary Senior Vice President/
Secretary/General Counsel
Joseph H. Hastings Senior Vice President/Corporate Senior Vice President/
Controller & Treasurer Corporate Controller
Terrence P. Cunningham Senior Vice President/Financial None
Institutions/National Sales Manger
Thomas E. Sawyer Senior Vice President/ None
National Sales Director
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Mac McAuliffe Senior Vice President/Sales None
Manager, Western Division
J. Chris Meyer Senior Vice President/ None
Director, Product Management
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
Stephen J. DeAngelis Senior Vice President/National None
Director/Managed Account Services
Joanne O. Hutcheson Senior Vice President/Human Senior Vice President/Human
Resources Resources
Holly W. Reimel Senior Vice President/National None
Accounts
Eric E. Miller Senior Vice President/Assistant Senior Vice President/Assistant
Secretary/Deputy General Counsel Secretary/Deputy General Counsel
Richelle S. Maestro Senior Vice President/Assistant Senior Vice President/Assistant
Secretary/Deputy General Counsel Secretary/Deputy General Counsel
Diane M. Anderson Senior Vice President/ None
Retirement Operations
James L. Shields Senior Vice President/ None
Chief Information Officer
Stephen C. Nell Senior Vice President/National None
Retirement Sales
Christopher H. Price Senior Vice President/Channel None
Manager
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<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
Daniel H. Carlson Vice President/Marketing Services None
Courtney S. West Vice President/Institutional Sales None
Gordon E. Searles Vice President/Client Services None
Julia R. Vander Els Vice President/Retirement Plan None
Contributions
Scott Metzger Vice President/Business Development None
Larry Carr Vice President/Variable Annuity None
Sales Manager
James R. Searles Vice President/Variable Annuity None
Sales Manager
Gregory J. McMillan Vice President/National Accounts None
Christopher W. Moore Vice President/Variable Annuity None
Wholesaler
Daniel J. O'Brien Vice President/Insurance Products None
Andrew W. Whitaker Vice President/Wholesaler None
Financial Institutions
Jessie Emery Vice President/Marketing None
Communications
Darryl S. Grayson Vice President, Broker/Dealer None
Internal Sales Director
Dinah J. Huntoon Vice President/Product None
Manager, Equities
Soohee Lee Vice President/Fixed Income None
and International Product
Management
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Joel A. Ettinger Vice President/Taxation Vice President/Taxation
Michael J. Woods Vice President/National None
Sales Manager
Susan T. Friestedt Vice President/Retirement Services None
Ellen M. Krott Vice President/Marketing None
John A. Wells Vice President/Marketing Technology None
Theodore V. Wood, III Vice President/Technical Systems None
Officer
Matthew Coldren Vice President/National Accounts None
Patrick A. Connelly Vice President/RIA Sales None
Karina J. Istvan Vice President/Strategic Planning Vice President/Strategic
Planning
Michael D. Mabry Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
David P. O'Connor Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
Philip Y. Lin Vice President/Associate General Vice President/Associate General
Counsel/Assistant Secretary Counsel/Assistant Secretary
Catherine A. Seklecki Vice President/Retirement Sales None
Michael T. Taggart Vice President/Facilities and None
Administrative Services
Bruce A. Ulmer Vice President/Year 2000 Vice President/Year 2000
Richard P. Allen Vice President/Wholesaler, None
Midwest Region
David P. Anderson, Jr. Vice President/Wholesaler None
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Jeffrey H. Arcy Vice President/Wholesaler, None
Southeast Region
Patrick A. Bearss Vice President/Wholesaler,
Midwest Region
Gabriella Bercze Vice President/Financial None
Institution Wholesaler
Larry D. Bridwell Vice President/Financial None
Institution Wholesaler
Terrence L. Bussard Vice President/Wholesaler None
William S. Carroll Vice President/Wholesaler None
Thomas J. Chadie Vice President/Wholesaler None
Douglas R. Glennon Vice President/Wholesaler None
Ronald A. Haimowitz Vice President/Wholesaler None
Edward J. Hecker Vice President/Wholesaler None
John R. Herron Vice President/Variable None
Annuity Wholesaler
Christopher L. Johnston Vice President/Wholesaler None
Michael P. Jordan Vice President/Wholesaler None
Carolyn Kelly Vice President/Wholesaler None
Richard M. Koerner Vice President/Wholesaler None
Theodore T. Malone Vice President/IPI Wholesaler None
Debbie A. Marler Vice President/Wholesaler None
Nathan W. Medin Vice President/Wholesaler None
Roger J. Miller Vice President/Wholesaler None
Andrew F. Morris Vice President/Wholesaler, None
East Division
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Patrick L. Murphy Vice President/Wholesaler None
Scott E. Naughton Vice President/IPI Wholesaler None
Julia A. Nye Vice President/Wholesaler None
Joseph T. Owczarek Vice President/Wholesaler None
Otis S. Page 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
Robert A. Rosso Vice President/Wholesaler None
Linda Schulz Vice President/Wholesaler None
John C. Shalloe Vice President/Wrap Fee None
Wholesaler, Western Region
Edward B. Sheridan Vice President/Wholesaler None
Robert E. Stansbury Vice President/Wholesaler None
Wayne W. Wagner Vice President/Wholesaler None
Scott Whitehouse Vice President/Wholesaler None
Denise D. Bradley Vice President/Variable None
Annuity Wholesaler
Rhonda J. Guido Vice President/Wholesaler None
John M. Leboeuf Vice President/Variable Annuity None
Wholesaler
John R. Logan Vice President/Wholesaler/ None
Financial Institutions
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
<PAGE>
PART C - Other Information
(Continued)
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address * with Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Christopher W. Moore Vice President/Variable Annuity None
Wholesaler
Julie Nusbaum Vice President/Wholesaler/ None
Financial Institutions
</TABLE>
* Business address of each is 1818 Market Street, Philadelphia, PA 19103.
(c) Not Applicable.
Item 30. Location of Accounts and Records.
All accounts and records are maintained in Philadelphia at 1818 Market
Street, Philadelphia, PA 19103 or One Commerce Square, Philadelphia, PA
19103.
Item 31. Management Services. None.
Item 32. Undertakings.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(d) Not Applicable
<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 15th day of April, 1999.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
By /s/Jeffrey J. Nick
-------------------------
Jeffrey J. Nick
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>
President, Chief Executive
/s/ Jeffrey J. Nick Officer, Chairman and Director April 15, 1999
- --------------------------------------
Jeffrey J. Nick
Executive Vice President/Chief Operating
Officer/Chief Financial Officer
(Principal Financial Officer and
/s/ David K. Downes Principal Accounting Officer) April 15, 1999
- --------------------------------------
David K. Downes
/s/ Wayne A. Stork * Director April 15, 1999
- --------------------------------------
Wayne A. Stork
/s/ Walter A. Babich * Director April 15, 1999
- --------------------------------------
Walter A. Babich
/s/ Anthony D. Knerr * Director April 15, 1999
- --------------------------------------
Anthony D. Knerr
/s/ Ann R. Leven * Director April 15, 1999
- --------------------------------------
Ann R. Leven
/s/ Thomas F. Madison * Director April 15, 1999
- --------------------------------------
Thomas F. Madison
/s/ John H. Durham * Director April 15, 1999
- --------------------------------------
John H. Durham
/s/ Charles E. Peck * Director April 15, 1999
- --------------------------------------
Charles E. Peck
/s/ Jan L. Yeomans * Director April 15, 1999
- --------------------------------------
Jan L. Yeomans
</TABLE>
<PAGE>
PART C - Other Information
(Continued)
*By /s/ Jeffrey J. Nick
-------------------
Jeffrey J. Nick
as Attorney-in-Fact for
each of the persons indicated
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Exhibits
to
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
<PAGE>
PART C - Other Information
(Continued)
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
EX-99.D Form of Investment Management Agreement
EX-99.E1.i Distribution Agreement
EX-99.E1.ii Amendment No.1 to Distribution Agreement
EX-99.G1 Custodian Agreement
EX-99.G2 Amendment to Custodian Agreement
EX-99.G3 Form of Letter
EX-99.H2.i Amendment No. 9 to Fund Accounting Agreement
EX-99.H2.ii Amendment No. 10 to Fund Accounting Agreement
EX-99.H2.iii Amendment No. 11 to Fund Accounting Agreement
EX-99.H2.iv Amendment No. 12 to Fund Accounting Agreement
EX-99.H2.v Amendment No. 13 to Fund Accounting Agreement
EX-99.J Consent of Auditors
EX-99.M1 Plan under Rule 12b-1 for Class A of Limited-Term Government Fund
EX-99.M2 Plan under Rule 12b-1 for Class B of Limited-Term Government Fund
EX-99.M3 Plan under Rule 12b-1 for Class C of Limited-Term Government Fund
EX-27 Financial Data Schedules
EX-99.P3 Power of Attorney for Jan L. Yeomans
<PAGE>
[REGISTRANT NAME]
FORM OF INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, made by and between [REGISTRANT], a Maryland
corporation ("Fund") on behalf of the [SERIES] ("Series"), and DELAWARE
MANAGEMENT COMPANY, a series of Delaware Management Business Trust, a Delaware
business trust ("Investment Manager").
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an
investment company registered under the Investment Company Act of 1940 and is
currently comprised of [x] series, including the Series; as a separate series of
the Fund, each series engages in the business of investing and reinvesting its
assets in securities, and
WHEREAS, the Investment Manager is a registered investment
adviser under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, in connection with the changes in investment manager,
the Fund on behalf of the Series and the Investment Manager desire to enter into
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, and each of the parties hereto intending to be legally bound,
it is agreed as follows:
1. The Fund hereby employs the Investment Manager to manage
the investment and reinvestment of the Series' assets and to administer its
<PAGE>
affairs, subject to the direction of the Fund's Board of Directors and officers
of the Fund for the period and on the terms hereinafter set forth. The
Investment Manager hereby accepts such employment and agrees during such period
to render the services and assume the obligations herein set forth for the
compensation herein provided. The Investment Manager shall for all purposes
herein be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent the
Fund in any way, or in any way be deemed an agent of the Fund. The Investment
Manager shall regularly make decisions as to what securities and other
instruments to purchase and sell on behalf of the Series and shall effect the
purchase and sale of such investments in furtherance of the Series' objectives
and policies and shall furnish the Board of Directors of the Fund with such
information and reports regarding the Series' investments as the Investment
Manager deems appropriate or as the Directors of the Fund may reasonably
request.
2. The Fund shall conduct its own business and affairs and
shall bear the expenses and salaries necessary and incidental thereto including,
but not in limitation of the foregoing, the costs incurred in: the maintenance
of its corporate existence; the maintenance of its own books, records and
procedures; dealing with its own shareholders; the payment of dividends;
transfer of stock, including issuance, redemption and repurchase of shares;
preparation of share certificates; reports and notices to shareholders; calling
and holding of shareholders' meetings; miscellaneous office expenses; brokerage
commissions; custodian fees; legal and accounting fees; taxes; and federal and
state registration fees. Directors, officers and employees of the Investment
Manager may be directors, officers and employees of any of the funds (including
the Fund) of which Delaware Management Company is investment manager. Directors,
officers and employees of the Investment Manager who are directors, officers
and/or employees of these funds shall not receive any compensation from the
funds for acting in such dual capacity.
-2-
<PAGE>
In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment Manager
may share facilities common to each, with appropriate proration of expenses
between them.
3. (a) Subject to the primary objective of obtaining the best
available prices and execution, the Investment Manager will place orders for the
purchase and sale of portfolio securities and other instruments with such
broker/dealers selected who provide statistical, factual and financial
information and services to the Fund, to the Investment Manager, to any
Sub-Adviser, as defined in Paragraph 5 hereof, or to any other fund for which
the Investment Manager or any such Sub-Adviser provides investment advisory
services and/or with broker/dealers who sell shares of the Fund or who sell
shares of any other fund for which the Investment Manager or any such
Sub-Adviser provides investment advisory services. Broker/dealers who sell
shares of the funds of which Delaware Management Company is investment manager,
shall only receive orders for the purchase or sale of portfolio securities to
the extent that the placing of such orders is in compliance with the Rules of
the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph
(a) above and subject to such policies and procedures as may be adopted by the
Board of Directors and officers of the Fund, the Investment Manager may ask the
Fund and the Fund may agree to pay a member of an exchange, broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged for effecting that transaction, in such instances where the Fund and the
Investment Manager have determined in good faith that such amount of commission
was reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Investment Manager's overall responsibilities with
respect to the Fund and to other funds and other advisory accounts for which the
Investment Manager or any Sub-Adviser, as defined in Paragraph 5 hereof,
exercises investment discretion.
-3-
<PAGE>
4. As compensation for the services to be rendered to the Fund
by the Investment Manager under the provisions of this Agreement, the Fund shall
pay to the Investment Manager monthly from the Series' assets, a fee on the
average daily net assets of the Series during the month. Such fee shall be
calculated in accordance with the following schedule:
Monthly Annual Rate Average Daily Net Assets
------- ----------- ------------------------
If this Agreement is terminated prior to the end of any
calendar month, the management fee shall be prorated for the portion of any
month in which this Agreement is in effect according to the proportion which the
number of calendar days, during which the Agreement is in effect, bears to the
number of calendar days in the month, and shall be payable within 10 days after
the date of termination.
-4-
<PAGE>
5. The Investment Manager may, at its expense, select and
contract with one or more investment advisers registered under the Investment
Advisers Act of 1940 (the "Sub-Adviser") to perform some or all of the services
for the Series for which it is responsible under this Agreement. The Investment
Manager will compensate any Sub-Adviser for its services to the Series. The
Investment Manager may terminate the services of any Sub-Adviser at any time in
its sole discretion, and shall at such time assume the responsibilities of such
Sub-Adviser unless and until a successor Sub-Adviser is selected and the
requisite approval of the Series' shareholders is obtained. The Investment
Manager will continue to have responsibility for all advisory services furnished
by any Sub-Adviser.
6. The services to be rendered by the Investment Manager to
the Fund under the provisions of this Agreement are not to be deemed to be
exclusive, and the Investment Manager shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
7. The Investment Manager, its directors, officers, employees,
agents and shareholders may engage in other businesses, may render investment
advisory services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
-5-
<PAGE>
8. The Investment Manager or its affiliates are permitted to
use the identifying names "Delaware," "Delaware Investments," or "Delaware
Group" when sponsoring Funds (or their series or classes), whether already
existing or to be created in the future. The Investment Manager hereby consents
to the Fund's use of the identifying words "Delaware," "Delaware Investments,"
or "Delaware Group" in the name of the Fund, or any series or class of shares of
the Fund. In the event that the Investment Manager ceases to be the Fund's
investment manager, or otherwise determines that the Fund should no longer
utilize such names for any reason, the Investment Manager may revoke its consent
in writing and the Fund will promptly cease using such names for the Fund, its
series or classes, and will take all necessary steps to amend the Fund's
Articles of Incorporation and Bylaws to reflect a name change.
9. In the absence of willful misfeasance, bad faith, gross
negligence, or a reckless disregard of the performance of its duties as the
Investment Manager to the Fund, the Investment Manager shall not be subject to
liability to the Fund or to any shareholder of the Fund for any action or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security, or otherwise.
10. This Agreement shall be executed and become effective as
of the date written below if approved by the vote of a majority of the
outstanding voting securities of the Series. It shall continue in effect for a
period of two years and may be renewed thereafter only so long as such renewal
and continuance is specifically approved at least annually by the Board of
Directors or by the vote of a majority of the outstanding voting securities of
the Series and only if the terms and the renewal hereof have been approved by
the vote of a majority of the Directors of the Fund who are not parties hereto
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated by the Fund at any time, without the payment of a
-6-
<PAGE>
penalty, on sixty days' written notice to the Investment Manager of the Fund's
intention to do so, pursuant to action by the Board of Directors of the Fund or
pursuant to the vote of a majority of the outstanding voting securities of the
Series. The Investment Manager may terminate this Agreement at any time, without
the payment of a penalty, on sixty days' written notice to the Fund of its
intention to do so. Upon termination of this Agreement, the obligations of all
the parties hereunder shall cease and terminate as of the date of such
termination, except for any obligation to respond for a breach of this Agreement
committed prior to such termination, and except for the obligation of the Fund
to pay to the Investment Manager the fee provided in Paragraph 4 hereof,
prorated to the date of termination. This Agreement shall automatically
terminate in the event of its assignment.
11. This Agreement shall extend to and bind the heirs,
executors, administrators and successors of the parties hereto.
12. For the purposes of this Agreement, the terms "vote of a
majority of the outstanding voting securities"; "interested persons"; and
"assignment" shall have the meaning defined in the Investment Company Act of
1940.
IN WITNESS WHEREOF, the parties hereto have caused their
corporate seals to be affixed and duly attested and their presents to be signed
by their duly authorized officers as of the _____ day of _________, _ _ _ _.
-7-
<PAGE>
[REGISTRANT NAME].
for the [SERIES NAME]
By:
Name:
Title:
Attest:
Name:
Title:
DELAWARE MANAGEMENT COMPANY, a
series of DELAWARE MANAGEMENT BUSINESS TRUST
By:
Name:
Title:
Attest:
Name:
Title:
-8-
<PAGE>
DELAWARE GROUP TREASURY RESERVES, INC.
TREASURY RESERVES INTERMEDIATE SERIES
DISTRIBUTION AGREEMENT
Distribution Agreement (the "Agreement") made as of this 3rd
day of April, 1995 by and between DELAWARE GROUP TREASURY RESERVES, INC., a
Maryland corporation (the "Fund"), for the TREASURY RESERVES INTERMEDIATE SERIES
(the "Series") and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware
limited partnership.
WITNESSETH
WHEREAS, the Fund is an investment company regulated by
Federal and State regulatory bodies, and
WHEREAS, the Distributor is engaged in the business of
promoting the distribution of the securities of investment companies and, in
connection therewith and acting solely as agent for such investment companies
and not as principal, advertising, promoting, offering and selling their
securities to the public, and
WHEREAS, the Fund and the Distributor (or its predecessor)
were the parties to a contract under which the Distributor acted as the national
distributor of the Series shares, which contract was amended and restated as of
the 2nd day of May, 1994 and subsequently readopted as of January 3, 1995 (the
"Prior Distribution Agreement"), and
<PAGE>
WHEREAS, Delaware Management Holdings, Inc. ("Holdings"), the
indirect parent company of the Distributor completed on the date of this
Agreement a merger transaction with a newly-formed subsidiary of Lincoln
National Corporation, pursuant to which Holdings became a wholly-owned
subsidiary of Lincoln National Corporation, and
WHEREAS, the merger transaction resulted in a change of
control of the Distributor and an automatic termination of the Prior
Distribution Agreement, and
WHEREAS, the Board of Directors of the Fund has determined to
enter into a new agreement with the Distributor as of the date hereof, pursuant
to which the Distributor shall continue to be the national distributor of the
Series' Treasury Reserves Intermediate Fund class (now doing business as
Treasury Reserves Intermediate Fund A Class and hereinafter referred to as the
"Class A Shares"), the Series' Treasury Reserves Intermediate Fund B Class (the
"Class B Shares") and the Series' Treasury Reserves Intermediate Fund
(Institutional) class (now doing business as Treasury Reserves Intermediate Fund
Institutional Class and hereinafter referred to as the "Institutional Class
Shares"), which Series and classes may do business under these or such other
names as the Board of Directors may designate from time to time, on the terms
and conditions set forth below,
NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. The Fund hereby engages the Distributor to promote the distribution of the
Series' shares and, in connection therewith and as agent for the Fund and not
as principal, to advertise, promote, offer and sell the Series' shares to the
public.
2. (a) The Distributor agrees to serve as distributor of the Series' shares
and, as agent for the Fund and not as principal, to advertise, promote
and use its best efforts to sell the Series' shares wherever their sale
is legal, either through dealers or otherwise, in such places and in
such manner, not inconsistent with the law and the provisions of this
Agreement and the Fund's Registration Statement under the Securities Act
of 1933, including the Prospectuses contained therein and the Statement
of Additional Information contained therein, as may be mutually
determined by the Fund and the Distributor from time to time.
-2-
<PAGE>
(b) For the Institutional Class Shares, the Distributor will bear all costs
of financing any activity which is primarily intended to result in the
sale of that class of shares, including, but not necessarily limited to,
advertising, compensation of underwriters, dealers and sales personnel,
the printing and mailing of sales literature and distribution of that
class of shares.
(c) For its services as agent for the Class A Shares and Class B Shares, the
Distributor shall be entitled to compensation on each sale or
redemption, as appropriate, of shares of such classes equal to any
front-end or deferred sales charge described in the Prospectus from time
to time and may allow concessions to dealers in such amounts and on such
terms as are therein set forth.
(d) For the Class A Shares and Class B Shares, the Fund shall, in addition,
compensate the Distributor for its services as provided in the
Distribution Plan as adopted on behalf of the Class A Shares and Class B
Shares, respectively, pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (the "Plans"), copies of which as presently in force
are attached hereto as, respectively, Exhibit "A" and Exhibit "B".
3. (a) The Fund agrees to make available for sale by the Fund through the
Distributor all or such part of the authorized but unissued shares of
the Series as the Distributor shall require from time to time, and
except as provided in Paragraph 3(b) hereof, the Fund will not sell
Series' shares other than through the efforts of the Distributor.
-3-
<PAGE>
(b) The Fund reserves the right from time to time (1) to sell and issue
shares other than for cash; (2) to issue shares in exchange for
substantially all of the assets of any corporation or trust, or in
exchange of shares of any corporation or trust; (3) to pay stock
dividends to its shareholders, or to pay dividends in cash or stock at
the option of its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from time to time in
cash, or to split up or combine its outstanding shares of common stock;
(4) to offer shares for cash to its stockholders as a whole, by the use
of transferable rights or otherwise, and to sell and issue shares
pursuant to such offers; and (5) to act as its own distributor in any
jurisdiction in which the Distributor is not registered as a
broker-dealer.
4. The Fund warrants the following:
(a) The Fund is, or will be, a properly registered investment company, and
any and all Series' shares which it will sell through the Distributor
are, or will be, properly registered with the Securities and Exchange
Commission ("SEC").
(b) The provisions of this Agreement do not violate the terms of any
instrument by which the Fund is bound, nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its
property.
5. (a) The Fund will supply to the Distributor a conformed copy of the
Registration Statement, all amendments thereto, all exhibits, and each
Prospectus and Statement of Additional Information.
(b) The Fund will register or qualify the Series' shares for sale in such
states as is deemed desirable.
(c) The Fund, without expense to the Distributor,
(1) will give and continue to give such financial statements and other
information as may be required by the SEC or the proper public
bodies of the states in which the Series' shares may be qualified;
-4-
<PAGE>
(2) from time to time, will furnish the Distributor as soon as
reasonably practicable true copies of its periodic reports to
stockholders;
(3) will promptly advise the Distributor in person or by telephone or
telegraph, and promptly confirm such advice in writing, (a) when
any amendment or supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectuses or
for additional information, and (c) of the issuance by the SEC of
any Stop Order suspending the effectiveness of the Registration
Statement, or the initiation of any proceedings for that purpose;
(4) if at any time the SEC shall issue any Stop Order suspending the
effectiveness of the Registration Statement, will make every
reasonable effort to obtain the lifting of such order at the
earliest possible moment;
(5) will from time to time, use its best efforts to keep a sufficient
supply of Series' shares authorized, any increases being subject to
the approval of shareholders as may be required;
(6) before filing any further amendment to the Registration Statement
or to any Prospectus, will furnish the Distributor copies of the
proposed amendment and will not, at any time, whether before or
after the effective date of the Registration Statement, file any
amendment to the Registration Statement or supplement to any
Prospectus of which the Distributor shall not previously have been
advised or to which the Distributor shall reasonably object (based
upon the accuracy or completeness thereof) in writing;
(7) will continue to make available to its stockholders (and forward
copies to the Distributor) of such periodic, interim and any other
reports as are now, or as hereafter may be, required by the
provisions of the Investment Company Act of 1940; and
-5-
<PAGE>
(8) will, for the purpose of computing the offering price of Series'
shares, advise the Distributor within one hour after the close of
the New York Stock Exchange (or as soon as practicable thereafter)
on each business day upon which the New York Stock Exchange may be
open of the net asset value per share of the Series' shares of
common stock outstanding, determined in accordance with any
applicable provisions of law and the provisions of the Articles of
Incorporation, as amended, of the Fund as of the close of business
on such business day. In the event that prices are to be calculated
more than once daily, the Fund will promptly advise the Distributor
of the time of each calculation and the price computed at each such
time.
6. The Distributor agrees to submit to the Fund, prior to its use, the form of
all sales literature proposed to be generally disseminated by or for the
Distributor, all advertisements proposed to be used by the Distributor, all
sales literature or advertisements prepared by or for the Distributor for
such dissemination or for use by others in connection with the sale of the
Series' shares, and the form of dealers' sales contract the Distributor
intends to use in connection with sales of the Series' shares. The
Distributor also agrees that the Distributor will submit such sales
literature and advertisements to the NASD, SEC or other regulatory agency as
from time to time may be appropriate, considering practices then current in
the industry. The Distributor agrees not to use such form of dealers' sales
contract or to use or to permit others to use such sales literature or
advertisements without the written consent of the Fund if any regulatory
agency expresses objection thereto or if the Fund delivers to the
Distributor a written objection thereto.
7. The purchase price of each share sold hereunder shall be the offering price
per share mutually agreed upon by the parties hereto, and as described in
the Fund's Prospectuses, as amended from time to time, determined in
accordance with any applicable provision of law, the provisions of its
Articles of Incorporation and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
-6-
<PAGE>
8. The responsibility of the Distributor hereunder shall be limited to the
promotion of sales of Series' shares. The Distributor shall undertake to
promote such sales solely as agent of the Fund, and shall not purchase or
sell such shares as principal. Orders for Series' shares and payment for
such orders shall be directed to the Fund's agent, Delaware Service Company,
Inc. for acceptance on behalf of the Fund. The Distributor is not empowered
to approve orders for sales of shares or accept payment for such orders.
Sales of Series' shares shall be deemed to be made when and where accepted
by Delaware Service Company, Inc. on behalf of the Fund.
9. With respect to the apportionment of costs between the Fund and the
Distributor of activities with which both are concerned, the following will
apply:
(a) The Fund and the Distributor will cooperate in preparing the
Registration Statements, the Prospectuses, the Statement of Additional
Information, and all amendments, supplements and replacements thereto.
The Fund will pay all costs incurred in the preparation of the Fund's
Registration Statement, including typesetting, the costs incurred in
printing and mailing Prospectuses and Annual, Semi-Annual and other
financial reports to its own shareholders and fees and expenses of
counsel and accountants.
(b) The Distributor will pay the costs incurred in printing and mailing
copies of Prospectuses to prospective investors.
(c) The Distributor will pay advertising and promotional expenses, including
the costs of printing and mailing literature sent to prospective
investors.
(d) The Fund will pay the costs and fees incurred in registering or
qualifying the Series' shares with the various states and with the SEC.
(e) The Distributor will pay the costs of any additional copies of Fund
financial and other reports and other Fund literature supplied to the
Distributor by the Fund for sales promotion purposes.
10. The Distributor may engage in other business, provided such other business
does not interfere with the performance by the Distributor of its
obligations under this Agreement.
-7-
<PAGE>
11. The Fund agrees to indemnify, defend and hold harmless from the assets of
the Series the Distributor and each person, if any, who controls the
Distributor within the meaning of Section 15 of the Securities Act of 1933,
from and against any and all losses, damages, or liabilities to which,
jointly or severally, the Distributor or such controlling person may become
subject, insofar as the losses, damages or liabilities arise out of the
performance of its duties hereunder except that the Fund shall not be liable
for indemnification of the Distributor or any controlling person thereof for
any liability to the Fund or its security holders to which they would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of their duties under this Agreement.
12. Copies of financial reports, Registration Statements and Prospectuses, as
well as demands, notices, requests, consents, waivers, and other
communications in writing which it may be necessary or desirable for either
party to deliver or furnish to the other will be duly delivered or
furnished, if delivered to such party at its address shown below during
regular business hours, or if sent to that party by registered mail or by
prepaid telegram filed with an office or with an agent of Western Union or
another nationally recognized telegraph service, in all cases within the
time or times herein prescribed, addressed to the recipient at 1818 Market
Street, Philadelphia, Pennsylvania 19103, or at such other address as the
Fund or the Distributor may designate in writing and furnish to the other.
13. This Agreement shall not be assigned, as that term is defined in the
Investment Company Act of 1940, by the Distributor and shall terminate
automatically in the event of its attempted assignment by the Distributor.
This Agreement shall not be assigned by the Fund without the written consent
of the Distributor signed by its duly authorized officers and delivered to
the Fund. Except as specifically provided in the indemnification provision
contained in Paragraph 11 herein, this Agreement and all conditions and
provisions hereof are for the sole and exclusive benefit of the parties
hereto and their legal successors and no express or implied provision of
this Agreement is intended or shall be construed to give any person other
than the parties hereto and their legal successors any legal or equitable
right, remedy or claim under or in respect of this Agreement or any
provisions herein contained.
14. (a) This Agreement shall remain in force for a period of two years from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Board of
Directors or by vote of a majority of the outstanding voting securities
of the Series and only if the terms and the renewal thereof have been
approved by the vote of a majority of the Directors of the Fund, who are
not parties hereto or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
-8-
<PAGE>
(b) The Distributor may terminate this Agreement on written notice to the
Fund at any time in case the effectiveness of the Registration Statement
shall be suspended, or in case Stop Order proceedings are initiated by
the SEC in respect of the Registration Statement and such proceedings
are not withdrawn or terminated within thirty days. The Distributor may
also terminate this Agreement at any time by giving the Fund written
notice of its intention to terminate the Agreement at the expiration of
three months from the date of delivery of such written notice of
intention to the Fund.
(c) The Fund may terminate this Agreement at any time on at least thirty
days prior written notice to the Distributor (1) if proceedings are
commenced by the Distributor or any of its partners for the
Distributor's liquidation or dissolution or the winding up of the
Distributor's affairs; (2) if a receiver or trustee of the Distributor
or any of its property is appointed and such appointment is not vacated
within thirty days thereafter; (3) if, due to any action by or before
any court or any federal or state commission, regulatory body, or
administrative agency or other governmental body, the Distributor shall
be prevented from selling securities in the United States or because of
any action or conduct on the Distributor's part, sales of the shares are
not qualified for sale. The Fund may also terminate this Agreement at
any time upon prior written notice to the Distributor of its intention
to so terminate at the expiration of three months from the date of the
delivery of such written notice to the Distributor.
15. The validity, interpretation and construction of this Agreement, and of each
part hereof, will be governed by the laws of the Commonwealth of
Pennsylvania.
-9-
<PAGE>
16. In the event any provisions of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of the
Agreement, which shall continue to be in force.
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.,
General Partner
Attest:
/s/ Eric E. Miller By: /s/ David K. Downes
- ----------------------------- --------------------------
Name: Eric E. Miller Name: David K. Downes
Title: Vice President Title: Senior Vice President
Assistant Secretary Chief Administrative
Officer
DELAWARE GROUP TREASURY RESERVES,
INC. for the TREASURY RESERVES
INTERMEDIATE SERIES
Attest:
/s/ Eric E. Miller By: /s/ Wayne A. Stork
- ----------------------------- -------------------------------
Name: Eric E. Miller Name: Wayne A. Stork
Title: Vice President Title: Chairman
Assistant Secretary
-10-
<PAGE>
DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
LIMITED-TERM GOVERNMENT FUND SERIES
AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT
This Amendment No. 1 to Distribution Agreement (this "Agreement") is
made as of the 29th day of November, 1995, by and between DELAWARE GROUP
LIMITED-TERM GOVERNMENT FUNDS, INC. (the "Fund"), for the LIMITED-TERM
GOVERNMENT FUND series (the "Series"), and DELAWARE DISTRIBUTORS, L.P. (the
"Distributor").
WITNESSETH
WHEREAS, the Fund, for the Series, and the Distributor are parties to
that certain Distribution Agreement made as of the 3rd day of April, 1995 (the
"Distribution Agreement"); and
WHEREAS, the Board of Directors of the Fund has established the
Limited-Term Government Fund C Class (the "Class C Shares") as an additional
class of the Series, and the Fund and the Distributor desire to amend the
Distribution Agreement to provide that the Distributor shall act as the national
distributor of the Class C Shares pursuant thereto;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. The Class C Shares are hereby included among the shares to which the
Distribution Agreement relates and the Distributor shall act as distributor for
the Class C Shares pursuant to and in accordance with the Distribution
Agreement, as amended hereby.
2. Hereafter, each reference to "Class A Shares and Class B Shares" in
Section 2 (c) and (d) of the Distribution Agreement shall be deemed to include
the Class C Shares, provided that the Distribution Plan adopted pursuant to Rule
12b-1 under the Investment Company Act of 1940 for the Class C Shares and
presently in force is attached hereto as Exhibit "A."
DELAWARE DISTRIBUTORS, L.P.
By: Delaware Distributors, Inc.,
General Partner
ATTEST:
/s/Eric E. Miller By: /s/David K. Downes
- ----------------------------- ---------------------------------
Name: Eric E. Miller Name: David K. Downes
Title: Vice President Title: Senior Vice President
Assistant Secretary Chief Administrative Officer
DELAWARE GROUP LIMITED-TERM
GOVERNMENT FUNDS, INC.,
ATTEST: for the LIMITED-TERM GOVERNMENT
FUND SERIES
/s/Eric E. Miller By: /s/Wayne A. Stork
- ----------------------------- ---------------------------------
Name: Eric E. Miller Name: Wayne A. Stork
Title: Vice President Title: Chairman
Assistant Secretary
CHASE
GLOBAL CUSTODY AGREEMENT
AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK, N.A.
(the "Bank") and those registered investment companies listed on Schedule A
hereto (each a Customer ) on behalf of certain of their respective series,
as listed on Schedule A (individually and collectively the Series ).
1. Customer Accounts.
The Bank agrees to establish and maintain the following accounts
("Accounts"):
(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and
(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by
the Bank or its Subcustodian for the account of the Customer, which cash
shall not be subject to withdrawal by draft or check.
The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.
Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional
Accounts under the terms of this Agreement.
2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.
Unless Instructions specifically require another location acceptable to
the Bank:
(a) Securities will be held 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) Cash will be credited to an account in a country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.
To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest
bearing accounts. If interest bearing accounts are not available, such cash
may be held in non-interest bearing accounts. The Bank is authorized to
maintain cash balances on deposit for the Customer with itself or one of its
affiliates. Interest bearing accounts shall bear interest at such reasonable
rates of interest as may from time to time be paid on such accounts by the
Bank or its affiliates.
(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:
(x) In the event that during a given calendar month a Series has maintained
an average daily cash balance greater than zero, the Bank shall provide an
earnings credit against custody fees otherwise owing hereunder by such Series
during such calendar month in an amount equal to the product of (A) 75% of
the 90 day U.S. government Treasury bill rate as quoted in the Wall Street
Journal for the last Business Day (being a day on which the Bank is open
for the transaction of all its ordinary business) of such calendar month, (B)
the average daily cash balance for such month, and (C) the number of days in
such calendar month divided by 365.
(y) In the event that during a given calendar month a Series has maintained
an average daily cash balance less than or equal to zero, the Bank shall be
paid interest on such amount by such Series in an amount equal to the product
of (A) the Overnight Fed Funds Rate (as defined below) plus 25 basis points
for the last Business Day of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.
(z) For purposes of (y) above, the term Overnight Fed Funds Rate shall mean
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published by the Federal Reserve Bank of New York (with the rate for the
last Business Day of a given calendar month being the rate so published on
the Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given
calendar month, of such transactions received by the Bank from three Federal
funds brokers of recognized standing selected by the Bank.
If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section
3 (or their securities depositories), such arrangement must be authorized by
a written agreement, signed by the Bank and the Customer.
3. Subcustodians and Securities Depositories.
The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank
to hold Assets in the Accounts in accounts which the Bank has established
with one or more of its branches or Subcustodians. The Bank and
Subcustodians are authorized to hold any of the Securities in their account
with any securities depository in which they participate.
The Bank reserves the right to add new, replace or remove Subcustodians.
The Customer will be given reasonable notice by the Bank of any amendment to
Schedule B. Upon request by the Customer, the Bank will identify the name,
address and principal place of business of any Subcustodian of the Customer's
Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.
Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.
4. Use of Subcustodian.
(a) The Bank will identify the Assets on its books as belonging to the
Customer.
(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of
the Bank.
(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only
to the instructions of such Subcustodian.
(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject
to any right, charge, security interest, lien or claim of any kind in favor
of such Subcustodian except for safe custody or administration, (ii) the
beneficial ownership of such assets will be freely transferable without the
payment of money or value other than for safe custody or administration;
(iii) adequate records will be maintained identifying the assets held
pursuant to such agreement as belonging to the customers of the Bank; (iv)
subject to applicable law, Subcustodian shall permit independent public
accountants for Bank and customers of the Bank reasonable access to
Subcustodian s books and records as they pertain to the subcustody account in
connection with such accountants' examination of the books and records of
such account; and (v) the Bank will receive periodic reports with respect to
the safekeeping of assets in the subcustody account, including advices and/or
notifications of any transfers to or from such subcustody account. The
foregoing shall not apply to the extent of any special agreement or
arrangement made by the Customer with any particular Subcustodian.
(e) Upon request of the Customer, the Bank shall deliver to the Customer
annually a report stating: (i) the identity of each Subcustodian then acting
on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian;
(ii) the countries in which each Subcustodian is located; and (iii) as long
as Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer s Board
of Directors/Trustees directly to approve its foreign custody arrangements,
such other information relating to such Subcustodians as may reasonably be
requested by the Customer to ensure compliance with Rule 17f-5. As long as
Rule 17f-5 requires the Customer s Board of Directors/Trustees directly to
approve its foreign custody arrangements, the Bank shall also furnish
annually to the Customer information concerning such Subcustodians similar in
kind and scope as that furnished to the Customer in connection with the
initial approval hereof. The Bank shall timely advise the Customer of any
material adverse change in the facts or circumstances upon which such
information is based where such changes would affect the eligibility of the
Subcustodian under Rule 17f-5 as soon as practicable after it becomes aware
of any such material adverse change in the normal course of its custodial
activities.
5. Deposit Account Transactions
(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required
by the Bank.
(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its
discretion, may advance the Customer such excess amount which shall be deemed
a loan payable on demand, bearing interest at the rate customarily charged by
the Bank on similar loans.
(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit
Account, with interest, dividends, redemptions or any other amount due, the
Customer will promptly return any such amount upon oral or written
notification: (i) that such amount has not been received in the ordinary
course of business or (ii) that such amount was incorrectly credited. If the
Customer does not promptly return any amount upon such notification, the Bank
shall be entitled, upon oral or written notification to the Customer, to
reverse such credit by debiting the Deposit Account for the amount previously
credited. The Bank or its Subcustodian shall have no duty or obligation to
institute legal proceedings, file a claim or a proof of claim in any
insolvency proceeding or take any other action with respect to the collection
of such amount, but may act for the Customer upon Instructions after
consultation with the Customer.
6. Custody Account Transactions.
(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include
all information required by the Bank. Settlement and payment for Securities
received for, and delivery of Securities out of, the Custody Account may be
made 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, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of
Securities out of the Custody Account may also be made in any manner
specifically required by Instructions acceptable to the Bank.
(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.
(i) The Bank 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 Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall
give Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).
(ii) If any Securities delivered pursuant to this Section 6 are returned
by the recipient thereof, the Bank may reverse the credits and debits of the
particular transaction at any time.
7. Actions of the Bank.
The Bank shall follow Instructions received regarding assets held in the
Accounts. However, until it receives Instructions to the contrary, the Bank
will:
(a) Present for payment any Securities 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 Bank or
Subcustodian is actually aware of such opportunities.
(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.
(c) Exchange interim receipts or temporary Securities for definitive
Securities.
(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.
(e) Issue statements to the Customer, at times mutually agreed upon,
identifying the Assets in the Accounts.
The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or
notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends
the Bank a written exception or objection to any Bank statement within 180
days of receipt, the Customer shall be deemed to have approved such
statement.
All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which
the Bank has agreed to take any action under this Agreement.
8. Corporate Actions; Proxies; Tax Reclaims.
a. Corporate Actions. Whenever the Bank receives information
concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Customer written notice (which
may be electronic) of such Corporate Actions to the extent that the Bank's
central corporate actions department has actual knowledge of a Corporate
Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in Section
10 hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too
late to seek Instructions, the Bank is authorized to sell such rights
entitlement or fractional interest and to credit the Deposit Account with the
proceeds or take any other action it deems, in good faith, to be appropriate
in which case it shall be held harmless for any such action.
b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in Section 10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee
of a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for
forwarding to its customers. In addition, the Bank will follow coupon
payments, redemptions, exchanges or similar matters with respect to
Securities in the Custody Account and advise the Customer or the Authorized
Person for such Account of rights issued, tender offers or any other
discretionary rights with respect to such Securities, in each case, of which
the Bank has received notice from the issuer of the Securities, or as to
which notice is published in publications routinely utilized by the Bank for
this purpose.
With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.
The foregoing proxy voting services may be provided by Bank, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would
have been if it performed such services itself..
c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer which the Bank
believes may be available to such Customer. Where such reports are available,
the Bank shall periodically report to Customer concerning the making of
applications for a reduction of withholding tax and refund of any tax paid or
tax credits which apply in each applicable market in respect of income
payments on Securities for the benefit of the Customer.
(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The
Bank shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup
withholding tax will be deducted from U.S. source income. The Customer shall
provide to the Bank such documentation and information as it may require in
connection with taxation, and warrants that, when given, this information
shall be true and correct in every respect, not misleading in any way, and
contain all material information. The Customer undertakes to notify the Bank
immediately if any such information requires updating or amendment.
(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any
third party, or as a result of the provision to the Bank or any third party
of inaccurate or misleading information or the withholding of material
information by the Customer or any other third party, or as a result of any
delay of any revenue authority or any other matter beyond the control of the
Bank.
(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies
required by any revenue or governmental authority for whatever reason in
respect of the Securities or Cash Accounts.
(v) The Bank shall perform tax reclaim services only with respect to
taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at
its absolute discretion, supplement or amend the markets in which the tax
reclaim services are offered. Other than as expressly provided in this sub-
clause, the Bank shall have no responsibility with regard to the Customer's
tax position or status in any jurisdiction. Except as provided in Section
8(c)(ii) and pursuant to Instructions, the Bank shall take no action in the
servicing of the Customer s Securities which, in and of itself, creates a
taxable nexus for the Customer in any jurisdiction other than with respect to
interest, dividends and capital gains that may otherwise be subject to tax by
such jurisdiction with respect to a foreign investor not otherwise engaged in
a trade or business in such jurisdiction in a given taxable year. Bank shall
not be liable for any tax liability caused, directly or indirectly, by
Customer's actions or status in any jurisdiction.
(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any
revenue authority or any governmental body in relation to the Customer or the
Securities and/or Cash held for the Customer. This provision does not
authorize any other voluntary disclosure to any revenue authority or any
governmental body without the prior written consent of Customer.
(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.
9. Nominees.
Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities
depository, as the case may be. The Bank may without notice to the Customer
cause any such Securities to cease to be registered in the name of any such
nominee and to be registered in the name of the Customer. In the event that
any Securities registered in a nominee name are called for partial redemption
by the issuer, the Bank may allot the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to
be fair and equitable. The Customer agrees to hold the Bank, Subcustodians,
and their respective nominees harmless from any liability arising directly or
indirectly from their status as a mere record holder of Securities in the
Custody Account.
10. Authorized Persons.
As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer
or its designated agent that any such employee or agent is no longer an
Authorized Person.
11. Instructions.
The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information
system acceptable to the Bank which the Bank reasonably believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until canceled or superseded. For
purposes hereof, reasonableness shall mean compliance with applicable
procedures.
Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be
confirmed in writing by any two Authorized Persons (which confirmation may
bear the facsimile signature of such Persons), but the Customer will hold the
Bank harmless for the failure of such Authorized Persons to send such
confirmation in writing, the failure of such confirmation to conform to the
telephone instructions received or the Bank's failure to produce such
confirmation at any subsequent time; provided that, where the Bank receives
a telephone Instruction from an Authorized Person requiring the transfer of
cash, prior to executing such Instruction the Bank will, to confirm such
Instruction, call back any one of the individuals on a list of persons
authorized to confirm such oral transfer Instructions (which Person shall be
a person other than the initiator of the transfer Instruction) and the Bank
shall not execute the Instruction until it has received such confirmation.
Either party may electronically record any Instructions given by telephone,
and any other telephone discussions with respect to the Custody Account. The
Customer shall be responsible for safeguarding any testkeys, identification
codes or other security devices which the Bank shall make available to the
Customer or its Authorized Persons.
12. Standard of Care; Liabilities.
(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in
Instructions which are consistent with the provisions of this Agreement as
follows:
(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable
to the Customer for any loss which shall occur as the result of the failure
of a Subcustodian to exercise reasonable care with respect to the safekeeping
of such Assets to the same extent that the Bank would be liable to the
Customer if the Bank were holding such Assets in New York. In the event that
Securities are lost by reason of the failure of the Bank or its Subcustodian
to use reasonable care, the Bank shall be liable to the Customer based on the
market value of the property which is the subject of the loss on the date it
is replaced by the Bank and without reference to any special conditions or
circumstances, it being understood that for purposes of measuring damages
hereunder, the value of Securities which are sold by the Customer prior to
the replacement thereof shall be equal to the sale price thereof less the
expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the
Bank be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Bank
has been advised of the likelihood of such loss or damage and regardless of
the form of action. Subject to the Bank's obligations pursuant to Section 4(e)
hereof, the Bank will not be responsible for the insolvency of any
Subcustodian which is not a branch or affiliate of Bank.
(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints
unless such appointment was made negligently or in bad faith.
(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission
was in good faith, without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any Customer document
which it reasonably believes in good faith to have been validly executed.
(b) The Bank shall hold Customer harmless from, and shall indemnify Customer
for, any loss, liability, claim or expense incurred by Customer (including,
but not limited to, Customer's reasonable legal fees) to the extent that such
loss, liability, claim or expense arises from the negligence or willful mis-
conduct on the part of the Bank or a Subcustodian; provided that, in no event
shall the Bank be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if the Bank has been advised of the likelihood of such loss or damage
and regardless of the form of action. Subject to the Bank's obligations
pursuant to Section 4(e) hereof, the Bank will not be responsible for the
insolvency of any Subcustodian which is not a branch or affiliate of Bank.
(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income
from or Assets in the Accounts.
(v) The Bank shall be entitled to rely, and may act, upon the 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.
(vi) The Bank need not maintain any insurance for the benefit of the
Customer.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from: 1) the general risk of investing, or 2)
investing or holding Assets in a particular country including, but not
limited to, losses resulting from nationalization, expropriation or other
governmental actions; regulation of the banking or securities industry;
currency restrictions, devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities transactions or affect the
value of Assets.
(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear
fusion, fission or radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty
or responsibility to:
(i) question Instructions or make any suggestions to the Customer or an
Authorized Person regarding such Instructions;
(ii) supervise or make recommendations with respect to investments or
the retention of Securities;
(iii) advise the Customer or an Authorized Person regarding any
default in the payment of principal or income of any security other than a
Security.
(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the
Customer or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments
are made pursuant to this Agreement;
(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such
confirmations against Instructions issued to and statements issued by the
Bank.
(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances
are such that the Bank may have a potential conflict of duty or interest
including the fact that the Bank or any of its affiliates may provide
brokerage services to other customers, act as financial advisor to the issuer
of Securities, act as a lender to the issuer of Securities, act in the same
transaction as agent for more than one customer, have a material interest in
the issue of Securities, or earn profits from any of the activities listed
herein.
13. Fees and Expenses.
The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal
fees. The Bank shall have a lien on and is authorized to charge any Accounts
of the Customer for any amount owing to the Bank under any provision of this
Agreement.
14. Miscellaneous.
(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to
enter into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange
through its subsidiaries, affiliates or Subcustodians. Instructions,
including standing instructions, may be issued with respect to such contracts
but the Bank may establish rules or limitations concerning any foreign
exchange facility made available. In all cases where the Bank, its
subsidiaries, affiliates or Subcustodians enter into a foreign exchange
contract related to Accounts, the terms and conditions of the then current
foreign exchange contract of the Bank, its subsidiary, affiliate or
Subcustodian and, to the extent not inconsistent, this Agreement shall apply
to such transaction.
(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes
in residency. The Bank may rely upon this certification or the certification
of such other facts as may be required to administer the Bank's obligations
under this Agreement. The Customer will indemnify the Bank against all
losses, liability, claims or demands arising directly or indirectly from any
such certifications.
(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during
normal business hours upon reasonable advance notice by Customer s
independent public accountants and by employees of Customer designated to the
Bank. All such materials shall, to the extent applicable, be maintained and
preserved in conformity with the Act and the rules and regulations
thereunder, including without limitation, SEC Rules 31a-1 and 31a-2. Subject
to restrictions under applicable law, the Bank shall also obtain an
undertaking to permit the Customer's independent public accountants
reasonable access to the records of any Subcustodian which has physical
possession of any Assets as may be required in connection with the
examination of the Customer's books and records.
(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws 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 Bank.
(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.
This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:
X MUTUAL FUND
----
X SPECIAL TERMS AND CONDITIONS
----
There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the
parties. Any amendment to this Agreement must be in writing, executed by
both parties.
(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the
basis of any particular circumstances or in any jurisdiction, the validity,
legality and enforceability of such provision or provisions under other
circumstances or in other jurisdictions and of the remaining provisions will
not in any way be affected or impaired.
(g) Waiver. Except as otherwise provided in this Agreement, 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, or the exercise
of any other power or right. No waiver by a party of any provision of this
Agreement, or waiver of any breach or default, is effective unless in writing
and signed by the party against whom the waiver is to be enforced.
(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses
or such other addresses as may subsequently be given to the other party in
writing:
Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division
or telex:
-------------------------------------
Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O Conner
or telex:
--------------------------------------
(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the
Bank shall deliver the Assets in the Accounts. If notice of termination is
given by the Bank, the Customer shall, within sixty (60) days following
receipt of the notice, deliver to the Bank Instructions specifying the names
of the persons to whom the Bank shall deliver the Assets. In either case the
Bank will deliver the Assets to the persons so specified, after deducting any
amounts which the Bank determines in good faith to be owed to it under
Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver
the Assets, the Bank, at its election, may deliver the Assets to a bank or
trust company doing business in the State of New York to be held and disposed
of pursuant to the provisions of this Agreement, or to Authorized Persons, or
may continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by
the Customer, such 60 day period shall be extended for an additional period
as requested by Customer of up to 120 days.
Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes
one or more Series, shall constitute a termination hereof only with respect
to such deleted Series, shall be governed by the preceding provisions of
Section 14 as to the identification of a successor custodian and the delivery
of the Assets of the Series so deleted to such successor custodian, and shall
not affect the obligations of the Bank and the Customer hereunder with
respect to the other Series set forth in Schedule A, as amended from time to
time.
(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series 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 Series and its Accounts.
CUSTOMER
By: /s/ Michael P. Bishof
---------------------
Title Vice President and Treasurer
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Rosemary M. Stidmon
-----------------------
Title Vice President
STATE OF Pennsylvania)
: ss.
COUNTY OF Philadelphia)
On this 9th day of July, 1996, before me personally came Michael P. Bishof,
to me known, who being by me duly sworn, did depose and say that he resides
in Blue Bell, PA at 110 Spyglass Drive; that he is Vice President/Treasurer
of Delaware Group of Funds, the entity described in and which executed the
foregoing instrument; that he knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of
said entity, and that he signed his name thereto by like order.
/s/ Maritza H. Cruzado
-----------------------
Maritza H. Cruzado
Notary
Sworn to before me this 9th
day of July, 1996.
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
On this 24th day of May, 1996, before me personally came Rosemary
Stidmon, to me known, who being by me duly sworn, did depose and say that she
resides in New Providence, NJ at 31 Sagamore Drive; that she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the
corporation described in and which executed the foregoing instrument; that
she knows the seal of said corporation, that the seal affixed to said
instrument is such corporate seal, that it was so affixed by order of the
Board of Directors of said corporation, and that she signed her name thereto
by like order.
Sworn to before me this 24th
day of May, 1996.
/s/ Laiyee Ng
- -------------
Laiyee Ng
Notary
Schedule A
Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Delchester High-Yield Bond Fund, Inc.
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund
March, 1996 Schedule B
SUB-CUSTODIANS EMPLOYED BY
THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
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<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK
ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA
AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA
AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA
BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH
BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM
BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA
BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL
CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA
Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA
CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE
COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA
CZECH REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC
DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK
EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT
EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817
EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country
FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND
FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE
GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY
GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA
GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68
HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG
HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY
INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA
Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA
INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA
IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND
ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL
ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN
JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN
KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya
LUXEMBOURG
Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg
MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA
MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS
MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities)Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.
(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO
MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO
NETHERLANDS
ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS
NEW ZEALAND
National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND
NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY
PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN
Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN
PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU
PHILIPPINES
The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES
POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND
For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND
PORTUGAL Banco Espirito Santo & Comercial Banco Nacional Ultra Marino
de Lisboa Lisbon
Servico de Gestaode Titulos
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL
SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA
SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA
SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE
SLOVAK REPUBLIC
Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC
SOUTH AFRICA
Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA
SOUTH KOREA
The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA
SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN
SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA
SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN
SWITZERLAND
Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND
TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China
THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND
TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia
TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey
U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM
URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY
U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.
VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA
ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA
ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>
<PAGE>
EX-99.g2
Exhibit 24(b)(8)(b)(2)
AMENDMENT, dated November 20, 1997 to the May 1, 1996 custody agreement
("Agreement"), between those registered investment companies listed on Schedule
A to the Agreement (each a "Customer"), having a place of business at 1818
Market Street, Philadelphia, PA 19103 and The Chase Manhattan Bank ("Bank"),
having a place of business at 270 Park Ave., New York, N.Y.
10017-2070.
It is hereby agreed as follows:
Section 1. Except as modified hereby, the Agreement is confirmed in all
respects. Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Agreement.
Section 2. The Agreement is amended by deleting the mutual fund rider
thereto and inserting, in lieu thereof, the following mutual fund rider:
1. Add a new Section 15 to the Agreement as follows:
15. COMPLIANCE WITH SEC RULE 17F-5 ("RULE 17F-5").
(a) Customer's board of directors (or equivalent body) (hereinafter
"Board") hereby delegates to Bank, and Bank hereby accepts the delegation to it,
of the obligation to perform as Customer's "Foreign Custody Manager" (as that
term is defined in Rule 17f-5(a)(2)) adopted under the Investment Company Act of
1940 ("Act"), as amended ("1940 Act"), the following responsibilities in a
manner consistent with Rule 17f-5, to: (i) select Eligible Foreign Custodians
(as that term is defined in Rule 17f-5(a)(1), and as the same may be amended
from time to time, or that have otherwise been made exempt pursuant to an SEC
exemptive order); (ii) enter into written contracts with such Eligible Foreign
Custodians that are banks or trust companies and with Eligible Foreign
Custodians that are "Securities Depositories" (as defined in Rule 17f-5(a)(6))
and that are not Compulsory Depositories (as defined below) where the Depository
has such a contract; and (iii) to monitor the appropriateness of maintaining
Assets of the series of the Customer with such Eligible Foreign Custodians;
provided that, Bank shall not be responsible for these duties with respect to
any compulsory Securities Depository ("Compulsory Depository"). A Compulsory
Depository shall mean a Securities Depository or clearing agency the use of
which is compulsory because: (1) its use is required by law or regulation or (2)
maintaining securities outside the depository is not consistent with prevailing
custodial practices in the country which the Depository serves. Compulsory
Depositories used by Chase as of the date hereof are set forth in Appendix 1-A
hereto. Appendix 1-A may be amended on notice to
<PAGE>
Customer from time to time. In that connection, Bank shall notify Customer
promptly of pending changes to Appendix 1-A.
(b) In connection with the foregoing, Bank shall:
(i) provide written reports to Customer's Board upon the placement of
Assets with a particular Eligible Foreign Custodian and of any Material
Change (as defined below) in the arrangements with such Eligible Foreign
Custodians, with such reports to be provided to Customer's Board at such
times as the Board deems reasonable and appropriate based on the
circumstances of Customer's foreign custody arrangements (and until further
notice from Customer such reports shall be provided within 30 days after
Bank becomes aware of any such Material Change. For purposes of the
foregoing, a Material Change shall include, but shall not be limited to,
Bank's decision to remove Customer's Assets from a particular Eligible
Foreign Custodian, an event that has a material adverse affect on an
Eligible Foreign Custodian's financial or operational strength, any
non-compliance by an Eligible Foreign Custodian with a "Material Term" of
Bank's subcustodian agreement with such Eligible Foreign Custodian (as
defined below) or any failure by an Eligible Foreign Custodian to meet the
requirements for its status as such under Rule 17f-5. A Material Term shall
mean a term which provides that (a) the Customer will be adequately
indemnified or its Assets adequately insured, or an adequate combination
thereof, in the event of loss; (b) the Assets of the Series will not be
subject to any right, charge, security interest, lien or claim of any kind
in favor of an Eligible Foreign Custodian or such Eligible Foreign
Custodian's creditors, except a claim of payment for their safe custody or
administration, or in the case of cash deposits, liens or rights in favor
of creditors of the Eligible Foreign Custodian arising under bankruptcy,
insolvency or similar laws; (c) beneficial ownership for the Assets of the
Series will be freely transferable without the payment of money or value
other than for safe custody or administration of the Assets of the Series;
(d) adequate records will be maintained identifying the Assets as belonging
to the Customer or the Series or as being held by a third party for the
benefit of the Customer or the Series; (e) the independent auditors for the
Customer will be given access to those records or confirmation of the
contents of those records; and (f) the Customer will receive periodic
reports with respect to the safekeeping of the Series' Assets, including,
but not necessarily limited to, notification of any transfer to or from the
Customer's account or a third party account containing Assets held for the
benefit of the Customer. In addition, in the event that a contract with an
Eligible Foreign Custodian does not include any or all of the terms
described in (a) through (f) of this paragraph 15(b)(i), a Material Term
shall mean a term which, in the Bank's judgment, if not complied with,
would cause the contract not to provide the same or greater level of care
and protection for Customer's Assets than if the contract contained the
provisions described in (a) through (f) of this paragraph 15(b)(i).
<PAGE>
(ii) exercise such reasonable care, prudence and diligence in performing as
Customer's Foreign Custody Manager as a person having responsibility for
the safekeeping of Assets would exercise;
(iii) in selecting an Eligible Foreign Custodian, first have determined
that Assets placed and maintained in the safekeeping of such Eligible
Foreign Custodian shall be subject to reasonable care, based on the
standards applicable to custodians in the relevant market, after having
considered all factors relevant to the safekeeping of such Assets,
including, without limitation, those factors set forth in Rule
17f-5(c)(1)(i)-(iv);
(iv) determine that the written contract with the Eligible Foreign
Custodian (or, in the case of an Eligible Foreign Custodian that is a
Securities Depository or clearing agency, such contract, the rules or
established practices or procedures of the depository, or any combination
of the foregoing) requires that the Eligible Foreign Custodian will provide
reasonable care for Assets based on the standards applicable to custodians
in the relevant market.
(v) have established a system to monitor the continued appropriateness of
maintaining Assets with particular Eligible Foreign Custodians based on the
standards set forth herein and of the governing contractual arrangements
based on the standards set forth in Rule 17f-5(c)(2), as it may be amended
from time to time.
Subject to (b)(i)-(v) above, Bank is hereby authorized to place and maintain
Assets on behalf of Customer with Eligible Foreign Custodians pursuant to a
written contract which either contains the terms described in Rule
17f-5(c)(2)(i) or which, in lieu of any or all of the terms described in Rule
17f-5(c)(2)(i), contains such other provisions which the Bank determines will
provide in their entirety, the same or a greater level of care and protection
for the Customer's Assets as the provisions of Rule 17f-5(c)(2)(i) in their
entirety. The written contract shall be in such form as deemed appropriate by
Bank. In addition, with respect to Eligible Foreign Custodians that are
non-compulsory Securities Depositories, reliance may be had on such a contract,
the rules or established practices and procedures of such Depository or any
combination thereof.
(c) Except as expressly provided herein, Customer shall be solely
responsible to assure that the maintenance of Assets hereunder complies with the
rules, regulations, interpretations and exemptive orders promulgated by or under
the authority of the
<PAGE>
SEC which are applicable to Fund's business or which have been granted to Fund.
Bank shall advise Customer of any exemptive orders which it obtains which may
have an impact on Bank's relationship with Customer.
(d) Bank represents to Customer that it is a U.S. Bank as defined in Rule
17f-5(a)(7). Customer represents to Bank that: (1) the Assets being placed and
maintained in Bank's custody are subject to the 1940 Act, as the same may be
amended from time to time; (2) its Board has determined that it is reasonable to
rely on Bank to perform as Customer's Foreign Custody Manager. Nothing contained
herein shall require Bank, on Customer's behalf, to make any selection regarding
countries in which Customer invests or to engage in any monitoring of Customer's
decision to invest in any particular country in which Bank selects , contracts
and monitors Eligible Foreign Custodians, as Customer's Foreign Custody Manager
pursuant to the Agreement.
(e) Bank shall provide to Customer such information as is specified in
Appendix 1-B hereto. Customer hereby acknowledges that: (i) such information is
solely designed to inform Customer of market conditions and procedures, but is
not intended to influence Customer's investment decisions; and (ii) Bank has
gathered the information from sources it considers reliable, but that Bank shall
have no responsibility for inaccuracies or incomplete information except to the
extent that Bank was negligent in selecting the sources of such information.
2. Add the following after the first sentence of Section 3 of the
Agreement:
At the request of Customer, Bank may, but need not, add to Schedule A an
Eligible Foreign Custodian that is either a bank or a non-Compulsory
Depository where Bank has not acted as Foreign Custody Manager with respect
to the selection thereof. Bank shall notify Customer in the event that it
elects not to add any such entity.
3. Add the following language to the end of Section 3 of the Agreement:
The term Subcustodian as used herein shall mean the following:
(a) a "U.S. Bank," which shall mean a U.S. bank as defined in Rule
17f-5(a)(7); and (b) with respect to Securities for which the primary
market is outside the U.S. an "Eligible Foreign Custodian," shall mean (i)
a banking institution or trust company, incorporated or organized under the
laws of a country other than the United States, that is regulated as such
by that country's government or an agency thereof, (ii) a majority-owned
direct or indirect subsidiary of a U.S. Bank or bank
<PAGE>
holding company which subsidiary is incorporated or organized under the
laws of a country other than the United States; (iii) a Securities
Depository or clearing agency (other than a Compulsory Depository),
incorporated or organized under the laws of a country other than the United
States, that acts as a system for the central handling of securities or
equivalent book-entries in that country and that is regulated by a foreign
financial regulatory autho rity as defined under section 2(a)(50) of the
1940 Act, (iv) a Securities Depository or clearing agency organized under
the laws of a country other than the United States that acts as a
transnational system ("Transnational Depository") for the central handling
of securities or equivalent book-entries, and (v) any other entity that
shall have been so qualified by exemptive order, rule or other appropriate
action of the SEC.
The term Subcustodian as used in Section 12(a)(i) (except the last sentence
thereof) shall not include any Eligible Foreign Custodians as to which Bank
has not acted as Foreign Custody Manager, any Compulsory Depository and any
Transnational Depository.
4. Add the following after the word "administration" at the end of
Subsection 4(d)(i): "or, in the case of cash deposits, liens or rights in favor
of creditors of Subcustodian arising under bankruptcy, insolvency, or similar
laws".
5. Delete all of Subsection 4(e) after the word "located" in (ii) thereof
and add the word "and" between "Subcustodian" and "(ii)".
*********************
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
Customer THE CHASE MANHATTAN BANK
By: /s/ Michael P. Bishof By: /s/ Rosemary M. Stidmon
Name: Michael P. Bishof Name: Rosemary M. Stidmon
Title: Senior Vice President/ Title: Vice President
Treasurer
Date: Nov. 20, 1997 Date: Nov. 20, 1997
<PAGE>
APPENDIX A
Delaware Group Adviser Funds, Inc.
U.S. Growth Fund
Overseas Equity Fund
New Pacific Fund
Delaware Group Equity Funds I, Inc.
Delaware Fund
Devon Fund
Delaware Group Equity Funds II, Inc.
Blue Chip Fund
Quantum Fund
Delaware Group Equity Funds IV, Inc.
DelCap Fund
Capital Appreciation Fund
Delaware Group Equity Funds V, Inc.
Retirement Income Fund
Small Cap Value Fund
Delaware Pooled Trust, Inc.
The International Equity Portfolio
The International Fixed Income Portfolio
The Global Equity Portfolio
The Global Fixed Income Portfolio
The High-Yield Bond Portfolio
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Real Estate Investment Trust Portfolio II
The Emerging Markets Portfolio
Delaware Group Global & International Funds, Inc.
Emerging Markets Series
Global Assets Series
Global Bond Series
Global Equity Series
International Equity Series
International Small Cap Series
Delaware Group Premium Fund, Inc.
Convertible Securities Series
Devon Series
Emerging Markets Series
Quantum Series
Strategic Income Series
Global Bond Series
DelCap Series
International Equity Series
Delaware Series
Value Series
Voyageur Mutual Funds III, Inc.
Tax-Efficient Equity Fund
Dated: November 20, 1997
<PAGE>
Appendix 1-A
COMPULSORY DEPOSITORIES
Argentina Caja de Valores Equity, Corporate &
Government Debt
Australia Austraclear Ltd. Corporate Debt, Money
Market & Semi-Government Debt
CHESS Equity
(Clearing House Electronic Sub-
register System)
RITS Government Debt
(Reserve Bank Information and
Transfer System)
Austria Oesterreichische Kontrolbank AG Equity, Corporate +
Government Debt
Belgium CIK Equity + Corporate
(Caisse Interprofessionnelle de Debt
Depots et de Virements de Titres)
Banque Nationale de Belgique Treasury Bills +
Government Debt
<PAGE>
Brazil BOVESPA Equity
(Bolsa de Valores de Sao Paolo)
BVRJ Equity
(Bolsa de Valores de Rio de
Janeiro)
Canada CDS Equity, Corporate +
(Canadian Depository for Government Debt
Securities)
China, SSCCRC Equity
Shanghai (Shanghai Securities Central
Clearing and Registration Corp.)
China, SSCC Equity
Shenzhen (Shenzhen Securities
Registration Co., Ltd.)
Czech SCP Equity + Long-Term
Republic (Securities Center) Government Debt
TKD Treasury Bills +
(Trh Kratkododich Dlluhopisu or Money Market
Short-Term Bond Market)
Denmark VP Equity, Corporate +
(Vaerdipapircentralen) Government Debt
Egypt Misr Clearing & Sec. Dep. Equity
Estonia EVK Equity
(Estonian Central Depository for
Securities Ltd.)
Euromarket Cedel & Euroclear Euro-Debt
Finland CSR Equity + Government
(Central Share Registry Finland) Debt
Helsinki Money Market Center Money Market
Ltd.
France SICOVAM Equity + Corporate
(Banque de France) Debt.
France SATURNE Government Debt.
(Banque de France)
Germany DKV Equity, Corporate +
(Deutscher Kassenverein) Government Debt
Greece Apothetirio Titlon A.E. Equity
Bank of Greece Government Debt
<PAGE>
Hong Kong CCASS Equity
(Central Clearing and
Settlement System)
CMU Corporate +
(Central Moneymarkets Unit) Government Debt
Hungary Keler Ltd. Equity + Government
Debt
Ireland CREST Equity
GSO Government Debt
(Gilt Settlement Office)
Israel TASE Clearing House Equity, Corporate +
(Tel Aviv Stock Exchange Government Debt
Clearing House)
Italy Monte Titoli Equity + Corporate Debt
Bank of Italy Government Debt
Japan Bank of Japan Registered Government
Debt
Latvia LCD Equity + Government
(Latvian Central Depository) Debt
Lebanon Midclear Equity
(Custodian and Clearing Center
of Lebanon and the Middle East)
Luxembourg Cedel Equity
Malaysia MCD Equity
(Malaysian Central Depository
Snd Bhd)
Mauritius CDS Equity
(Central Depository System)
Mexico Indeval Equity, Corporate +
(Institucion para el Deposito Government Debt.
de Valores)
Morocco Maroclear Equity + Corporate Debt
Bank Al'Maghrib Government Debt
Netherlands NECIGEF/KAS Associate NV Equity, Corp. + Govt. D
De Nederlandsche Bank N.V. Money Market
<PAGE>
Netherlands NIEC Premium Bonds
(Nederlands Interpforessioneel
Effectencentrum B.V.)
New Zealand Austraclear New Zealand Equity, Corporate +
Government Debt
Norway VPS Equity, Corporate +
(Verdipapirsentralen) Government Debt
Oman NONE
Pakistan CDC Equity
(Central Depository Company of
Pakistan Ltd.)
Peru CAVALI Equity
(Caja de Valores)
Philippines PCD Equity
(Philippine Central Depository)
Poland NDS Equity, Long-Term
(National Securities Government Debt +
Depository) Vouchers
CRT Treasury-Bills
(Central Registry of Treasury-
Bills)
Portugal Interbolsa Equity, Corporate +
Government Debt
Romania SNCDD - RASDAQ Equity
(National Company for Clearing,
Settlement and Depository for
Securities)
Budapest Stock Exchange Equity
Registry
National Bank of Romania Treasury-Bills
Russia MICEX GKO's
(Moscow Interbank Currency (Gosudarstvennye
Exchange) Kratkosrochnye
Obyazatelstva [T-
Bills])
OFZ's
(Obligatsyi
Federalnogo Zaima
[Federal Loan Bonds])s
<PAGE>
Singapore CDP Equity + Corporate
(Central Depository Pte. Ltd.) Debt and Malaysian
equities traded on CLOB
Monetary Authority of Singapore Government Debt
Slovak SCP Equity + Government
Republic (Stredisko Cennych Papiru) Debt
National Bank of Slovakia Treasury-Bills
So. Africa CD Corporate + Government
(Central Depository) Debt
So. Korea KSD Equity, Corporate +
Government Debt
Spain SCLV Equity + Corporate
(Servicio de Compensacion y Debt.
Liquidacion de Valores)
CBEO Government Debt
(Central Book Entry Office)
Sri Lanka CDS Equity
(Central Depository System
(Private) Ltd.)
Sweden VPC Equity, Corporate +
(Vardepapperscentralen AB) Government Debt
Switzerland SEGA Equity, Corporate +
(Schweizerische Effekten-Giro Government Debt
AG)
Taiwan TSCD Equity + Government
(Taiwan Securities Central Debt
Depository Co., Ltd.)
Thailand TSDC Equity, Corporate +
(Thailand Securities Depository Government Debt
Company Ltd.)
Tunisia STICODEVAM Equity
(Societe Tunisienne
Interprofessionnelle pour la
Compensation et le Depot des
Valeurs Mobilieres)
Ministry of Finance Government Debt
tradable on the stock
exchange (BTNBs)
Central Bank of Tunisia Government Debt not
tradable on the stock
exchange (BTCs)
<PAGE>
Turkey Takas Bank Equity + Corporate
Debt
Central Bank of Turkey Government Debt
United CREST Equity + Corp. Debt
Kingdom
CMO Sterling CDs & CP
(Central Moneymarket Office)
CGO Gilts
(Central Gilts Office)
United DTC Equity + Corporate
States (Depository Trust Company) Debt
PTC Mortgage Back Debt
(Participants Trust Company)
Fed Book-Entry Government Debt.
Zambia LuSE Equity + Government
(LuSE Central Shares Depository Debt
Ltd.)
Appendix 1-B
Information Regarding Country Risk
1. To aid Customer's board in its determinations regarding Country Risk,
Bank shall furnish board annually and upon the initial placing of Assets into a
country the following information (check items applicable):
A Opinions of local counsel concerning:
___ i. Whether applicable foreign law would restrict the access afforded
Customer's independent public accountants to books and records kept by
an eligible foreign custodian located in that country.
___ ii. Whether applicable foreign law would restrict the Customer's
ability to recover its assets in the event of the bankruptcy of an
Eligible Foreign Custodian located in that country.
___ iii. Whether applicable foreign law would restrict the Customer's
ability to recover assets that are lost while under the control of an
Eligible Foreign Custodian located in the country.
<PAGE>
B. Written information concerning:
___ i. The likelihood of expropriation,
nationalization, freezes, or confiscation of
Customer's assets.
___ ii. Whether difficulties in converting Customer's
cash and cash equivalents to U.S. dollars are
reasonably foreseeable.]
C. A market report with respect to the following topics:
(i) securities regulatory environment, (ii) foreign ownership restrictions,
(iii) foreign exchange, (iv) securities settlement and registration, (v)
taxation, and (vi) compulsory depositories (including depository
evaluation).
2. To aid Customer's board in monitoring Country Risk, Bank shall furnish
board the following additional information:
Market flashes, including with respect to changes in the information in
market reports.
<PAGE>
As of
VIA UPS OVERNIGHT
The Chase Manhattan Bank
4 Chase MetroTech Center
Brooklyn, New York 11245
Attention: Global Custody Division
Re: Global Custody Agreement, Effective May 1, 1996, as amended November
20, 1997 between The Chase Manhattan Bank and those registered
investment companies (and on behalf of certain series thereof), listed
on Schedule A attached thereto ("Agreement")
----------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to the provisions of Section 1 of the Agreement, the undersigned, on
behalf of Delaware Group Equity Funds II, Inc. for the benefit of the
Diversified Value Fund series (the "Series") hereby appoints The Chase Manhattan
Bank to provide custodial services for the Series under and in accordance with
the terms of the Agreement and accordingly, requests that the Series be added to
Schedule A to the Agreement effective September , 1998. Kindly acknowledge your
agreement to provide such services and to add the Series to Schedule A by
signing in the space provided below.
DELAWARE GROUP EQUITY FUNDS II, INC.
on behalf of Diversified Value Fund
By:_________________________________
David K. Downes
Its: Executive Vice President
Chief Operating Officer
Chief Financial Officer
AGREED:
THE CHASE MANHATTAN BANK
By:__________________________
Its:_________________________
<PAGE>
AMENDMENT NO. 9
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.
<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)
REIT 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 March 31, 1998
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>
AMENDMENT NO. 10
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
Social Awareness Fund (formerly 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.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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 August 31, 1998
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>
AMENDMENT NO. 11
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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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 September 14, 1998
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>
AMENDMENT NO. 12
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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation 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)
Corporate Bond Fund (New)
Extended Duration Bond 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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 September 14, 1998
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>
AMENDMENT NO. 13
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
Social Awareness Fund (formerly Quantum Fund) (New)
Diversified Value 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)
Mid-Cap Value Fund (New)
Small Cap Contrarian 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.
<PAGE>
Delaware Group Foundation Funds (New)
Balanced Portfolio (New)
Growth Portfolio (New)
Income Portfolio (New)
The Asset Allocation 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)
New Europe Fund (New)
Latin America Fund (New)
Delaware Group Income Funds, Inc. (formerly Delchester)
Delchester Fund
High-Yield Opportunities Fund (New)
Strategic Income Fund (New)
Corporate Bond Fund (New)
Extended Duration Bond Fund (New)
Delaware Group Limited-Term Government Funds, Inc.
Limited-Term Government Fund
U. S. Government Money Fund
Delaware Pooled Trust, Inc.
The Mid-Cap Growth Equity Portfolio (formerly 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)
The Small-Cap Growth Equity Portfolio (New)
The Growth and 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
Social Awareness Series (formerly Quantum Series) (New)
REIT Series (New)
Strategic Income Series (New)
Trend Series
Small Cap Value Series (formerly 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 US 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) (liquidated November 18, 1998)
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, 1998
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>
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. 21 to the Registration Statement (Form N-1A) (No.
2-75526) of Delaware Group Limited-Term Government Funds, Inc. of our report
dated February 5, 1999, included in the 1998 Annual Report to shareholders.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
April 26, 1999
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term
Government Fund
We have audited the accompanying statement of net assets of Delaware Group
Limited-Term Government Funds, Inc. -Limited-Term Government Fund (the "Fund")
as of December 31, 1998, 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, 1998, by correspondence with the Fund's
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund at December 31, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
---------------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
February 5, 1999
<PAGE>
Exhibit A
12b-1 Plan
----------
The following Distribution Plan (the "Plan") has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Treasury Reserves, Inc. (the "Fund"), for Treasury Reserves Intermediate
Series (the "Series") on behalf of the Treasury Reserves Intermediate Fund class
(now doing business as Treasury Reserves Intermediate Fund A Class and
hereinafter referred to as the "Class"), which Fund, Series and Class may do
business under these or such other names as the Board of Directors of the Fund
may designate from time to time. The Plan has been approved by a majority of the
Board of Directors, including a majority of the Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related thereto, cast in person at a
meeting called for the purpose of voting on such Plan. Such approval by the
Directors included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Class and its shareholders. If the
Plan has not yet been approved by a majority of the outstanding voting
securities as required in the Act, the Plan will be presented to the public
shareholders at the next regular annual or special meeting.
<PAGE>
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. ("DMC") serves as the Series' investment adviser and
manager pursuant to an Investment Management Agreement. Delaware Service
Company, Inc. serves as the Series' shareholder servicing, dividend disbursing
and transfer agent. Delaware Distributors, L.P. (the "Distributor") is the
principal underwriter and national distributor for the Series' shares, including
shares of the Class, pursuant to the Distribution Agreement between the
Distributor and the Series ("Distribution Agreement").
The Distributor may enter into agreements with other registered
broker-dealers substantially in the form of the Dealer Agreement approved by the
Fund in the implementation of this Plan and of the Distribution Agreement
between it and the Fund on behalf of the Series. The Fund on behalf of the
Series may, in addition, enter into arrangements with persons other than
broker-dealers which are not "affiliated persons" or "interested persons" of the
Series, DMC or the Distributor to provide to the Series services in the Series'
marketing of the shares of the Class, such arrangements to be reflected by
Service Agreements.
The Plan provides that:
<PAGE>
1. The Fund shall pay a monthly fee not to exceed 0.3% (3/10
of l%) per annum of the Series' average daily net assets represented by shares
of the Class (the "Maximum Amount") as may be determined by the Fund's Board of
Directors from time to time. Such monthly fee shall be reduced by the aggregate
sums paid by the Fund to persons other than broker-dealers (the "Service
Providers") pursuant to Service Agreements referred to above.
2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph 1 above to furnish, or cause or encourage others to
furnish, services and incentives in connection with the promotion, offering and
sale of Class shares and, where suitable and appropriate, the retention of Class
shares by shareholders.
(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs they have
incurred in confirming that their customers have received the Prospectus and
Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Fund (2)
answering questions relating to their respective accounts and (3) aiding in
maintaining the investment of their respective customers in the Class.
<PAGE>
3. The Distributor shall report to the Fund at least monthly
on the amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Service Agreement and the Plan; both the Distributor and the
Service Providers shall furnish the Board of Directors of the Fund with such
other information as the Board may reasonably request in connection with the
payments made under the Plan and the use thereof by the Distributor and the
Service Providers, respectively, in order to enable the Board to make an
informed determination of the amount of the Fund's payments and whether the Plan
should be continued.
4. The officers of the Fund shall furnish to the Board of
Directors of the Fund, for their review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.
5. This Plan shall take effect at such time as the Distributor
shall notify the Fund in writing of the commencement of the Plan, which time
shall not be before the first annual or special meeting of the public
shareholders at which the Plan is or was approved by the vote of a majority of
the outstanding voting securities as required in the Act (the "Commencement
Date"); thereafter, the Plan shall continue in effect for a period of more than
one year from the Commencement Date only so long as such continuance is
specifically approved at least annually by a vote of the Board of Directors of
the Fund, and of the Directors who are not interested persons of the Fund and
have no direct or indirect financial interest in the operation of the Plan or in
any agreements related to the Plan ("non-interested Directors"), cast in person
at a meeting called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Directors or by vote of a majority of the
outstanding voting securities of the Class.
<PAGE>
(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.
7. The Distribution Agreement between the Fund on behalf of
the Series and the Distributor, and the Service Agreements between the Fund on
behalf of the Series and the Service Providers, shall specifically have a copy
of this Plan attached to, and its terms and provisions incorporated respectively
by reference in, such agreements.
8. All material amendments to this Plan shall be approved by
the non-interested Directors in the manner described in paragraph 5 above.
9. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Directors shall be committed to the
discretion of such non-interested Directors.
10. The definitions contained in Sections 2(a)(3), 2(a)(4),
2(a)(l9) and 2(a)(42) of the Act shall govern the meaning of "affiliated
person," "assignment," "interested person(s)" and "vote of a majority of the
outstanding voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as
previously defined.
<PAGE>
Exhibit B
12b-1 Plan
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Treasury Reserves, Inc. (the "Fund"), for the Treasury Reserves
Intermediate Series (the "Series") on behalf of the Treasury Reserves
Intermediate Fund B Class (the "Class"), which Fund, Series and Class may do
business under these or such other names as the Board of Directors of the Fund
may designate from time to time. The Plan has been approved by a majority of the
Board of Directors, including a majority of the Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related thereto, cast in person at a
meeting called for the purpose of voting on such Plan. Such approval by the
Directors included a determination that in the exercise of reasonable business
judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Class and its shareholders. The Plan
has been approved by a vote of the holders of a majority of the outstanding
voting securities of the Class, as defined in the Act.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Fund's shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund for the Series ("Distribution Agreement").
The Plan provides that:
1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of l%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.
(b) In addition to the amounts described in (a) above, the Fund
shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements, the forms of which have
been approved from time to time by the Fund's Board of Directors.
<PAGE>
2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph l(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the Directors who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related to the Plan ("non-interested Directors"), cast in person at a meeting
called for the purpose of voting on such Plan.
6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph l thereof without approval by
the shareholders of the Class.
<PAGE>
7. The Distribution Agreement between the Fund on behalf of the Series
and the Distributor, and any dealers or servicing agreements between the
Distributor and brokers or others or between the Fund on behalf of the Series
and others receiving a servicing fee, shall specifically have a copy of this
Plan attached to, and its terms and provisions incorporated respectively by
reference in, such agreements.
8. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
9. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
10. The definitions contained in Sections 2(a)(3), 2(a)(4), 2(a)(19)
and 2(a)(42) of the Act shall govern the meaning of "affiliated person,"
"assignment," "interested person(s)" and "vote of a majority of the outstanding
voting securities," respectively, for the purposes of this Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
<PAGE>
Exhibit C
12b-1 Plan
The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Limited-Term Government Funds, Inc. (the "Fund"), for the Limited-Term
Government Fund series (the "Series") on behalf of the Limited-Term Government
Fund C Class (the "Class"), which Fund, Series and Class may do business under
these or such other names as the Board of Directors of the Fund may designate
from time to time. The Plan has been approved by a majority of the Board of
Directors, including a majority of the Directors who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related thereto ("non-interested
Directors"), cast in person at a meeting called for the purpose of voting on
such Plan. Such approval by the Directors included a determination that in the
exercise of reasonable business judgment and in light of their fiduciary duties,
there is a reasonable likelihood that the Plan will benefit the Class and its
shareholders. The Plan has been approved by a vote of the holders of a majority
of the outstanding voting securities of the Class, as defined in the Act.
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund ("Distribution Agreement").
The Plan provides that:
1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Series' average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.
(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.
<PAGE>
2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.
(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.
3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.
4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.
6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.
(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.
7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.
8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.
9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.
This Plan shall take effect on the Commencement Date, as previously
defined.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 021
<NAME> LIMITED-TERM GOVERNMENT FUND A CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 364,674,170
<INVESTMENTS-AT-VALUE> 369,071,471
<RECEIVABLES> 10,729,452
<ASSETS-OTHER> 12,040
<OTHER-ITEMS-ASSETS> 149
<TOTAL-ASSETS> 379,813,112
<PAYABLE-FOR-SECURITIES> 21,091,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,359,756
<TOTAL-LIABILITIES> 22,451,114
<SENIOR-EQUITY> 41,098
<PAID-IN-CAPITAL-COMMON> 492,414,518
<SHARES-COMMON-STOCK> 36,486,167
<SHARES-COMMON-PRIOR> 41,199,558
<ACCUMULATED-NII-CURRENT> 48,815
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (139,772,272)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,629,839
<NET-ASSETS> 317,329,063
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,780,737
<OTHER-INCOME> 0
<EXPENSES-NET> 3,793,494
<NET-INVESTMENT-INCOME> 22,987,243
<REALIZED-GAINS-CURRENT> 3,061,740
<APPREC-INCREASE-CURRENT> 16,068
<NET-CHANGE-FROM-OPS> 26,065,051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 20,661,739
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,823,010
<NUMBER-OF-SHARES-REDEEMED> 26,163,018
<SHARES-REINVESTED> 1,626,617
<NET-CHANGE-IN-ASSETS> (46,318,000)
<ACCUMULATED-NII-PRIOR> 9,997
<ACCUMULATED-GAINS-PRIOR> (147,122,182)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,527
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,793,494
<AVERAGE-NET-ASSETS> 327,713,297
<PER-SHARE-NAV-BEGIN> 8.62
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> .079
<PER-SHARE-DIVIDEND> .539
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.70
<EXPENSE-RATIO> 1.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 022
<NAME> LIMITED-TERM GOVERNMENT FUND B CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 364,674,170
<INVESTMENTS-AT-VALUE> 369,071,471
<RECEIVABLES> 10,729,452
<ASSETS-OTHER> 12,040
<OTHER-ITEMS-ASSETS> 149
<TOTAL-ASSETS> 379,813,112
<PAYABLE-FOR-SECURITIES> 21,091,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,359,756
<TOTAL-LIABILITIES> 22,451,114
<SENIOR-EQUITY> 41,098
<PAID-IN-CAPITAL-COMMON> 492,414,518
<SHARES-COMMON-STOCK> 1,598,214
<SHARES-COMMON-PRIOR> 1,406,191
<ACCUMULATED-NII-CURRENT> 48,815
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (139,772,272)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,629,839
<NET-ASSETS> 13,900,072
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,780,737
<OTHER-INCOME> 0
<EXPENSES-NET> 3,793,494
<NET-INVESTMENT-INCOME> 22,987,243
<REALIZED-GAINS-CURRENT> 3,061,740
<APPREC-INCREASE-CURRENT> 16,068
<NET-CHANGE-FROM-OPS> 26,065,051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 679,520
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 707,452
<NUMBER-OF-SHARES-REDEEMED> 569,491
<SHARES-REINVESTED> 54,062
<NET-CHANGE-IN-ASSETS> (46,318,000)
<ACCUMULATED-NII-PRIOR> 9,997
<ACCUMULATED-GAINS-PRIOR> (147,122,182)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,527
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,793,494
<AVERAGE-NET-ASSETS> 12,534,774
<PER-SHARE-NAV-BEGIN> 8.62
<PER-SHARE-NII> .467
<PER-SHARE-GAIN-APPREC> .079
<PER-SHARE-DIVIDEND> .466
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.70
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 023
<NAME> LIMITED-FUND GOVERNMENT FUND C CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 364,674,170
<INVESTMENTS-AT-VALUE> 369,071,471
<RECEIVABLES> 10,729,452
<ASSETS-OTHER> 12,040
<OTHER-ITEMS-ASSETS> 149
<TOTAL-ASSETS> 379,813,112
<PAYABLE-FOR-SECURITIES> 21,091,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,359,756
<TOTAL-LIABILITIES> 22,451,114
<SENIOR-EQUITY> 41,098
<PAID-IN-CAPITAL-COMMON> 492,414,518
<SHARES-COMMON-STOCK> 567,107
<SHARES-COMMON-PRIOR> 415,380
<ACCUMULATED-NII-CURRENT> 48,815
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (139,772,272)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,629,839
<NET-ASSETS> 4,932,252
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,780,737
<OTHER-INCOME> 0
<EXPENSES-NET> 3,793,494
<NET-INVESTMENT-INCOME> 22,987,243
<REALIZED-GAINS-CURRENT> 3,061,740
<APPREC-INCREASE-CURRENT> 16,068
<NET-CHANGE-FROM-OPS> 26,065,051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 163,243
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 547,427
<NUMBER-OF-SHARES-REDEEMED> 412,395
<SHARES-REINVESTED> 16,695
<NET-CHANGE-IN-ASSETS> (46,318,000)
<ACCUMULATED-NII-PRIOR> 9,997
<ACCUMULATED-GAINS-PRIOR> (147,122,182)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,527
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,793,494
<AVERAGE-NET-ASSETS> 3,043,245
<PER-SHARE-NAV-BEGIN> 8.62
<PER-SHARE-NII> .467
<PER-SHARE-GAIN-APPREC> .079
<PER-SHARE-DIVIDEND> .466
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.70
<EXPENSE-RATIO> 1.86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000357059
<NAME> DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.
<SERIES>
<NUMBER> 024
<NAME> LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL CLASS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 364,674,170
<INVESTMENTS-AT-VALUE> 369,071,471
<RECEIVABLES> 10,729,452
<ASSETS-OTHER> 12,040
<OTHER-ITEMS-ASSETS> 149
<TOTAL-ASSETS> 379,813,112
<PAYABLE-FOR-SECURITIES> 21,091,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,359,756
<TOTAL-LIABILITIES> 22,451,114
<SENIOR-EQUITY> 41,098
<PAID-IN-CAPITAL-COMMON> 492,414,518
<SHARES-COMMON-STOCK> 2,437,629
<SHARES-COMMON-PRIOR> 3,817,544
<ACCUMULATED-NII-CURRENT> 48,815
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (139,772,272)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,629,839
<NET-ASSETS> 21,200,611
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,780,737
<OTHER-INCOME> 0
<EXPENSES-NET> 3,793,494
<NET-INVESTMENT-INCOME> 22,987,243
<REALIZED-GAINS-CURRENT> 3,061,740
<APPREC-INCREASE-CURRENT> 16,068
<NET-CHANGE-FROM-OPS> 26,065,051
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,443,992
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 537,313
<NUMBER-OF-SHARES-REDEEMED> 2,083,368
<SHARES-REINVESTED> 166,140
<NET-CHANGE-IN-ASSETS> (46,318,000)
<ACCUMULATED-NII-PRIOR> 9,997
<ACCUMULATED-GAINS-PRIOR> (147,122,182)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,818,527
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,793,494
<AVERAGE-NET-ASSETS> 22,361,819
<PER-SHARE-NAV-BEGIN> 8.62
<PER-SHARE-NII> .553
<PER-SHARE-GAIN-APPREC> .079
<PER-SHARE-DIVIDEND> .552
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.70
<EXPENSE-RATIO> .86
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
The undersigned, a member of the Boards of Directors/Trustees of the
Delaware Investments Family of 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, Jeffrey J. Nick, Wayne A. Stork and Walter P. Babich and any one
of them acting singly, her true and lawful attorneys-in-fact, in her 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 has executed this instrument as of
this 15th day of April, 1999.
/s/ Jan L. Yeomans
- ------------------------
Jan L. Yeomans
<PAGE>
POWER OF ATTORNEY
EXHIBIT A
DELAWARE INVESTMENTS FAMILY OF 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.
