DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC, 497, 1999-05-04

DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC
497, 1999-05-04

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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, 1999 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.

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TABLE OF CONTENTS

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COVER PAGE 1
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INVESTMENT OBJECTIVE AND POLICIES 3
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ACCOUNTING AND TAX ISSUES
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PERFORMANCE INFORMATION
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TRADING PRACTICES AND BROKERAGE
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PURCHASING SHARES
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INVESTMENT PLANS
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DETERMINING OFFERING PRICE AND NET ASSET VALUE
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REDEMPTION AND REPURCHASE
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INCOME DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS
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INVESTMENT MANAGEMENT AGREEMENT
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OFFICERS AND DIRECTORS
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EXCHANGE PRIVILEGE
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GENERAL INFORMATION
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FINANCIAL STATEMENTS
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APPENDIX A - RATINGS
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APPENDIX B - INVESTMENT OBJECTIVES OF THE OTHER FUNDS IN THE DELAWARE
INVESTMENTS FAMILY
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INVESTMENT OBJECTIVE AND POLICIES

The Fund will invest in securities for income earnings rather than
trading for profit. The Fund will not vary portfolio investments, except to:

1. eliminate unsafe investments and investments not consistent with the
preservation of the capital or the tax status of the investments of the Fund;

2. honor redemption orders, meet anticipated redemption requirements,
and negate gains from discount purchases;

3. reinvest the earnings from securities in like securities; or

4. defray normal administrative expenses.

INVESTMENT RESTRICTIONS

Limited-Term Funds, Inc. has adopted the following restrictions for the
Fund which cannot be changed without approval by the holders of a "majority" of
the Fund's outstanding shares, which is a vote by the holders of the lesser of
a) 67% or more of the voting securities present in person or by proxy at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy; or b) more than 50% of the outstanding
voting securities. The percentage limitations contained in the restrictions and
policies set forth herein apply at the time of purchase of securities.

THE FUND SHALL NOT:

1. MAKE INVESTMENTS THAT WILL RESULT IN THE CONCENTRATION (AS THAT TERM
MAY BE DEFINED IN THE 1940 ACT, ANY RULE OR OTHER THEREUNDER, OR U.S. SECURITIES
AND EXCHANGE COMMISSION ("SEC") STAFF INTERPRETATION THEREOF) OF ITS INVESTMENTS
IN THE SECURITIES OF ISSUERS PRIMARILY ENGAGED IN THE SAME INDUSTRY, PROVIDED
THAT THIS RESTRICTION DOES NOT LIMIT THE FUND FROM INVESTING IN OBLIGATIONS
ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES,
OR IN CERTIFICATES OF DEPOSIT.

2. BORROW MONEY OR ISSUE SENIOR SECURITIES, EXCEPT AS THE 1940 ACT, ANY
RULE OR ORDER THEREUNDER, OR SEC STAFF INTERPRETATION THEREOF, MAY PERMIT.

3. UNDERWRITE THE SECURITIES OF OTHER ISSUERS, EXCEPT THAT THE FUND MAY
ENGAGE IN TRANSACTIONS INVOLVING THE ACQUISITION, DISPOSITION OR RESALE OF ITS
PORTFOLIO SECURITIES, UNDER CIRCUMSTANCES WHERE IT MAY BE CONSIDERED TO BE AN
UNDERWRITER UNDER THE SECURITIES ACT OF 1933.

4. PURCHASE OR SELL REAL ESTATE, UNLESS ACQUIRED AS A RESULT OF
OWNERSHIP OF SECURITIES OR OTHER INSTRUMENTS AND PROVIDED THAT THIS RESTRICTION
DOES NOT PREVENT THE FUND FROM INVESTING IN ISSUERS WHICH INVEST, DEAL OR
OTHERWISE ENGAGE IN TRANSACTIONS IN REAL ESTATE OR INTERESTS THEREIN, OR
INVESTING IN SECURITIES THAT ARE SECURED BY REAL ESTATE OR INTERESTS THEREIN.

5. PURCHASE OR SELL PHYSICAL COMMODITIES, UNLESS ACQUIRED AS A RESULT
OF OWNERSHIP OF SECURITIES OR OTHER INSTRUMENTS AND PROVIDED THAT THIS
RESTRICTION DOES NOT PREVENT THE FUND FROM ENGAGING IN TRANSACTIONS INVOLVING
FUTURES CONTRACTS AND OPTIONS THEREON OR INVESTING IN SECURITIES THAT ARE
SECURED BY PHYSICAL COMMODITIES.

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6. MAKE LOANS, PROVIDED THAT THIS RESTRICTION DOES NOT PREVENT THE FUND
FROM PURCHASING DEBT OBLIGATIONS, ENTERING INTO REPURCHASE AGREEMENTS, LOANING
ITS ASSETS TO BROKER/DEALERS OR INSTITUTIONAL INVESTORS AND INVESTING IN LOANS,
INCLUDING ASSIGNMENTS AND PARTICIPATION INTERESTS.

IN ADDITION TO THE FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
DESCRIBED ABOVE, AND THE VARIOUS GENERAL INVESTMENT POLICIES DESCRIBED IN THE
PROSPECTUS, THE FUND WILL BE SUBJECT TO THE FOLLOWING INVESTMENT RESTRICTIONS,
WHICH ARE CONSIDERED NON-FUNDAMENTAL AND MAY BE CHANGED BY THE BOARD OF
DIRECTORS WITHOUT SHAREHOLDER APPROVAL.

1. THE FUND IS PERMITTED TO INVEST IN OTHER INVESTMENT COMPANIES,
INCLUDING OPEN-END, CLOSED-END OR UNREGISTERED INVESTMENT COMPANIES, EITHER
WITHIN THE PERCENTAGE LIMITS SET FORTH IN THE 1940 ACT, ANY RULE OR ORDER
THEREUNDER, OR SEC STAFF INTERPRETATION THEREOF, OR WITHOUT REGARD TO PERCENTAGE
LIMITS IN CONNECTION WITH A MERGER, REORGANIZATION, CONSOLIDATION OR OTHER
SIMILAR TRANSACTION. HOWEVER, THE FUND MAY NOT OPERATE AS A "FUND OF FUNDS"
WHICH INVESTS PRIMARILY IN THE SHARES OF OTHER INVESTMENT COMPANIES AS PERMITTED
BY SECTION 12(D)(1)(F) OR (G) OF THE 1940 ACT, IF ITS OWN SHARES ARE UTILIZED AS
INVESTMENTS BY SUCH A "FUND OF FUNDS."

2. THE FUND MAY NOT INVEST MORE THAN 15% OF ITS NET ASSETS IN
SECURITIES WHICH IT CANNOT SELL OR DISPOSE OF IN THE ORDINARY COURSE OF BUSINESS
WITHIN SEVEN DAYS AT APPROXIMATELY THE VALUE AT WHICH THE FUND HAS VALUED THE
INVESTMENT.

IN ADDITION TO THE FUNDAMENTAL POLICIES AND INVESTMENT RESTRICTIONS
DESCRIBED ABOVE, AND THE VARIOUS GENERAL INVESTMENT POLICIES DESCRIBED IN THE
PROSPECTUSES, THE FUND WILL BE SUBJECT TO THE FOLLOWING INVESTMENT RESTRICTIONS,
WHICH ARE CONSIDERED NON-FUNDAMENTAL AND MAY BE CHANGED BY THE BOARD OF
DIRECTORS WITHOUT SHAREHOLDER APPROVAL.

THE FUND SHALL NOT:

1. Invest more than 5% of the market or other fair value of its assets
in the securities of any one issuer (other than obligations of, or guaranteed
by, the U.S. government, its agencies or instrumentalities).

2. Invest in securities of other investment companies except as part of
a merger, consolidation or other acquisition, and except to the extent that an
issuer of mortgage-backed securities may be deemed to be an investment company,
provided that any such investment in securities of an issuer of a
mortgage-backed security which is deemed to be an investment company will be
subject to the limits set forth in Section 12(d)(1)(A) of the Investment Company
Act of 1940 (the "1940 Act"), as amended.

The Fund has been advised by the staff of the Securities and Exchange
Commission (the "Commission") that it is the staff's position that, under the
1940 Act, the Fund may invest (a) no more than 10% of its assets in the
aggregate in certain CMOs and REMICs which are deemed to be investment companies
under the 1940 Act and issue their securities pursuant to an exemptive order
from the Commission, and (b) no more than 5% of its assets in any single issue
of such CMOs or REMICs.

3. Make loans, except to the extent that purchases of debt obligations
(including repurchase agreements) in accordance with the Fund's investment
objective and policies are considered loans and except that the Fund may loan up
to 25% of its assets to qualified broker/dealers or institutional investors for
their use relating to short sales or other security transactions.

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4. Purchase or sell real estate but this shall not prevent the Fund
from investing in securities secured by real estate or interests therein.

5. Purchase more than 10% of the outstanding voting or nonvoting
securities of any issuer, or invest in companies for the purpose of exercising
control or management.

6. Engage in the underwriting of securities of other issuers, except
that in connection with the disposition of a security, the Fund may be deemed to
be an "underwriter" as that term is defined in the Securities Act of 1933.

7. Make any investment which would cause more than 25% of the market or
other fair value of its total assets to be invested in the securities of issuers
all of which conduct their principal business activities in the same industry.
This restriction does not apply to obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.

8. Write, purchase or sell options, puts, calls or combinations
thereof, except that the Fund may: (a) write covered call options with respect
to any part or all of its portfolio securities; (b) purchase call options to the
extent that the premiums paid on all outstanding call options do not exceed 2%
of the Fund's total assets; (c) write secured put options; (d) purchase put
options to the extent that the premiums on all outstanding put options do not
exceed 2% of the Fund's total assets and only if the Fund owns the security
covered by the put option at the time of purchase. The Fund may sell put options
or call options previously purchased or enter into closing transactions with
respect to such options.

9. Enter into futures contracts or options thereon, except that the
Fund may enter into futures contracts to the extent that not more than 5% of the
Fund's assets are required as futures contract margin deposits and only to the
extent that obligations under such contracts or transactions represent not more
than 20% of the Fund's assets.

10. Purchase securities on margin or make short sales of securities.

11. Invest in warrants or rights except where acquired in units or
attached to other securities.

12. Purchase or retain the securities of any issuer any of whose
officers, directors or security holders is a director or officer of Limited-Term
Funds, Inc. or of its investment manager if or so long as the directors and
officers of Limited-Term Funds, Inc. and of its investment manager together own
beneficially more than 5% of any class of securities of such issuer.

13. Invest in interests in oil, gas or other mineral exploration or
development programs.

14. Invest more than 10% of the Fund's total assets in repurchase
agreements maturing in more than seven days and other illiquid assets.

15. Borrow money in excess of one-third of the value of its net assets
and then only as a temporary measure for extraordinary purposes or to facilitate
redemptions. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank and to the extent that such
borrowing

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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).

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,

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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

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security interest in all of the obligations backing such receivables due to the
large number of vehicles involved in a typical issuance and technical
requirements under state laws. Therefore recoveries on repossessed collateral
may not always be available to support payments on the securities.

Asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection, and (ii) protection against
losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provisions of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
due on the underlying pool is timely. Protection against losses resulting from
ultimate default enhances the likelihood of payments of the obligations on at
least some of the assets in the pool. Such protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The Fund will not pay any
additional fees for such credit support, although the existence of credit
support may increase the price of a security.

Examples of credit support arising out of the structure of the
transaction include "senior-subordinated securities" (multiple class securities
with one or more classes subordinate to other classes as to the payment of
principal thereof and interest thereon, with the result that defaults on the
underlying assets are borne first by the holders of the subordinated class),
creation of "reserve funds" (where cash or investments, sometimes funded from a
portion of the payments on the underlying assets, are held in reserve against
future losses) and "over collateralization" (where the scheduled payments on, or
the principal amount of, the underlying assets exceeds that required to make
payments of the securities and pay any servicing or other fees). The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in such issue.

OPTIONS--The Fund may purchase call options, write call options on a
covered basis, write secured put options and purchase put options on a covered
basis only, and will not engage in option writing strategies for speculative
purposes.

The Fund may invest in options that are either Exchange listed or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close option positions and this may have an adverse
impact on the Fund's ability to effectively hedge its securities. The Fund will
not, however, invest more than 10% of its assets in illiquid securities.

A. COVERED CALL WRITING--The Fund may write covered call options from
time to time on such portion of its portfolio, without limit, as Delaware
Management Company (the "Manager") determines is appropriate in seeking to
obtain the Fund's investment objective. A call option gives the purchaser of
such option the right to buy, and the writer, in this case the Fund, has the
obligation to sell the underlying security at the exercise price during the
option period. The advantage to the Fund of writing covered calls is that the
Fund receives a premium which is additional income. However, if the security
rises in value, the Fund may not fully participate in the market appreciation.

During the option period, a covered call option writer may be assigned
an exercise notice by the broker/dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or

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at such earlier time in which the writer effects a closing purchase transaction.
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.

With respect to options on actual portfolio securities owned by the
Fund, the Fund may enter into closing purchase transactions. A closing purchase
transaction is one in which the Fund, when obligated as a writer of an option,
terminates its obligation by purchasing an option of the same series as the
option previously written.

Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirety offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.

If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.

The market value of a call option generally reflects the market price
of an underlying security. Other principal factors affecting market value
include supply and demand, interest rates, the price volatility of the
underlying security and the time remaining until the expiration date.

The Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold.
Options written by the Fund will normally have expiration dates between one and
nine months from the date written. The exercise price of a call option may be
below, equal to or above the current market value of the underlying security at
the time the option is written.

B. PURCHASING CALL OPTIONS--The Fund may purchase call options to the
extent that premiums paid by the Fund do not aggregate more than 2% of the
Fund's total assets. The advantage of purchasing call options is that the Fund
may alter portfolio characteristics, and modify portfolio maturities without
incurring the cost associated with portfolio transactions.

The Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same Fund as the option previously purchased. The Fund
will realize a profit from a closing sale transaction if the price received on
the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.

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Although the Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an Exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on a
Exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the results that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund.

C. PURCHASING PUT OPTIONS-- The Fund will only purchase put options to
the extent that the premiums on all outstanding put options do not exceed 2% of
the Fund's total assets. A put option purchased by the Fund gives it the right
to sell one of its securities for an agreed price up to an agreed date. However,
the Fund must pay a premium for this right, whether it exercises it or not. The
Fund will, at all times during which it holds a put option, own the security
covered by such option.

The Fund intends to purchase put options in order to protect against a
decline in the market value of the underlying security below the exercise price
less the premium paid for the option ("protective puts"). The ability to
purchase put options will allow the Fund to protect an unrealized gain in an
appreciated security in its portfolio without actually selling the security. If
the security does not drop in value, the Fund will lose the value of the premium
paid. The Fund may sell a put option which it has previously purchased prior to
the sale of the securities underlying such option. Such sales will result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.

The Fund may sell a put option purchased on individual portfolio
securities. Additionally, the Fund may enter into closing sale transactions. A
closing sale transaction is one in which the Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.

D. WRITING PUT OPTIONS--The Fund may also write put options on a
secured basis which means that the Fund will maintain in a segregated account
with its custodian, cash or U.S. government securities in an amount not less
than the exercise price of the option at all times during the option period. The
amount of cash or U.S. government securities held in the segregated account will
be adjusted on a daily basis to reflect changes in the market value of the
securities covered by the put option written by the Fund. Secured put options
will generally be written in circumstances where the Manager wishes to purchase
the underlying security for the Fund's portfolio at a price lower than the
current market price of the security. In such event, the Fund would write a
secured put option at an exercise price which, reduced by the premium received
on the option, reflects the lower price it is willing to pay.

Following the writing of a put option, the Fund may wish to terminate
the obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.

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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.

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

-12-

<PAGE>

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.

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

-13-

<PAGE>

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.

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.

-14-
<PAGE>

CONCENTRATION

IN APPLYING THE FUND'S FUNDAMENTAL POLICY CONCERNING CONCENTRATION THAT
IS DESCRIBED ABOVE, IT IS A MATTER OF NON-FUNDAMENTAL POLICY THAT: (I) UTILITY
COMPANIES WILL BE DIVIDED ACCORDING TO THEIR SERVICES, FOR EXAMPLE, GAS, GAS
TRANSMISSION, ELECTRIC AND TELEPHONE WILL EACH BE CONSIDERED A SEPARATE
INDUSTRY; (II) FINANCIAL SERVICE COMPANIES WILL BE CLASSIFIED ACCORDING TO THE
END USERS OF THEIR SERVICES, FOR EXAMPLE, AUTOMOBILE FINANCE, BANK FINANCE AND
DIVERSIFIED FINANCE WILL EACH BE CONSIDERED A SEPARATE INDUSTRY; AND (III) ASSET
BACKED SECURITIES WILL BE CLASSIFIED ACCORDING TO THE UNDERLYING ASSETS SECURING
SUCH SECURITIES.

-15-

<PAGE>

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.

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.

-16-
<PAGE>

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.

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.

-17-
<PAGE>

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:
<TABLE>
<S> <C>

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.
</TABLE>

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

-18-
<PAGE>

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.

-19-
<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.

-20-
<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.

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

-21-
<PAGE>

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.

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

-22-
<PAGE>

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.

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.

-23-
<PAGE>

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>
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>

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

-24-
<PAGE>

Manager's affiliates, including the number of such clients serviced by the
Manager's affiliates.

DOLLAR-COST AVERAGING
For many people, deciding when to invest can be a difficult decision.
Security prices tend to move up and down over various market cycles and logic
says to invest when prices are low. However, even experts can't always pick the
highs and the lows. By using a strategy known as dollar-cost averaging, you
schedule your investments ahead of time. If you invest a set amount on a regular
basis, that money will always buy more shares when the price is low and fewer
when the price is high. You can choose to invest at any regular interval--for
example, monthly or quarterly--as long as you stick to your regular schedule.
Dollar-cost averaging looks simple and it is, but there are important things to
remember.

Dollar-cost averaging works best over longer time periods, and it
doesn't guarantee a profit or protect against losses in declining markets. If
you need to sell your investment when prices are low, you may not realize a
profit no matter what investment strategy you utilize. That's why dollar-cost
averaging can make sense for long-term goals. Since the potential success of a
dollar-cost averaging program depends on continuous investing, even through
periods of fluctuating prices, you should consider your dollar-cost averaging
program a long-term commitment and invest an amount you can afford and probably
won't need to withdraw. Delaware Investments offers three services -- Automatic
Investing Program, Direct Deposit Program and the Wealth Builder Option -- that
can help to keep your regular investment program on track. See Investing by
Electronic Fund Transfer - Direct Deposit Purchase Plan and Automatic Investing
Plan under Investment Plans and Wealth Builder Option under Investment Plans for
a complete description of these services including restrictions or limitations.

-25-
<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.

-26-

<PAGE>

TRADING PRACTICES AND BROKERAGE

Portfolio transactions are executed by the Manager on behalf of the
Fund in accordance with the standards described below.

Brokers, dealers and banks are selected to execute transactions for the
purchase or sale of portfolio securities on the basis of the Manager's judgment
of their professional capability to provide the service. The primary
consideration is to have brokers, dealers or banks execute transactions at best
price and execution. Best price and execution refers to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. Trades are generally made on a net basis where
securities are either bought or sold directly from or to a broker, dealer or
bank. In these instances, there is no direct commission charged, but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, the Fund pays reasonably competitive
brokerage commission rates based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Fund pays a minimal share
transaction cost when the transaction presents no difficulty.

The Manager may allocate out of all commission business generated by
all of the funds and accounts under its management, brokerage business to
brokers or dealers who provide brokerage and research services. These services
include advice, either directly or through publications or writings, as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting in
determining portfolio strategy; providing computer software and hardware used in
security analyses; and providing portfolio performance evaluation and technical
market analyses. Such services are used by the Manager in connection with its
investment decision-making process with respect to one or more funds and
accounts managed by it, and may not be used, or used exclusively, with respect
to the fund or account generating the brokerage.

As provided in the Securities Exchange Act of 1934 and the Fund's
Investment Management Agreement, higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services, if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, Limited-Term Funds, Inc. believes
that the commissions paid to such broker/dealers are not, in general, higher
than commissions that would be paid to broker/dealers not providing such
services and that such commissions are reasonable in relation to the value of
the brokerage and research services provided. In some instances, services may be
provided to the Manager which constitute in some part brokerage and research
services used by the Manager in connection with its investment decision-making
process and constitute in some part services used by the Manager in connection
with administrative or other functions not related to its investment
decision-making process. In such cases, the Manager will make a good faith
allocation of brokerage and research services and will pay out of its own
resources for services used by the Manager in connection with administrative or
other functions not related to its investment decision-making process. In
addition, so long as no fund is disadvantaged, portfolio transactions which
generate commissions or their equivalent are allocated to broker/dealers who
provide daily portfolio pricing services to the Fund and to other funds in the
Delaware Investments family. Subject to best price and execution, commissions
allocated to brokers providing such pricing services may or may not be generated
by the funds receiving the pricing service.

-27-
<PAGE>

The Manager may place a combined order for two or more accounts or
funds engaged in the purchase or sale of the same security if, in its judgment,
joint execution is in the best interest of each participant and will result in
best price and execution. Transactions involving commingled orders are allocated
in a manner deemed equitable to each account or fund. When a combined order is
executed in a series of transactions at different prices, each account
participating in the order may be allocated an average price obtained from the
executing broker. It is believed that the ability of the accounts to participate
in volume transactions will generally be beneficial to the accounts and funds.
Although it is recognized that, in some cases, the joint execution of orders
could adversely affect the price or volume of the security that a particular
account or fund may obtain, it is the opinion of the Manager and Limited-Term
Funds, Inc.'s Board of Directors that the advantages of combined orders outweigh
the possible disadvantages of separate transactions.

Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. (the "NASD"), and subject to seeking best price and
execution, the Manager may place orders with broker/dealers that have agreed to
defray certain Fund expenses such as custodian fees, and may, at the request of
the Distributor, give consideration to sales of shares of the funds in the
Delaware Investments family as a factor in the selection of brokers and dealers
to execute portfolio transactions.

PORTFOLIO TURNOVER
Portfolio trading will be undertaken principally to accomplish the
Fund's objective in relation to anticipated movements in the general level of
interest rates, and not for the purpose of realizing capital gains, although
capital gains may be realized on certain portfolio transactions. For example,
capital gains may be realized when a security is sold (i) so that, provided
capital is preserved or enhanced, another security can be purchased to obtain a
higher yield, (ii) to take advantage of what the Manager believes to be a
temporary disparity in the normal yield relationship between the two securities
to increase income or improve the quality of the portfolio, (iii) to purchase a
security which the Manager believes is of higher quality than its rating or
current market value would indicate, or (iv) when the Manager anticipates a
decline in value due to market risk or credit risk. The Fund is free to dispose
of portfolio securities at any time, subject to complying with the Internal
Revenue Code and the 1940 Act, when changes in circumstances or conditions make
such a move desirable in light of the investment objective. The Fund will not
attempt to achieve or be limited to a predetermined rate of portfolio turnover,
such a turnover always being incidental to transactions undertaken with a view
to achieving the Fund's investment objective.

Although the Fund trades principally to seek a high level of income and
stability of principal and not for profits, the portfolio turnover may be high,
particularly if interest rates are volatile. The portfolio turnover rate of the
Fund is calculated by dividing the lesser of purchases or sales of portfolio
securities for the particular fiscal year by the monthly average of the value of
the portfolio securities owned by the Fund during the particular fiscal year,
exclusive of securities whose maturities at the time of acquisition are one year
or less.

During the past two fiscal years ended December 31, 1997 and 1998, the
Fund's portfolio turnover rates were 79% and 69%, respectively.

-28-
<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.

-29-
<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.

-30-
<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 Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.

-31-
<PAGE>

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 Shares under
Redemption and Exchange for the Fund Classes for a list of the instances in
which the CDSC is waived.

-32-
<PAGE>

During the fourth year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately five years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the Fund.
See Automatic Conversion of Class B Shares under REDEMPTION AND EXCHANGE. Such
conversion will constitute a tax-free exchange for federal income tax purposes.
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 Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the fifth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the fifth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's fifth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the fifth anniversary of
purchase before the shares will automatically convert into Class A Shares.

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<PAGE>

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.

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 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.

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The maximum aggregate fee payable by the Fund under the Plans, and the
Fund's Distribution Agreement, is on an annual basis up to 0.30% of Class A
Shares' average daily net assets for the year, and up to 1% (0.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C Shares' average daily net assets for the year.
Limited-Term Funds, Inc.'s Board of Directors may reduce these amounts at any
time. The Distributor has agreed to waive these distribution fees to the extent
such fees for any day exceeds the net investment income realized by the Fund
Classes for such day.

On May 21, 1987, the Board of Directors set the fee for Class A Shares,
pursuant to its Plan, at 0.15% of average daily net assets. This fee was
effective until May 31, 1992. Effective June 1, 1992, the Board of Directors has
determined that the annual fee, payable on a monthly basis, under the Plan, will
be equal to the sum of: (i) the amount obtained by multiplying 0.10% by the
average daily net assets represented by Class A Shares which were originally
purchased prior to June 1, 1992 in the Investors Series I class (which was
converted into what is now referred to as Class A Shares) on June 1, 1992
pursuant to a Plan of Recapitalization approved by shareholders of the Investors
Series I class), and (ii) the amount obtained by multiplying 0.15% by the
average daily net assets represented by all other Class A Shares. While this is
the method to be used to calculate the 12b-1 fees to be paid by Class A Shares,
the fee is a Class expense so that all shareholders regardless of whether they
originally purchased or received shares in the Investors Series I class, or in
one of the other classes that is now known as Class A Shares will bear 12b-1
expenses at the same rate. While this describes the current formula for
calculating the fees which will be payable under the Class A Shares' Plan
beginning June 1, 1992, the Plan permits a full 0.30% on all assets of Class A
Shares to be paid at any time following appropriate Board approval.

All of the distribution expenses incurred by the Distributor and
others, such as broker/dealers, in excess of the amount paid on behalf of Class
A, Class B and Class C Shares would be borne by such persons without any
reimbursement from such Fund Classes. Subject to seeking best price and
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plans.

From time to time, the Distributor may pay additional amounts from its
own resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.

The Plans and the Distribution Agreement, as amended, have been
approved by the Board of Directors of Limited-Term Funds, Inc., including a
majority of the directors who are not "interested persons" (as defined in the
1940 Act) of Limited-Term Funds, Inc. and who have no direct or indirect
financial interest in the Plans, by vote cast in person at a meeting duly called
for the purpose of voting on the Plans and such Distribution Agreement.
Continuation of the Plans and the Distribution Agreement, as amended, must be
approved annually by the Board of Directors in the same manner as specified
above.

Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares and that there is a reasonable 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

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<PAGE>

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.

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.

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<PAGE>

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.

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

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<PAGE>

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 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

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<PAGE>

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.

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

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<PAGE>

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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<PAGE>

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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<PAGE>

INVESTMENT PLANS

REINVESTMENT PLAN/OPEN ACCOUNT
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares 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 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.

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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.

* * *

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

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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 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

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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.

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.

Certain shareholder services are not available to investors using the
Asset Planner service, due to its special design. These include Delaphone,
Checkwriting, Wealth Builder Option and Letter of Intention. Systematic
Withdrawal Plans are available after the account has been open for two years.

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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
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

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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;

(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.
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<PAGE>

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.

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.

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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 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.

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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 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.

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REDEMPTION AND EXCHANGE

YOU CAN REDEEM OR EXCHANGE YOUR SHARES IN A NUMBER OF DIFFERENT WAYS.
Exchanges are subject to the requirements of the Fund and all exchanges of
shares constitute taxable events. Further, in order for an exchange to be
processed, shares of the fund being acquired must be registered in the state
where the acquiring shareholder resides. 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.

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<PAGE>

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 (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

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<PAGE>

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.

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

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<PAGE>

that instructions communicated by telephone are genuine (including verification
of a form of personal identification) as, if it does not, the Fund or the
Transfer Agent may be liable for any losses due to unauthorized or fraudulent
transactions. Telephone instructions received by the Fund Classes are generally
tape recorded, and a written confirmation will be provided for all purchase,
exchange and redemption transactions initiated by telephone. By exchanging
shares by telephone, you are acknowledging prior receipt of a prospectus for the
fund into which your shares are being exchanged.

TELEPHONE REDEMPTION--CHECK TO YOUR ADDRESS OF RECORD
THE TELEPHONE REDEMPTION FEATURE IS A QUICK AND EASY METHOD TO REDEEM
SHARES. You or your investment dealer of record can have redemption proceeds of
$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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<PAGE>

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 of the Class at net asset value. This plan is not recommended
for all investors and should be started only after careful

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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 the Institutional
CLASS. Shareholders should consult with their financial advisers to determine
whether a Systematic Withdrawal Plan would be suitable for them.

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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).

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

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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 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.

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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:

"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.

-61-

<PAGE>

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.

The Investment Management Agreement for the Fund is dated April 1, 1999
and was approved by shareholders on March 17, 1999. The Agreement HAS an initial
term of two years. The Agreement may be renewed each year only so long as such
renewal and continuance are specifically approved at least annually by the Board
of 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 FOLLOWING ANNUAL RATE:

0.50% ON THE FIRST $500 MILLION
0.475% ON THE NEXT $500 MILLION
0.45% ON THE NEXT $1.5 BILLION
0.425% ON ASSETS IN EXCESS OF $2.5 BILLION

On December 31, 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.

-62-

<PAGE>

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

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
</TABLE>

-63-

<PAGE>

<TABLE>
<CAPTION>
Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
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 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.

-64-
<PAGE>

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>
* 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>
- ---------------------------------------------------------------------------------------------------------------------------
<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>
- ---------------------------------------------------------------------------------------------------------------------------
<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>
- ---------------------------------------------------------------------------------------------------------------------------
<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 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>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <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>

-69-

<PAGE>

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<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.
- ---------------------------------------------------------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

-70-

<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
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.
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

-71-
<PAGE>

<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
<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.

- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
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 TOTAL COMPENSATION
AGGREGATE BENEFITS ACCRUED AS FROM DELAWARE
COMPENSATION FOR PART OF LIMITED-TERM ESTIMATED ANNUAL INVESTMENTS
LIMITED-TERM FUNDS, FUNDS, INC. BENEFITS UPON INVESTMENT
INC. EXPENSES RETIREMENT(1) COMPANIES(2)
- ---------------------------------------------------------------------------------------------------------------------
<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) 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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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 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.

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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.

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.

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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.

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.

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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

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.

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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.

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

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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. 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.

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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.

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.

DELAWARE-VOYAGEUR TAX-FREE MINNESOTA FUND seeks to provide a high level
of current income exempt from federal income tax and the Minnesota personal
income tax, consistent with the preservation of capital. DELAWARE-VOYAGEUR
TAX-FREE NORTH DAKOTA FUND seeks to provide a high level of current income
exempt from federal income tax and the North Dakota personal income tax,
consistent with the preservation of capital.

For more complete information about any of the funds in the Delaware
Investments family, including charges and expenses, you can obtain a prospectus
from the Distributor. Read it carefully before you invest or forward funds.

Each of the summaries above is qualified in its entirety by the
information contained in each fund's prospectus(es).

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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

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LIMITED-TERM GOVERNMENT FUND
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A CLASS
B CLASS
C CLASS
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INSTITUTIONAL CLASS
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CLASSES OF DELAWARE GROUP
LIMITED-TERM GOVERNMENT FUNDS, INC.
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PART B

STATEMENT OF
ADDITIONAL INFORMATION

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APRIL 28, 1999

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