485BPOS 1 dglt485b.htm

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
File No. 002-75526
File No. 811-03363

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/

Pre-Effective Amendment No. / /

Post-Effective Amendment No. 59 /X/

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/

Amendment No. 59
(Check appropriate box or boxes)

DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

2005 Market Street, Philadelphia, Pennsylvania 19103-7094
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(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (800) 523-1918

David F. Connor, Esq., 2005 Market Street, Philadelphia, PA 19103-7094
--------------------------------------------------------------------------------
(Name and Address of Agent for Service)

Approximate Date of Public Offering: April 30, 2006

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
---------
X on April 30, 2006 pursuant to paragraph (b)
---------
60 days after filing pursuant to paragraph (a) (1)
---------
on (date) pursuant to paragraph (a)(1)
---------
75 days after filing pursuant to paragraph (a) (2)
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on (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate:

This post-effective amendment designates a new effective date for a
------- previously filed post-effective amendment

- - - CONTENTS - - -

This Post-Effective Amendment No. 59 to Registration File No. 002-75526 includes
the following:

1. Facing Page

2. Contents Page

3. Part A - Prospectuses

4. Part B - Statement of Additional Information

5. Part C - Other Information

6. Signatures

7. Exhibits

[DELAWARE INVESTMENTS LOGO]

Delaware Limited-Term Government Fund

Class A o Class B o Class C o Class R

Prospectus
April 30, 2006

Fixed Income

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this Prospectus, and any
representation to the contrary is a criminal offense.

Table of contents

Fund profile page 2
Delaware Limited-Term Government Fund 2

How we manage the Fund page 5
Our investment strategies 5
The securities we typically invest in 6
The risks of investing in the Fund 9
Disclosure of portfolio holdings information 10

Who manages the Fund page 11
Investment manager 11
Portfolio managers 11
Who's who? 12

About your account page 13
Investing in the Fund 13
Choosing a share class 13
Dealer compensation 16
How to reduce your sales charge 17
How to buy shares 20
Fair valuation 21
Retirement plans 21
Document delivery 21
How to redeem shares 22
Account minimums 23
Special services 24
Frequent trading of Fund shares 26
Dividends, distributions and taxes 28
Certain management considerations 29
Manager of managers structure 29

Financial highlights page 30
Glossary page 32
Additional information page 35

Profile: Delaware Limited-Term Government Fund

What are the Fund's goals?
Delaware Limited-Term Government Fund seeks to provide a high stable level of
income, while attempting to minimize fluctuations in principal and provide
maximum liquidity. Although the Fund will strive to meet its goals, there is no
assurance that it will.

What are the Fund's main investment strategies?
The Fund invests primarily in short- and intermediate-term U.S. government
securities. These are debt securities issued or guaranteed by the U.S., such as
U.S. Treasuries; securities issued by U.S. government agencies or
instrumentalities, such as securities of the Government National Mortgage
Association; and securities that are privately issued but are 100%
collateralized by securities or certificates issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The Fund may also invest up to
20% of its net assets in corporate notes and bonds, certificates of deposit and
obligations of U.S. and foreign banks, commercial paper, certain asset-backed
securities and non-agency mortgage-backed securities.

The level of income the Fund provides will vary depending on current interest
rates and the specific securities in the portfolio. However, since longer-term
rates are generally less volatile than short-term rates, the Fund's income may
fluctuate less than a money market fund's income.

Under normal circumstances, the Fund will invest at least 80% of its net assets
in U.S. government securities ("80% policy"). This 80% policy can be changed
without shareholder approval. However, shareholders would be given at least 60
days notice prior to any such change.

What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. Over time, the value of your investment in
the Fund will increase and decrease according to changes in the value of the
securities in the Fund's portfolio. This Fund will be affected primarily by
changes in interest rates. For example, when interest rates rise, the value of
bonds in the Fund's portfolio will likely decline.

For a more complete discussion of risk, please see "The risks of investing in
the Fund" on page 9.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.

Who should invest in the Fund
o Investors with intermediate or long-term financial goals.
o Investors seeking monthly income.
o Investors who would like a relatively conservative income investment to
help balance a growth-oriented long-term portfolio.
o Investors seeking a high-quality investment with a measure of capital
preservation.

Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially over the short term.
o Investors who want an investment with a fixed share price, such as a money
market fund.

You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial advisor to
determine whether it is an appropriate choice for you.

How has Delaware Limited-Term Government Fund performed?

This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how annual returns for the Fund's Class A shares have varied over
the past ten calendar years, as well as the average annual returns of Class A,
B, C and R shares for one-year, five-year and ten-year or lifetime periods, as
applicable. The Fund's past performance (before and after taxes) is not
necessarily an indication of how it will perform in the future. The returns
reflect expense caps in effect during these periods. The returns would be lower
without the expense caps. Please see the footnotes on page 4 for additional
information about the expense caps.

[GRAPHIC OMITTED: BAR CHART SHOWING YEAR-BY-YEAR TOTAL RETURN (CLASS A)]

Year-by-year total return (Class A)

------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
3.69% 5.23% 7.46% 1.07% 8.59% 8.16% 7.08% 2.12% 2.31% 1.76%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

During the periods illustrated in this bar chart, Class A's highest quarterly
return was 4.49% for the quarter ended December 31, 1998 and its lowest
quarterly return was - 1.33% for the quarter ended June 30, 2004.

The maximum Class A sales charge of 2.75%, which is normally deducted when you
purchase shares, is not reflected in the previous paragraph or in the bar chart.
If this fee were included, the returns would be less than those shown. The
average annual returns in the table below do include the sales charge.

Average annual returns for periods ending 12/31/05

-------------------------------------------------------- -------- -------- -----------
1 year 5 years 10 years or
lifetime**
-------------------------------------------------------- -------- -------- -----------
Class A return before taxes (1.04%) 3.66% 4.41%
-------------------------------------------------------- -------- -------- -----------
Class A return after taxes on distributions (2.50%) 1.96% 2.24%
-------------------------------------------------------- -------- -------- -----------
Class A return after taxes on distributions and sale (0.69%) 2.10% 2.39%
of Fund shares
-------------------------------------------------------- -------- -------- -----------
Class B return before taxes* (1.05%) 3.36% 4.26%
-------------------------------------------------------- -------- -------- -----------
Class C return before taxes* (0.08%) 3.36% 3.82%
-------------------------------------------------------- -------- -------- -----------
Class R return before taxes 1.34% N/A% 1.24%
-------------------------------------------------------- -------- -------- -----------
Merrill Lynch 1-3 Year U.S. Treasury Index 1.67% 3.67% 4.79%
(reflects no deduction for fees, expenses or
taxes)
-------------------------------------------------------- -------- -------- -----------

The Fund's returns above are compared to the performance of the Merrill Lynch
1-3 Year U.S. Treasury Index. You should remember that, unlike the Fund, the
index is unmanaged and does not reflect the actual costs of operating a mutual
fund, such as the costs of buying, selling and holding securities. Maximum sales
charges are included in the Fund returns shown above.

After-tax performance is presented only for Class A shares of the Fund. The
after-tax returns for other Fund classes may vary. Actual after-tax returns
depend on the investor's individual tax situation and may differ from the
returns shown. After-tax returns are not relevant for shares held in
tax-deferred investment vehicles such as employer-sponsored 401(k) plans and
individual retirement accounts. The after-tax returns shown are calculated using
the highest individual federal marginal income tax rates in effect during the
Fund's lifetime and do not reflect the impact of state and local taxes. The
after-tax rate used is based on the current tax characterization of the elements
of the Fund's returns (e.g., qualified vs. non-qualified dividends) and may be
different than the final tax characterization of such elements. Past
performance, both before and after taxes, is not a guarantee of future results.

* Total returns assume redemption of shares at end of period. Lifetime
returns for Class B shares reflect conversion to Class A shares after 5
years. If shares were not redeemed, the returns for Class B would be 0.90%,
3.36% and 4.26% for the one-year, five-year and ten-year periods,
respectively. If shares were not redeemed, the returns for Class C would be
0.90%, 3.36% and 3.82% for the one-year, five-year and ten-year periods,
respectively.
** Lifetime returns are shown if the Fund or Class existed for less than 10
years. The inception date for the Class R shares of the Fund was June 2,
2003. The Merrill Lynch 1-3 Year U.S. Treasury Index returns shown are for
the ten-year period. The Merrill Lynch 1-3 year U.S. Treasury Index reports
returns on a monthly basis. The index returns for the Class R lifetime
period was 1.26%. The index return for Class R

lifetime reflects the return from June 30, 2003 through December 31, 2005.

What are the Fund's fees and expenses?

----------------------------- ---------------------------------- -------- -------- -------- --------
Sales charges are fees CLASS A B C R
paid directly from your ----------------------------------- ------- -------- -------- --------
investments when you buy Maximum sales charge (load) 2.75% none none none
or sell shares of the imposed on purchases as a
Fund. You do not pay sales percentage of offering price
charges when you buy or ----------------------------------- ------- -------- -------- --------
sell Class R shares. Maximum contingent deferred sales none(1) 2.00%(2) 1.00%(3) none
charge (load) as a percentage of
original purchase price or
redemption price, whichever is
lower
----------------------------------- ------- -------- -------- --------
Maximum sales charge (load) none none none none
imposed on reinvested dividends
----------------------------------- ------- -------- -------- --------
Redemption fees none none none none
----------------------------------- ------- -------- -------- --------
Exchange fees none none none none
----------------------------- ----------------------------------- ------- -------- -------- --------
----------------------------- ----------------------------------- ------- -------- -------- --------
Annual fund operating Management fees 0.50% 0.50% 0.50% 0.50%
expenses are deducted from ----------------------------------- ------- -------- -------- --------
the Fund's assets. Distribution and service (12b-1) 0.30%(4) 1.00% 1.00% 0.60%(4)
fees
----------------------------------- ------- -------- -------- --------
Other expenses(5) 0.30% 0.30% 0.30% 0.30%
----------------------------- ----------------------------------------
Total operating expenses 1.10% 1.80% 1.80% 1.40%
----------------------------------- ------- -------- -------- --------
Fee waivers and (0.30%) (0.15%) (0.15%) (0.25%)
payments(6)
----------------------------------- ------- -------- -------- --------
Net expenses 0.80% 1.65% 1.65% 1.15%
----------------------------- ----------------------------------- ------- -------- -------- --------

This example is intended to CLASS(7) A B(8) B(8) C C R
help you compare the cost (if redeemed) (if redeemed)
of investing in the Fund to -------- ------- ------- ------- ------- ------- -------
the cost of investing in 1 year $354 $168 $368 $168 $268 $117
other mutual funds with -------- ------- ------- ------- ------- ------- -------
similar investment 3 years $586 $552 $652 $552 $552 $4
objectives. We show the -------- ------- ------- ------- ------- ------- -------
cumulative amount of Fund 5 years $836 $961 $961 $961 $961 $742
expenses on a hypothetical -------- ------- ------- ------- ------- ------- -------
investment of $10,000 with 10 years $1,552 $1,671 $1,671 $2,104 $2,104 $1,658
an annual 5% return over -------- ------- ------- ------- ------- ------- -------
the time shown.(7) This
example reflects the net
operating expenses with
expense waivers for the
one-year contractual period
and the total operating
expenses without expense
waivers for years two
through 10. This is an
example only, and does not
represent future expenses,
which may be greater or
less than those shown here.
----------------------------- -------- ------- ------- ------- ------- ------- -------

(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial advisor who is
paid a commission, a contingent deferred sales charge will apply to
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first year after you buy them, you
will pay a contingent deferred sales charge of 2.00%, which declines to
1.00% during the second and third years and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1.00%
contingent deferred sales charge.

(4) The Fund's Distributor has contracted to limit the Class A and Class R
shares' 12b-1 fees through April 30, 2007 to no more than 0.15% and 0.50%,
respectively, of average daily net assets.
(5) "Other expenses" have been restated to reflect an expected decrease during
the current fiscal year because the Fund is not expected to convene a
shareholders' meeting and issue a proxy statement during the current fiscal
year.
(6) The investment manager has contracted to waive fees and pay expenses
through April 30, 2007 in order to prevent total operating expenses
(excluding any 12b-1 fees, taxes, interest, brokerage fees, extraordinary
expenses and certain insurance costs) from exceeding 0.65% of average daily
net assets.
(7) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here.
(8) The Class B example reflects the conversion of Class B shares to Class A
shares after five years. Information for years six through 10 reflects
expenses of the Class A shares.

How we manage the Fund

Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we believe are the best investments for the Fund. Following
are descriptions of how the portfolio management team pursues the Fund's
investment goals.

We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.

We invest primarily in short- and intermediate-term fixed income securities including:

o securities issued or guaranteed by the U.S. government, such as U.S.
Treasuries; and
o securities issued by U.S. government agencies or instrumentalities, such as
securities of the Government National Mortgage Association.

We may invest in instruments that use these government securities as collateral.
We may invest up to 20% of the Fund's net assets in corporate notes and bonds,
certificates of deposit and obligations of both U.S. and foreign banks,
commercial paper, certain asset-backed securities and non-agency mortgage-backed
securities.

The Fund's level of income and the stability of its share price will be directly
affected by changes in short- and intermediate-term interest rates. We
anticipate that the level of income could be higher than a money market fund.
However, the Fund's share price will increase and decrease with changes in
interest rates. This makes its risk level greater than that of a money market
fund.

We strive to reduce the effects of interest rate changes on the share price by
maintaining an average effective duration of two to three years. The average
effective duration is determined by averaging the individual effective duration
of all securities in the portfolio. If we believe that interest rates are
historically low, we may shorten the average effective duration to two years.
Conversely, if we believe rates are high and therefore likely to go lower, we
may increase average effective duration to as high as three years.

The Fund's investment objectives are non-fundamental. This means that the Board
of Trustees may change the Fund's objectives without obtaining shareholder
approval. If the objectives were changed, we would notify shareholders before
the change in the objectives became effective.

The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.

--------------------------------------- ----------------------------------
Securities How we use them
--------------------------------------- ----------------------------------
Direct U.S. Treasury obligations We may invest without limit in
include Treasury bills, notes and U.S. Treasury securities,
bonds of varying maturities. U.S. although they are typically
Treasury securities are backed by the not our largest holding
"full faith and credit" of the United because they generally do not
States. offer as high a level of
current income as other
fixed-income securities.
--------------------------------------- ----------------------------------
Mortgage-backed securities: There is no limit on
Fixed-income securities that government-related
represent pools of mortgages, with mortgage-backed securities.
investors receiving principal and
interest payments as the underlying We may invest up to 35% of the
mortgage loans are paid back. Many Fund's net assets in
are issued and guaranteed against mortgage-backed securities
default by the U.S. government or its issued by private entities if at
agencies or instrumentalities, such the time they are issued they
as the Federal Home Loan Mortgage are 100% collateralized by
Corporation, Fannie Mae and the securities or certificates
Government National Mortgage issued or guaranteed by the U.S.
Association. Others are issued by government, its agencies or
private financial institutions, with instrumentalities. These
some fully collateralized by securities must be rated in one
certificates issued or guaranteed by of the two highest categories by
the government or its agencies or a nationally recognized
instrumentalities. statistical ratings organization
(NRSRO) at the time of purchase.

The Fund may also invest in
mortgage-backed securities that
are secured by the underlying
collateral of the private
issuer. Such securities are not
government securities and are
not directly guaranteed by the
U.S. government in any way.
These include collateralized
mortgage obligations (CMOs),
real estate mortgage investment
conduits (REMICs) and commercial
mortgage-backed securities
(CMBSs). We may invest in
these securities only if they
are rated in the highest quality
category, such as AAA, by an
NRSRO. However, we may not
invest more than 20% of the
Fund's net assets in securities
that are not government
securities or are not
collateralized by government
securities.
--------------------------------------- ----------------------------------
Asset-backed securities: Bonds or We may invest only in
notes backed by accounts receivable asset-backed securities rated in
including home equity, automobile or the highest quality category,
credit loans. such as AAA, by an NRSRO.
However, we may not invest more
than 20% of the Fund's net
assets in securities (including
these asset-backed securities)
that are not government
securities or do not use
government securities as
collateral.
--------------------------------------- ----------------------------------
Repurchase agreements: An agreement Typically, the Fund uses
between a buyer of securities, such repurchase agreements as a
as the Fund, and a seller of short-term investment for its
securities, in which the seller cash position. In order to enter
agrees to buy the securities back into these repurchase
within a specified time at the same agreements, the Fund must have
price the buyer paid for them, plus collateral of at least 102% of
an amount equal to an agreed upon the repurchase price. The Fund
interest rate. Repurchase agreements will only enter into repurchase
are often viewed as equivalent to agreements in which the
cash. collateral is comprised of U.S.
government securities.
--------------------------------------- ----------------------------------

--------------------------------------- ----------------------------------
Securities How we use them
--------------------------------------- ----------------------------------
Options and futures: Options At times when we anticipate
represent a right to buy or sell a adverse conditions, we may want
security or a group of securities at to protect gains on securities
an agreed upon price at a future without actually selling them.
date. The purchaser of an option may We might use options or futures
or may not choose to go through with to neutralize the effect of any
the transaction. The seller of an price declines, without selling
option, however, must go through with a bond or bonds, or as a hedge
the transaction if its purchaser against changes in interest
exercises the option. rates. We may also sell an
option contract (often referred
Futures contracts are agreements for to as "writing" an option) to
the purchase or sale of a security or earn additional income for the
a group of securities at a specified Fund.
price, on a specified date. Unlike
purchasing an option, a futures Use of these strategies can
contract must be executed unless it increase the operating costs of
is sold before the settlement date. the Fund and can lead to loss of
principal.
Certain options and futures may be
considered to be derivative
securities.
--------------------------------------- ----------------------------------
Restricted securities: Privately The Fund may invest in privately
placed securities whose resale is placed securities, including
restricted under U.S. securities laws. those that are eligible for
resale only among certain
institutional buyers without
registration, commonly known as
"Rule 144A Securities."
Restricted securities that are
determined to be illiquid may
not exceed the Fund's 10% limit
on illiquid securities, which is
described below.
--------------------------------------- ----------------------------------
Illiquid securities: Securities that The Fund may invest up to 10% of
do not have a ready market and cannot its net assets in illiquid
be easily sold within seven days at securities.
approximately the price at which a
fund has valued them.
--------------------------------------- ----------------------------------
Interest rate swap, index swap and We may use interest rate swaps
credit default swap agreements: In an to adjust the Fund's sensitivity
interest rate swap, a fund receives to interest rates or to hedge
payments from another party based on against changes in interest
a variable or floating interest rate, rates. Index swaps may be used
in return for making payments based to gain exposure to markets that
on a fixed interest rate. An interest the Fund invests in, such as the
rate swap can also work in reverse corporate bond market. We may
with a fund receiving payments based also use index swaps as a
on a fixed interest rate and making substitute for futures or
payments based on a variable or options contracts if such
floating interest rate. In an index contracts are not directly
swap, a fund receives gains or incurs available to the Fund on
losses based on the total return of a favorable terms. We may enter
specified index, in exchange for into credit default swaps in
making interest payments to another order to hedge against a credit
party. An index swap can also work event, to enhance total return
in reverse with a fund receiving or to gain exposure to certain
interest payments from another party securities or markets.
in exchange for movements in the
total return of a specified index.
In a credit default swap, a fund may
transfer the financial risk of a
credit event occurring (a bond
default, bankruptcy, restructuring,
etc.) on a particular security or
basket of securities to another party
by paying that party a periodic
premium; likewise, a fund may assume
the financial risk of a credit event
occurring on a particular security or
basket of securities in exchange for
receiving premium payments from
another party. Interest rate swaps,
index swaps and credit default swaps
may be considered to be illiquid.
--------------------------------------- ----------------------------------

The Fund may also invest in other securities, including certificates of deposit
and obligations of both U.S. and foreign banks; and corporate debt and
commercial paper. Please see the Statement of Additional Information (SAI) for
additional descriptions of these securities as well as those listed in the table
above.

Borrowing from banks
The Fund may borrow money from banks as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions. The Fund will be required to
pay interest to the lending banks on the amounts borrowed. As a result,
borrowing money could result in the Fund being unable to meet its investment
objectives. The Fund will not borrow money in excess of one-third of the value
of its net assets.

Lending securities
The Fund may lend up to 25% of its assets to qualified brokers, dealers and
institutional investors for their use in securities transactions. Borrowers of
the Fund's securities must provide collateral to the Fund and adjust the amount
of collateral each day to reflect changes in the value of the loaned securities.
These transactions may generate additional income for the Fund.

Purchasing securities on a when-issued or delayed delivery basis
The Fund may buy or sell securities on a when-issued or delayed delivery basis;
that is, paying for securities before delivery or taking delivery at a later
date. The Fund will designate cash or securities in amounts sufficient to cover
its obligations, and will value the designated assets daily.

Portfolio turnover
We anticipate that the Fund's annual portfolio turnover may be greater than
100%. A turnover rate of 100% would occur if, for example, the Fund bought and
sold all of the securities in its portfolio once in the course of a year or
frequently traded a single security. A high rate of portfolio turnover in any
year may increase brokerage commissions paid and could generate taxes for
shareholders on realized investment gains.

The risks of investing in the Fund
Investing in any mutual fund involves risk, including the risk that you may
receive little or no return on your investment, and the risk that you may lose
part or all of the money you invest. Before you invest in the Fund, you should
carefully evaluate the risks. Because of the nature of the Fund, you should
consider your investment to be a long-term investment that typically provides
the best results when held for a number of years. The table below describes the
chief risks you assume when investing in the Fund. Please see the SAI for a
further discussion of these risks and other risks not discussed here.

--------------------------------------- ----------------------------------
Risks How we strive to manage them
--------------------------------------- ----------------------------------
Interest rate risk is the risk that Interest rate risk is the most
securities will decrease in value if significant risk for this Fund.
interest rates rise. The risk is In striving to manage this risk,
greater for bonds with longer we monitor economic conditions
maturities than for those with and the interest rate
shorter maturities. environment. We keep the
average maturity of the
Swaps may be particularly sensitive portfolio as short as is
to interest rate changes. Depending prudent, in keeping with the
on the actual movements of interest Fund's objective to provide high
rates and how well the portfolio current income.
manager anticipates them, a fund
could experience a higher or lower We will not invest in swaps with
return than anticipated. maturities of more than two
years. Each business day we
will calculate the amount the
Fund must pay for swaps it holds
and will segregate enough cash
or other liquid securities to
cover that amount.
--------------------------------------- ----------------------------------
Market risk is the risk that all or a We maintain a long-term
majority of the securities in a investment approach and focus on
certain market-- like the stock or high-quality individual bonds
bond market-- will decline in value that we believe can provide a
because of factors such as economic steady stream of income
conditions, future expectations or regardless of interim
investor confidence. fluctuations in the bond
market. We generally do not buy
Index swaps are subject to the same and sell securities for
market risks as the investment market short-term purposes.
or sector that the index represents.
Depending on the actual movements of In evaluating the use of an
the index and how well the portfolio index swap, we carefully
manager forecasts those movements, a consider how market changes
fund could experience a higher or could affect the swap and how
lower return than anticipated. that compares investing directly
in the market the swap is
intended to represent.
--------------------------------------- ----------------------------------
Industry and security risk: Industry For non-government securities,
risk is the risk that the value of we limit the amount of the
securities in a particular industry Fund's assets invested in any
will decline because of changing one industry and in any
expectations for the performance of individual security or issuer.
that industry. Securities risk is We also follow a rigorous
the risk that the value of an selection process when choosing
individual stock or bond will decline securities for the portfolio.
because of changing expectations for
the performance of the individual
company issuing the stock or bond.
--------------------------------------- ----------------------------------
Credit risk is the possibility that a By focusing primarily on U.S.
bond's issuer (or an entity that Treasury securities and other
insures the bond) will be unable to securities that are backed by
make timely payments of interest and the U.S. government, we minimize
principal. the possibility that any of the
securities in our portfolio will
not pay interest or principal.
U.S. government securities are
generally considered to be of
the highest quality.

When selecting non-government
securities and the dealers with
whom we execute interest rate
swaps, we focus on those with
high-quality ratings and do
careful credit analysis before
investing.
--------------------------------------- ----------------------------------
Prepayment risk: The risk that We take into consideration the
homeowners will prepay mortgages likelihood of prepayment when we
during periods of low interest rates, select mortgages. We may look
forcing a fund to reinvest its money for mortgage securities that
at interest rates that might be lower have characteristics that make
than those on the prepaid mortgage. them less likely to be prepaid,
Prepayment risk may also affect other such as low outstanding loan
types of debt securities, but balances or below-market
generally to a lesser extent than interest rates.
mortgage securities.
--------------------------------------- ----------------------------------

--------------------------------------- ----------------------------------
Risks How we strive to manage them
--------------------------------------- ----------------------------------
Liquidity risk is the possibility U.S. Treasuries and other U.S.
that securities cannot be readily government debt securities are
sold within seven days at typically the most liquid
approximately the price at which a securities available. Therefore,
fund values them. liquidity risk is not a
significant risk for this Fund.

Swap agreements will be treated
as illiquid securities, but most
swap dealers will be willing to
repurchase interest rate swaps
within seven days.

We limit exposure to illiquid
securities to no more than 10%
of the Fund's net assets.
--------------------------------------- ----------------------------------
Derivatives risk is the possibility We will use derivatives for
that a fund may experience a defensive purposes, such as to
significant loss if it employs a protect gains or hedge against
derivatives strategy (including a potential losses in the
strategy involving swaps such as portfolio without actually
interest rate swaps, index swaps and selling a security, to
credit default swaps) related to a neutralize the impact of
security or a securities index and interest rate changes, to affect
that security or index moves in the diversification or to earn
opposite direction from what the additional income.
portfolio management team had
anticipated. Another risk of
derivative transactions is the
creditworthiness of the counterparty
because the transaction depends on
the willingness and ability of the
counterparty to fulfill its
contractual obligations. Derivatives
also involve additional expenses,
which could reduce any benefit or
increase any loss to a fund from
using the strategy.
--------------------------------------- ----------------------------------

Disclosure of portfolio holdings information
A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's portfolio securities is available in the Fund's SAI.

Who manages the Fund

Investment manager
The Fund is managed by Delaware Management Company (the "Manager"), a series of
Delaware Management Business Trust, which is an indirect subsidiary of Delaware
Management Holdings, Inc. The Manager makes investment decisions for the Fund,
manages the Fund's business affairs and provides daily administrative services.
For its services to the Fund, the Manager was paid an aggregate fee of 0.35% of
average daily net assets for the last fiscal year, after giving effect to
waivers by the Manager.

A discussion of the basis for the Board of Trustees' approval of the Fund's
investment advisory contract is available in the Fund's semiannual report to
shareholders for the period ended June 30, 2005.

Portfolio managers
Stephen R. Cianci and Paul Grillo have day-to-day responsibilities for making
investment decisions for the Fund.

Stephen R. Cianci, Senior Vice President/Senior Portfolio Manager, holds a BS
and an MBA in Finance from Widener University. Mr. Cianci became co-manager of
the Fund in January 1999. He joined the Manager's fixed-income department in
1992 as an investment grade quantitative research analyst. In addition to his
quantitative research responsibilities, Mr. Cianci also served as a
mortgage-backed and asset-backed securities analyst. Mr. Cianci is an Adjunct
Professor of Finance at Widener University and is a CFA charterholder.

Paul Grillo, Senior Vice President/Senior Portfolio Manager, holds a bachelor's
degree in Business Management from North Carolina State University and an MBA in
Finance from Pace University. Mr. Grillo became co-manager of the Fund in
January 1999. Prior to joining the Manager in 1993, he served as Mortgage
Strategist and Trader at the Dreyfus Corporation. He also served as Mortgage
Strategist and Portfolio Manager at Chemical Investment Group and as Financial
Analyst at Chemical Bank. Mr. Grillo is a CFA charterholder.

The SAI provides additional information about the portfolio managers'
compensation, other accounts managed by the portfolio managers and the portfolio
managers' ownership of Fund shares.

Who's who?
This diagram shows the various organizations involved with managing,
administering and servicing the Delaware Investments(R) Funds.

[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED WITH
MANAGING, ADMINISTERING AND SERVICING THE DELAWARE INVESTMENTS FUNDS]

Board of Trustees
Custodian
Investment Manager JPMorgan Chase Bank
Delaware Management Company 4 Chase Metrotech Center
2005 Market Street The Funds Brooklyn, NY 11245
Philadelphia, PA 19103-7094

Service agent
Distributor Delaware Service Company, Inc.
Delaware Distributors, L.P. 2005 Market Street
2005 Market Street Philadelphia, PA 19103-7094
Philadelphia, PA 19103-7094

Financial intermediary wholesaler
Portfolio managers Lincoln Financial Distributors,
(see page 14 for details) Inc.
2001 Market Street
Philadelphia, PA 19103-7055

Financial advisors

Shareholders

Board of Trustees A mutual fund is governed by a board of trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. Generally, at least 40% of the board of trustees must be independent of a
fund's investment manager and distributor. However, the Fund relies on certain
exemptive rules adopted by the SEC that require its Board of Trustees to be
comprised of a majority of such independent Trustees. These independent
Trustees, in particular, are advocates for shareholder interests.

Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.

Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.

Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.

Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker/dealers and are subject to NASD
rules governing mutual fund sales practices.

Financial intermediary wholesaler Pursuant to a contractual arrangement with
Delaware Distributors, L.P., Lincoln Financial Distributors, Inc. (LFD) is
primarily responsible for promoting the sale of fund shares through
broker/dealers, financial advisors and other financial intermediaries.

Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.

Financial advisors Financial advisors provide advice to their clients, analyzing
their financial objectives and recommending appropriate funds or other
investments. Financial advisors are associated with securities broker/dealers
who have entered into selling and/or service arrangements with the distributor.
Selling broker/dealers and financial advisors are compensated for their
services, generally through sales commissions, and through 12b-1 fees and/or
service fees deducted from the fund's assets.

Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights. Material changes in the terms of a fund's management
contract must be approved by a shareholder vote, and funds seeking to change
fundamental investment policies must also seek shareholder approval.

About your account

Investing in the Fund
You can choose from a number of share classes for the Fund. Because each share
class has a different combination of sales charges, fees and other features, you
should consult your financial advisor to determine which class best suits your
investment goals and time frame.

Choosing a share class

CLASS A
o Class A shares have an up-front sales charge of up to 2.75% that you pay
when you buy the shares.

o If you invest $100,000 or more, your front-end sales charge will be
reduced.

o You may qualify for other reductions in sales charges, and, under certain
circumstances, the sales charge may be waived; as described in "How to
reduce your sales charge," below.

o Class A shares are also subject to an annual 12b-1 fee no greater than
0.30% (currently limited to 0.15%) of average daily net assets, which is
lower than the 12b-1 fee for Class B, Class C and Class R shares. See
"Dealer compensation" below for further information.

o Class A shares generally are not subject to a contingent deferred sales
charge except in the limited circumstances described in the table below.

o Class A shares generally are not available for purchase by anyone qualified
to purchase Class R shares, except as described below.

Class A sales charges
The table below details your sales charges on purchases of Class A shares. The
offering price for Class A shares includes the front-end sales charge. The sales
charge as a percentage of the net amount invested is the maximum percentage of
the amount invested rounded to the nearest hundredth. The actual sales charge
that you pay as a percentage of the offering price and as a percentage of the
net amount invested will vary depending on the then-current net asset value, the
percentage rate of sales charge and rounding.

----------------------------- ----------------------------------- -------------------------------
Sales charge as % of net amount
Amount of purchase Sales charge as % of offering price invested
--------------------------------------------------------------------------------------------------
Less than $100,000 2.75% 3.23%
--------------------------------------------------------------------------------------------------
$100,000 but under $250,000 2.00% 2.44%
--------------------------------------------------------------------------------------------------
$250,000 but under $1 million 1.00% 1.34%-
--------------------------------------------------------------------------------------------------
$1 million or more None (Limited CDSC may apply)* None (Limited CDSC may apply)*
--------------------------------------------------------------------------------------------------

* There is no front-end sales charge when you purchase $1 million or more of
Class A shares. However, if the Fund's Distributor paid your financial advisor a
commission on your purchase of $1 million or more of Class A shares, you will
have to pay a limited contingent deferred sales charge (Limited CDSC) of 0.75%
if you redeem these shares within the first year, unless a specific waiver of
the charge applies. 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(R)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.
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. See "Dealer compensation" below for a
description of the dealer commission that is paid.

CLASS B
o Class B shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge if you redeem your shares within three years after
you buy them.

o If you redeem Class B shares during the first year after you buy them, the
shares will be subject to a contingent deferred sales charge of 2.00%. The
contingent deferred sales charge is 1.00% during the second and third years
and 0% thereafter.

o In determining whether the contingent deferred sales charge 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. For further information on how the
contingent deferred sales charge is determined, please see "Calculation of
Contingent Deferred Sales Charges-- Class B and Class C" below.

o Under certain circumstances the contingent deferred sales charge may be
waived; please see "Waivers of Contingent Deferred Sales Charges" below for
further information.

o For approximately five years after you buy your Class B shares, they are
subject to annual 12b-1 fees no greater than 1.00% of average daily net
assets (of which 0.25% are service fees) paid to the Distributor, dealers
or others for providing services and maintaining shareholder accounts.

o Because of the higher 12b-1 fees, Class B shares have higher expenses and
any dividends paid on these shares are generally lower than dividends on
Class A and Class R shares.

o Approximately five years after you buy them, Class B shares automatically
convert into Class A shares with a 12b-1 fee of no more than 0.30%.
Conversion may occur as late as three months after the fifth anniversary of
purchase, during which time Class B's higher 12b-1 fees apply.

o You may purchase only up to $100,000 of Class B shares at any one time. The
limitation on maximum purchases varies for retirement plans.

CLASS C
o Class C shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. However, you will pay a contingent
deferred sales charge of 1.00% if you redeem your shares within 12 months
after you buy them.

o In determining whether the contingent deferred sales charge applies to a
redemption of 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. For further information on how the contingent deferred
sales charge is determined, please see "Calculation of Contingent Deferred
Sales Charges - Class B and Class C" below.

o Under certain circumstances the contingent deferred sales charge may be
waived; please see "Waivers of Contingent Deferred Sales Charges" below for
further information.

o Class C shares are subject to an annual 12b-1 fee no greater than 1.00% of
average daily net assets, (of which 0.25% are service fees) paid to the
Distributor, dealers or others for providing services and maintaining
shareholder accounts.

o Because of the higher 12b-1 fees, Class C shares have higher expenses and
any dividends paid on these shares are generally lower than dividends on
Class A and Class R shares.

o Unlike Class B shares, Class C shares do not automatically convert into
another class.

o You may purchase any amount less than $1,000,000 of Class C shares at any
one time. The limitation on maximum purchases varies for retirement plans.

CLASS R
o Class R shares have no up-front sales charge, so the full amount of your
purchase is invested in the Fund. Class R shares are not subject to a
contingent deferred sales charge.

o Class R shares are subject to an annual 12b-1 fee no greater than 0.60%
(currently limited to 0.50%) of average daily net assets, which is lower
than the 12b-1 fee for Class B and Class C shares.

o Because of the higher 12b-1 fee, Class R shares have higher expenses and
any dividends paid on these shares are generally lower than dividends on
Class A shares.

o Unlike Class B shares, Class R shares do not automatically convert into
another class.

o Class R shares generally are available only to: (i) qualified and
non-qualified plan shareholders covering multiple employees (including
401(k), 401(a), 457 and non-custodial 403(b) plans, as well as other
non-qualified deferred compensation plans) with assets at the time shares
are considered for purchase of $10 million or less; and (ii) to IRA
rollovers from plans maintained on the Delaware Investments(R)retirement
recordkeeping system or BISYS's retirement recordkeeping system that are
offering Class R shares to participants.

Except as noted above, no other IRA accounts are eligible for Class R shares
(e.g., no SIMPLE IRA's, SEP/IRA's, SAR/SEP IRA's, Roth IRA's, etc.). For
purposes of determining plan asset levels, affiliated plans may be combined at
the request of the plan sponsor.

Any account holding Class A shares as of June 2, 2003 (the date Class R shares
were made available) continues to be eligible to purchase Class A shares after
that date. Any account holding Class R shares is not eligible to purchase Class
A shares.

Each share class may be eligible for purchase through programs sponsored by
financial intermediaries that require the purchase of a specific class of
shares.

Each share class of the Fund has adopted a separate 12b-1 plan that allows it to
pay distribution fees for the sale and distribution of its shares. Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.

Calculation of Contingent Deferred Sales Charges - Class B and Class C
Contingent deferred sales charges are charged as a percentage of the dollar
amount subject to the contingent deferred sales charge. The charge will be
assessed on an amount equal to the lesser of the net asset value at the time of
the shares being redeemed or the net asset value of those shares at the time of
redemption. No contingent deferred sales charge will be imposed on increases in
net asset value above the initial purchase price, nor will a contingent deferred
sales charge 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 a Fund, even if those shares are
later exchanged for shares of another Delaware Investments(R)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.

Dealer compensation

The financial advisor that sells you shares of the Fund may be eligible to
receive the following amounts as compensation for your investment in the Fund.
These amounts are paid by the Distributor to the securities dealer with whom
your financial advisor is associated.

------------------------- ---------- ---------- ---------- ----------
Class A(1) Class B(2) Class C(3) Class R(4)
------------------------- ---------- ---------- ---------- ----------
Commission (%) - 2.00% 1.00% -
------------------------- ---------- ---------- ---------- ----------
Investment less than 2.35% - - -
$100,000
------------------------- ---------- ---------- ---------- ----------
$100,000 but less than 1.75% - - -
$250,000
------------------------- ---------- ---------- ---------- ----------

------------------------- ---------- ---------- ---------- ----------
$250,000 but less than 0.75% - - -
$1,000,000
------------------------- ---------- ---------- ---------- ----------
$1,000,000 but less than 0.75% - - -
$5,000,000
------------------------- ---------- ---------- ---------- ----------
$5,000,000 but less than 0.50% - - -
$25,000,000
------------------------- ---------- ---------- ---------- ----------
$25,000,000 or more 0.25% - - -
------------------------- ---------- ---------- ---------- ----------
12b-1 Fee to Dealer 0.30% 0.15% 1.00% 0.60%
------------------------- ---------- ---------- ---------- ----------

(1) On sales of Class A shares, the Distributor re-allows to your securities
dealer a portion of the front-end sales charge depending upon the amount
you invested. The maximum 12b-1 fee applicable to Class A shares is 0.30%
of average daily net assets. However, the Distributor has contracted to
limit this amount to 0.15% through April 30, 2007. Your securities dealer
is eligible to receive the maximum annual 12b-1 fee applicable to Class A
shares of up to 0.30% of average daily net assets, although this rate is
currently 0.15%.

(2) On sales of Class B shares, the Distributor pays your securities dealer an
up-front commission of 2.00%. After approximately eight years, Class B
shares automatically convert into Class A shares and dealers may then be
eligible to receive the 0.30% 12b-1 fee applicable to Class A.

(3) On sales of Class C shares, the Distributor pays your securities dealer an
up-front commission of 1.00%. The up-front commission includes an advance
of the first year's 12b-1 service fee of up to 0.25%. During the first 12
months, the Distributor retains the full 1.00% 12b-1 fee to partially
offset the up-front commission and the prepaid 0.25% service fee advanced
at the time of purchase. Starting in the 13th month, your securities dealer
may be eligible to receive the full 1.00% 12b-1 fee applicable to Class C.

(4) On sales of Class R shares, the Distributor does not pay your securities
dealer an up-front commission. The maximum 12b-1 fee applicable to Class R
shares is 0.60% of average daily net assets. However, the Distributor has
contracted to limit this amount to 0.50% through April 30, 2007. Your
securities dealer may be eligible to receive a 12b-1 fee of up to 0.60%
from the date of purchase, although this rate is currently 0.50%.

How to reduce your sales charge
We offer a number of ways to reduce or eliminate the sales charge on shares.
Please refer to the SAI for detailed information and eligibility requirements.
You can also get additional information from your financial advisor. You or your
financial advisor must notify us at the time you purchase shares if you are
eligible for any of these programs. You may also need to provide information to
your financial advisor or the Fund in order to qualify for a reduction in sales
charges. Such information may include your Delaware Investments(R)Funds holdings
in any other account, including retirement accounts held indirectly or through
an intermediary and the names of qualifying family members and their holdings.
Class R shares have no sales charge. We reserve the right to determine whether
any purchase is entitled, by virtue of the foregoing, to the reduced sales
charge.

----------------- ------------------------ -----------------------------------------------
Program How it works Share class
A B C
----------------- --------------------- -------------- ------------------------------- ----------
Letter of Intent Through a Letter of X Although the Letter of Intent and Rights
Intent you agree to of Accumulation do not apply to the purchase
invest a certain of Class B and Class C shares, you can combine
amount in Delaware your purchase of Class A shares with your
Investments(R)Funds purchase of Class B and Class C shares to
(except money market fulfill your Letter of Intent or qualify
funds with no sales for Rights of Accumulation.
charge) over a
13-month period to
qualify for reduced
front-end sales
charges.
----------------- --------------------- --------------
Rights of You can combine your X
Accumulation holdings or
purchases of all
Delaware
Investments(R)Funds
(except money market
funds with no sales
charge) as well as
the holdings and
purchases of your
spouse and children
under 21 to qualify
for reduced
front-end sales
charges.
----------------- --------------------- -------------- ------------------------------- ----------
Reinvestment of Up to 12 months For Class A, For Class B, your account Not
Redeemed Shares after you redeem you will not will be credited with the available.
shares, you can have to pay contingent deferred sales
reinvest the an additional charge you previously paid
proceeds without front-end on the amount you are
paying a sales sales charge. reinvesting. Your schedule
charge as noted to for contingent deferred
the right. sales charges and conversion
to Class A will not start
over again; it will pick up
from the point at which you
redeemed your shares.
----------------- --------------------- -------------- ------------------------------- ----------
SIMPLE/IRA, These investment X There is no reduction in sales charges for
SEP/IRA, SAR/SEP, plans may qualify Class B or Class C shares for group purchases
Profit Sharing, for reduced sales by retirement plans.
Pension, 401(k), charges by combining
SIMPLE 401(k), the purchases of all
403(b)(7), and members of the
457 Retirement group. Members of
Plans these groups may
also qualify to
purchase shares
without a front-end
sales charge and may
qualify for a waiver
of any contingent
deferred sales
charges on 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
following circumstances, provided that you notify the Fund in advance that the
trade qualifies for this privilege.

o Shares purchased under the Delaware Investments(R)Dividend Reinvestment
Plan and, under certain circumstances, the Exchange Privilege and the
12-Month Reinvestment Privilege.

o Purchases by (i) current and former officers, Trustees/Directors and
employees of any Delaware Investments(R)Fund, the Manager or any of its
current affiliates and those that may in the future be created; (ii) legal
counsel to the Delaware Investments(R)Funds; and (iii) registered
representatives and employees of broker/dealers who have entered into
dealer's agreements with the Distributor. Family members (regardless of
age) of such persons at their direction, and any employee benefit plan
established by any of the foregoing entities, counsel or broker/dealers may
also purchase shares at net asset value.

o Shareholders who own Class A shares of Delaware Cash Reserve Fund as a
result of a liquidation of a Delaware Investments(R)Fund may exchange into
Class A shares of another Delaware Investments(R)Fund at net asset value.

o Purchases by bank employees who provide services in connection with
agreements between the bank and unaffiliated brokers or dealers concerning
sales of shares of Delaware Investments(R)Funds.

o Purchases by certain officers, trustees and key employees of institutional
clients of the Manager or any of the Manager's affiliates.

o Purchases for the benefit of the clients of brokers, dealers and registered
investment advisors if such brokers, dealers or investment advisors have
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.

o Purchases by financial institutions investing for the account of their
trust customers if they are not eligible to purchase shares of the Fund's
Institutional Class.

o Purchases by retirement plans that are maintained on retirement platforms
sponsored by financial intermediary firms, provided the financial
intermediary firm has entered into a Class A NAV Agreement with respect to
such retirement platforms.

o Purchases by certain legacy bank sponsored retirement plans that meet
requirements set forth in the SAI.

o Purchases by certain legacy retirement assets that meet requirements set
forth in the SAI.

o Investments made by plan level and/or participant retirement accounts that
are for the purpose of repaying a loan taken from such accounts.

o Loan repayments made to a Fund account in connection with loans originated
from accounts previously maintained by another investment firm.

Waivers of Contingent Deferred Sales Charges

--------------------------------------- ------------ -------------- -------------
Share Class

Category A* B C
--------------------------------------- ------------ -------------- -------------
Redemptions in accordance with a X X X
Systematic Withdrawal Plan, provided
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.
--------------------------------------- ------------ -------------- -------------
Redemptions that result from the X X X
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.
--------------------------------------- ------------ -------------- -------------
Distributions to participants or X Not Not
beneficiaries from a retirement plan available. available.
qualified under section 401(a) of the
Internal Revenue Code of 1986, as
amended (the "Code").
--------------------------------------- ------------ -------------- -------------
Redemptions pursuant to the direction X Not Not
of a participant or beneficiary of a available. available.
retirement plan qualified under
section 401(a) of the Code with
respect to that retirement plan.
--------------------------------------- ------------ -------------- -------------
Periodic distributions from an X X X
individual retirement account (i.e.,
IRA, ROTH IRA, EDUCATION OR COVERDELL
IRA, SIMPLE IRA, SAR/SEP or SEP/IRA)
or a qualified plan** (403(b)(7)
plan, 457 Deferred Compensation Plan,
Profit Sharing Plan, Money Purchase
Plan or 401(k) Defined Contribution
Plan) not subject to a penalty under
Section 72(t)(2)(A) of the Code or a
hardship or unforeseen emergency
provision in the qualified plan as
described in Tres. Reg.
ss.1.401(k)-1(d)(2) and Section
457(d)(3) of the Code.
--------------------------------------- ------------ -------------- -------------
Returns of Excess Contributions due X X X
to any regulatory limit from an
individual retirement account (i.e.,
IRA, ROTH IRA, EDUCATION OR COVERDELL
IRA, SIMPLE IRA, SAR/SEP or SEP/IRA)
or a qualified plan (403(b)(7) plan,
457 Deferred Compensation Plan,
Profit Sharing Plan, Money Purchase
Plan or 401(k) Defined Contribution
Plan).
--------------------------------------- ------------ -------------- -------------
Distributions by other employee X Not Not
benefit plans to pay benefits. available. available.
--------------------------------------- ------------ -------------- -------------
Systematic withdrawals from a X X X
retirement account or qualified plan
that are not subject to a penalty
pursuant to Section 72(t)(2)(A) of
the Code or a hardship or unforeseen
emergency provision in the qualified
plan** as described in Tres. Reg.
ss.1.401(k)-1(d)(2) and Section
457(d)(3) of the Code. The
systematic withdrawal may be pursuant
to Delaware Investments(R)Funds'
Systematic Withdrawal Plan or a
systematic withdrawal permitted by
the Code.
--------------------------------------- ------------ -------------- -------------

--------------------------------------- ------------ -------------- -------------
Share Class

Category A* B C
--------------------------------------- ------------ -------------- -------------
Distributions from an account of a X X X
redemption resulting from the death
or disability (as defined in Section
72(t)(2)(A) of the Code) of a
registered owner or a registered
joint owner occurring after the
purchase of the shares being
redeemed. In the case of accounts
established under the Uniform Gifts
to Minors Act or Uniform Transfers to
Minors Act or trust accounts, the
waiver applies upon the death of all
beneficial owners.
--------------------------------------- ------------ -------------- -------------
Redemptions by certain legacy X Not X
retirement assets that meet the available.
requirements set forth in the SAI.
--------------------------------------- ------------ -------------- -------------
Redemptions by the classes of X Not Not
shareholders who are permitted to available. available.
purchase shares at net asset value,
regardless of the size of the
purchase. See "Buying Class A shares
at Net Asset Value" above.
--------------------------------------- ------------ -------------- -------------

* The waiver for Class A shares relates to a waiver of the Limited CDSC.
Please note that you or your financial advisor will have to notify us at
the time of purchase that the trade qualifies for such waiver.

** Qualified plans that are fully redeemed at the direction of the plan's
fiduciary are subject to any applicable contingent deferred sales charge or
Limited CDSC, unless the redemption is due to the termination of the plan.

Certain sales charges may be based on historical cost. Therefore, you should
maintain any records that substantiate these costs because the Fund, its
transfer agent and financial intermediaries may not maintain this information.
Information about existing sales charges and sales charge reductions and waivers
is available free of charge in a clear and prominent format on the Delaware
Investments(R)Funds' Web site at www.delawareinvestments.com. Additional
information on sales charges can be found in the SAI.

About your account (continued)

How to buy shares

[GRAPHIC OMITTED: SYMBOL OF A PERSON]

Through your financial advisor
Your financial advisor can handle all the details of purchasing shares,
including opening an account. Your financial advisor may charge a separate fee
for this service.

[GRAPHIC OMITTED: SYMBOL OF AN ENVELOPE]

By mail
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 2005
Market Street, Philadelphia, PA 19103-7094. If you are making an initial
purchase by mail, you must include a completed investment application (or an
appropriate retirement plan application if you are opening a retirement account)
with your check.

[GRAPHIC OMITTED: SYMBOL OF A JAGGED LINE]

By wire
Ask your bank to wire the amount you want to invest to Bank of New York, ABA
#021000018, Bank Account number 8900403748. Include your account number and the
name of the fund and class of shares in which you want to invest. If you are
making an initial purchase by wire, you must first call us at 800 523-1918 so we
can assign you an account number.

[GRAPHIC OMITTED: EXCHANGE SYMBOL]

By exchange
You may exchange all or part of your investment in one or more Delaware
Investments(R)Funds for shares of other Delaware Investments(R)Funds. Please
keep in mind, however, that under most circumstances you are allowed to exchange
only between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800 523-1918.

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Through automated shareholder services
You may purchase or exchange shares through Delaphone, our automated telephone
service, or through our Web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800 523-1918.

Once you have completed an application, you can open an account with an initial
investment of $1,000 and make additional investments at any time for as little
as $100. The minimum initial purchase is $250, and you can make additional
investments of only $25, if you are buying shares in an IRA or Roth IRA, under
the Uniform Gifts to Minors Act or the Uniform Transfers to Minors Act, or
through an Automatic Investing Plan. The minimum purchase for a Coverdell
Education Savings Account (formerly an "Education IRA") is $500. The minimums
vary for retirement plans other than IRAs, Roth IRAs or Coverdell Education
Savings Accounts.

The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (NYSE), which is normally 4:00 p.m.
Eastern Time, you will pay that day's closing share price, which is based on the
Fund's net asset value (NAV). If your order is received after the close of
regular trading on the NYSE, you will pay the next business day's price. A
business day is any day that the NYSE is open for business (Business Day). We
reserve the right to reject any purchase order.

We price fixed-income securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the Board of Trustees.
We price any fixed-income securities that have a maturity of less than 60 days
at amortized cost, which approximates market value. For all other securities, we
use methods approved by the Board of Trustees that are designed to price
securities at their fair market value.

Fair valuation
When the Fund uses fair value pricing, it may take into account any factors it
deems appropriate. The Fund may determine fair value based upon developments
related to a specific security, current valuations of foreign stock indices (as
reflected in U.S. futures markets) and/or U.S. sector or broader stock market
indices. The price of securities used by the Fund to calculate its NAV may
differ from quoted or published prices for the same securities. Fair value
pricing may involve subjective judgments and it is possible that the fair value
determined for a security is materially different than the value that could be
realized upon the sale of that security.

The Fund anticipates using fair value pricing for securities primarily traded on
U.S. exchanges only under very limited circumstances, such as the early closing
of the exchange on which a security is traded or suspension of trading in the
security. The Fund may use fair value pricing more frequently for securities
primarily traded in non-U.S. markets because, among other things, most foreign
markets close well before the Fund values its securities at 4:00 p.m. Eastern
Time. The earlier close of these foreign markets gives rise to the possibility
that significant events, including broad market moves, may have occurred in the
interim. To account for this, the Fund may frequently value many foreign equity
securities using fair value prices based on third party vendor modeling tools to
the extent available.

Subject to the Board's oversight, the Fund's Board has delegated responsibility
for valuing the Fund's assets to a Pricing Committee of the Manager, which
operates under the policies and procedures approved by the Board as described
above.

Retirement plans
In addition to being an appropriate investment for your IRA, Roth IRA and
Coverdell Education Savings Account, shares in the Fund may be suitable for
group retirement plans. You may establish your IRA account even if you are
already a participant in an employer-sponsored retirement plan. For more
information on how shares in the Fund can play an important role in your
retirement planning or for details about group plans, please consult your
financial advisor, or call 800 523-1918.

Document delivery
If you have an account in the same Delaware Investments(R)Fund as another member
of your household, we are sending your household one copy of the Fund's
prospectus and annual and semiannual reports unless you opt otherwise. This will
help us reduce the printing and mailing expenses associated with the Fund. We
will continue to send one copy of each of these documents to your household
until you notify us that you wish individual materials. If you wish to receive
individual materials, please call our Shareholder Service Center at 800 523-1918
or your financial advisor. We will begin sending you individual copies of these

About your account (continued)

How to redeem shares

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Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares
(selling them back to the Fund). Your financial advisor may charge a separate
fee for this service.

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By mail
You may redeem your shares by mail by writing to: Delaware Investments, 2005
Market Street, Philadelphia, PA 19103-7094. All owners of the account must sign
the request, and for redemptions of more than $100,000, you must include a
signature guarantee for each owner. Signature guarantees are also required when
redemption proceeds are going to an address other than the address of record on
the account.

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By telephone
You may redeem up to $100,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.

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By wire
You may redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account, normally the next Business Day after we receive
your request. If you request a wire deposit, a bank wire fee may be deducted
from your proceeds. Bank information must be on file before you request a wire
redemption.

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Through automated shareholder services
You may redeem shares through Delaphone, our automated telephone service, or
through our Web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at 800
523-1918.

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Through checkwriting
You may redeem Class A shares by writing checks of $500 or more. Checks must be
signed by all owners of the account unless you indicate otherwise on your
Investment Application. The checkwriting feature is not available for retirement
plans. Also, because dividends Fare declared daily, you may not close your
account by writing a check. When you write checks you are subject to bank
regulations and may be subject to a charge if the check amount exceeds the value
of your account.

If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.

When you send us a properly completed request to redeem or exchange shares and
we or an authorized agent receive the request before the close of regular
trading on the NYSE (normally 4:00 p.m. Eastern Time), you will receive the NAV
as next determined after we receive your request. If we receive your request
after the close of regular trading on the NYSE, you will receive the NAV next
determined on the next Business Day. We will deduct any applicable contingent
deferred sales charges. You may also have to pay taxes on the proceeds from your
sale of shares. We will send you a check, normally the next Business Day, but no
later than seven days after we receive

your request to sell your shares. If you purchased your shares by check, we will
wait until your check has cleared, which can take up to 15 days, before we send
your redemption proceeds.

If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' NAV when
you purchased them or their NAV when you redeem them, whichever is less. This
arrangement assures that you will not pay a contingent deferred sales charge on
any increase in the value of your shares. You also will not pay the charge on
any shares acquired by reinvesting dividends or capital gains. If you exchange
shares of one fund for shares of another, you do not pay a contingent deferred
sales charge at the time of the exchange. If you later redeem those shares, the
purchase price for purposes of the contingent deferred sales charge formula will
be the price you paid for the original shares, not the exchange price. The
redemption price for purposes of this formula will be the NAV of the shares you
are actually redeeming.

Account minimums
If you redeem shares and your account balance falls below the Fund's required
account minimum of $1,000 ($250 for IRAs, Roth IRAs, Uniform Gifts to Minors Act
and Uniform Transfers to Minors Act accounts or accounts with automatic
investing plans, and $500 for Coverdell Education Savings Accounts) for three or
more consecutive months, you will have until the end of the current calendar
quarter to raise the balance to the minimum. If your account is not at the
minimum by the required time, you will be charged a $9 fee for that quarter and
each quarter after that until your account reaches the minimum balance. If your
account does not reach the minimum balance, the Fund may redeem your account
after 60 days' written notice to you.

Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.

Automatic Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.

Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as Social Security or
direct transfers from your bank account.

Electronic Delivery
With Delaware eDelivery, you can receive your fund documents electronically
instead of via U.S. mail. When you sign up for eDelivery, you can access your
account statements, shareholder reports and other fund materials online, in a
secure internet environment, at any time, from anywhere.

Online Account Access
Online Account Access is a password-protected area of the Delaware
Investments(R)Web site that gives you access to your account information and
allows you to perform transactions in a secure internet environment.

Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments(R)Funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.

Dividend Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another Delaware
Investments(R)Fund. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.

Exchanges
You may generally exchange all or part of your shares for shares of the same
class in another Delaware Investments(R)Fund without paying a front-end sales
charge or a contingent deferred sales charge at the time of the exchange.
However, if you exchange shares from a money market fund that does not have a
sales charge or from Class R shares of any fund, you will pay any applicable
sales charge on your new shares. When exchanging Class B and Class C shares of
one fund for the same class of shares in other funds, your new shares will be
subject to the same contingent deferred sales charge as the shares you
originally purchased. The holding period for the contingent deferred sales
charge will also remain the same, with the amount of time you held your original
shares being credited toward the holding period of your new shares. You do not
pay sales charges on shares that you acquired through the reinvestment of
dividends. You may have to pay taxes on your exchange. When you exchange shares,
you are purchasing shares in another fund so you should be sure to get a copy of
the fund's prospectus and read it carefully before buying shares through an
exchange. We may refuse the purchase side of any exchange request, 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.

MoneyLine(SM) On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial advisor may
transfer money between your Fund account and your predesignated bank account by
telephone request. This service is not available for retirement plans. MoneyLine
has a minimum transfer of $25 and a maximum transfer of $50,000, except for
purchases into IRAs. Delaware Investments does not charge a fee for this
service; however, your bank may assess one.

MoneyLine Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one. This service is not available for retirement plans.

Systematic Withdrawal Plan
Through our Systematic Withdrawal Plan, you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.

The applicable limited contingent deferred sales charge for Class A Shares and
the contingent deferred sales charge for Class B and C Shares redeemed via a
Systematic Withdrawal Plan will be waived if the annual amount withdrawn in each
year is less than 12% of the account balance on the date that the Plan is
established. If the annual amount withdrawn in any year exceeds 12% of the
account balance on the date that the Systematic Withdrawal Plan is established,
all redemptions under the Plan will be subjected to the applicable contingent
deferred sales charge, including an assessment for previously redeemed amounts
under the Plan.

Frequent trading of Fund shares
The Fund discourages purchases by market timers and purchase orders (including
the purchase side of exchange orders) by shareholders identified as market
timers may be rejected. The Fund's Board of Trustees has adopted policies and
procedures designed to detect, deter and prevent trading activity detrimental to
the Fund and its shareholders, such as market timing. The Fund will consider
anyone who follows a pattern of market timing in any Delaware Investments(R)Fund
or the Optimum Fund Trust to be a market timer and may consider anyone who has
followed a similar pattern of market timing at an unaffiliated fund family to be
a market timer.

Market timing of a fund occurs when investors make consecutive, rapid,
short-term "roundtrips" -- that is, purchases into a fund followed quickly by
redemptions out of that fund. A short-term roundtrip is any redemption of fund
shares within 20 business days of a purchase of that fund's shares. If you make
a second such short-term roundtrip in a fund within the same calendar quarter as
a previous short-term roundtrip in that fund, you may be considered a market
timer. In determining whether market timing has occurred, the Fund will consider
short-term roundtrips to include rapid purchases and sales of Fund shares
through the exchange privilege. The Fund reserves the right to consider other
trading patterns to be market timing.

Your ability to use the Fund's exchange privilege may be limited if you are
identified as a market timer. If you are identified as a market timer, we will
execute the redemption side of your exchange order but may refuse the purchase
side of your exchange order. The Fund reserves the right to restrict or reject,
without prior notice, any purchase order or exchange order for any reason,
including any purchase order or exchange order accepted by any shareholder's
financial intermediary or in any omnibus-type account. Transactions placed in
violation of the Fund's market timing policy are not necessarily deemed accepted
by the Fund and may be rejected by the Fund on the next business day following
receipt by the Fund.

Redemptions will continue to be permitted in accordance with the Fund's current
Prospectus. A redemption of shares under these circumstances could be costly to
a shareholder if, for example, the shares have declined in value, the
shareholder recently paid a front-end sales charge, the shares are subject to a
contingent deferred sales charge or the sale results in adverse tax
consequences. To avoid this risk, a shareholder should carefully monitor the
purchases, sales and exchanges of Fund shares and avoid frequent trading in Fund
shares.

The Fund reserves the right to modify this policy at any time without notice,
including modifications to the Fund's monitoring procedures and the procedures
to close accounts to new purchases. Although the implementation of this policy
involves judgments that are inherently subjective, we seek to apply this policy
uniformly in all cases and make judgments and applications that are consistent
with the interests of the Fund's shareholders. While we will take actions
designed to detect and prevent market timing, there can be no assurance that
such trading activity will be completely eliminated.

portfolio management. In particular, the Fund may have difficulty implementing
its long-term investment strategies if it is forced to maintain a higher level
of its assets in cash to accommodate significant short-term trading activity.
Excessive purchases and sales or exchanges of the Fund's shares may also force
the Fund to sell portfolio securities at inopportune times to raise cash to
accommodate short-term trading activity. This could adversely affect the Fund's
performance if, for example, the Fund incurs increased brokerage costs and
realization of taxable capital gains without attaining any investment advantage.

A fund that invests significantly in foreign securities may be particularly
susceptible to short-term trading strategies. This is because foreign securities
are typically traded on markets that close well before the time the fund
calculates its NAV (typically, 4:00 p.m. Eastern Time). Developments that occur
between the closing of the foreign market and the fund's NAV calculation may
affect the value of these foreign securities. The time zone differences among
international stock markets can allow a shareholder engaging in a short-term
trading strategy to exploit differences in fund share prices that are based on
closing prices of foreign securities established some time before a fund
calculates its own share price.

Any fund that invests in securities that are thinly traded, traded infrequently
or relatively illiquid has the risk that the securities prices used to calculate
the fund's NAV may not accurately reflect current market values. A shareholder
may seek to engage in short-term trading to take advantage of these pricing
differences. Funds that may be adversely affected by such arbitrage include, in
particular, funds that significantly invest in small-cap securities, technology
and other specific industry sector securities, and in certain fixed-income
securities, such as high-yield bonds, asset-backed securities or municipal
bonds.

Transaction monitoring procedures
The Fund, through its transfer agent, maintains surveillance procedures designed
to detect excessive or short-term trading in Fund shares. This monitoring
process involves several factors, which include scrutinizing transactions in
fund shares for violations of the Fund's market timing policy or other patterns
of short-term or excessive trading. For purposes of these transaction monitoring
procedures, the Fund may consider trading activity by multiple accounts under
common ownership, control or influence to be trading by a single entity. Trading
activity identified by these factors, or as a result of any other available
information, will be evaluated to determine whether such activity might
constitute market timing. These procedures may be modified from time to time to
improve the detection of excessive or short-term trading or to address other
concerns. Such changes may be necessary or appropriate, for example, to deal
with issues specific to certain retirement plans, plan exchange limits, U.S.
Department of Labor regulations, certain automated or pre-established exchange,
asset allocation or dollar cost averaging programs, or omnibus account
arrangements.

Omnibus account arrangements are common forms of holding shares of the Fund,
particularly among certain broker/dealers and other financial intermediaries,
including sponsors of retirement plans and variable insurance products. The Fund
will attempt to apply its monitoring procedures to these omnibus accounts and to
the individual participants in such accounts. In an effort to discourage market
timers in such accounts, the Fund may consider enforcement against market timers
at the participant level and at the omnibus level, up to and including
termination of the omnibus account's authorization to purchase Fund shares.

Limitations on ability to detect and curtail market timing
Shareholders seeking to engage in market timing may employ a variety of
strategies to avoid detection and, despite the efforts of the Fund and its
agents to detect market timing in Fund shares, there is no guarantee that the
Fund will be able to identify these shareholders or curtail their trading
practices. In particular, the Fund may not be able to detect market timing
attributable to a particular investor who effects purchase, redemption and/or
exchange activity in Fund shares through omnibus accounts. The difficulty of
detecting market timing may be further compounded if these entities utilize
multiple tiers or omnibus accounts.

Dividends, distributions and taxes
Dividends and Distributions. The Fund has elected to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code. As a
regulated investment company, the Fund generally pays no federal income tax on
the income and gains it distributes to you. The Fund expects to declare
dividends daily and distribute all of its net investment income, if any, to
shareholders as dividends monthly. The Fund will also distribute net capital
gains, if any, annually. The amount of any distribution will vary, and there is
no guarantee the Fund will pay either an income dividend or a capital gain
distribution. We automatically reinvest all dividends and any capital gains,
unless you direct us to do otherwise.

Annual Statements. Every January, you will receive a statement that shows the
tax status of distributions you received the previous year. Distributions
declared in December but paid in January are taxable as if they were paid in
December. Mutual funds may reclassify income after your tax reporting statement
is mailed to you. Prior to issuing your statement, the Fund makes every effort
to search for reclassified income to reduce the number of corrected forms mailed
to shareholders. However, when necessary, the Fund will send you a corrected
Form 1099-DIV to reflect reclassified information.

Avoid "Buying A Dividend." If you invest in the Fund shortly before the record
date of a taxable distribution, the distribution will lower the value of the
Fund's shares by the amount of the distribution and, in effect, you will receive
some of your investment back in the form of a taxable distribution.

Tax Considerations. In general, if you are a taxable investor, Fund
distributions are taxable to you at either ordinary income or capital gains tax
rates. This is true whether you reinvest your distributions in additional Fund
shares or receive them in cash.

For federal income tax purposes, Fund distributions of short-term capital gains
are taxable to you as ordinary income. Fund distributions of long-term capital
gains are taxable to you as long-term capital gains no matter how long you have
owned your shares. A portion of income dividends designated by the Fund may be
qualified dividend income eligible for taxation by individual shareholders at
long-term capital gain rates provided certain holding period requirements are
met.

A sale or redemption of Fund shares is a taxable event and, accordingly, a
capital gain or loss may be recognized. For tax purposes, an exchange of your
Fund shares for shares of a different Delaware Investments(R)Fund is the same as
a sale.

By law, if you do not provide the Fund with your proper taxpayer identification
number and certain required certifications, you may be subject to backup
withholding on any distributions of income, capital gains or proceeds from the
sale of your shares. The Fund also must withhold if the IRS instructs it to do
so. When withholding is required, the amount will be 28% of any distributions or
proceeds paid.

Fund distributions and gains from the sale or exchange of your Fund shares
generally are subject to state and local taxes. Non-U.S. investors may be
subject to U.S. withholding or estate tax, and are subject to special U.S. tax
certification requirements.

This discussion of "Dividends, distributions and taxes" is not intended or
written to be used as tax advice. Because everyone's tax situation is unique,
you should consult your tax professional about federal, state, local or foreign
tax consequences before making an investment in the Fund.

Certain management considerations

Investments by fund of funds and similar investment vehicles
The Fund may accept investments from funds of funds, including those offered by
the Delaware Investments(R)Funds, as well as similar investment vehicles, such
as 529 Plans. A "529 Plan" is a college savings program that operates under
Section 529 of the Internal Revenue Code. From time to time, the Fund may
experience large investments or redemptions due to allocations or rebalancings
by these funds of funds and/or similar investment vehicles. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management. For example, the Fund may be
required to sell securities or invest cash at times when it would not otherwise
do so. These transactions could also have tax consequences if sales of
securities result in gains, and could also increase transaction costs or
portfolio turnover. The Manager will monitor transactions by the funds of funds
and will attempt to minimize any adverse effects on both the Fund and the funds
of funds as a result of these transactions.

approval but without shareholder approval (the "Manager of Managers Structure").
While the Manager does not currently expect to use the Manager of Managers
Structure with respect to the Fund, the Manager may, in the future, recommend to
the Fund's Board the establishment of the Manager of Managers Structure by
recommending the hiring of one or more sub-advisors to manage all or a portion
of the Fund's portfolio if it believes that doing so would be likely to enhance
the Fund's performance by introducing a different investment style or focus.

The ability to implement the Manager of Managers Structure with respect to the
Fund is contingent upon the receipt of an exemptive order from the U.S.
Securities and Exchange Commission (the "SEC") or the adoption of a rule by the
SEC authorizing the implementation of the Manager of Managers Structure. The use
of the Manager of Managers Structure with respect to the Fund may be subject to
certain conditions set forth in the SEC exemptive order or rule. There can be no
assurance that the SEC will grant the Fund's application for an exemptive order
or adopt such a rule.

The Manager of Managers Structure would enable the Fund to operate with greater
efficiency and without incurring the expense and delays associated with
obtaining shareholder approval of sub-advisory agreements. The Manager of
Managers Structure would not permit investment management fees paid by the Fund
to be increased without shareholder approval or change the Manager's
responsibilities to the Fund, including the Manager's responsibility for all
advisory services furnished by a sub-advisor.

Financial highlights

The financial highlights tables are intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800 523-1918.

Delaware Limited-Term Government Fund Class A
Year Ended 12/31
2005 2004 2003 2002 2001
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430

Income (loss) from investment operations:
Net investment income 0.278 0.244 0.222 0.349 0.423
Net realized and unrealized gain (loss) on investments (0.132) (0.048) (0.039) 0.255 0.238
-------- ------- ------- ------- -------
Total from investment operations 0.146 0.196 0.183 0.604 0.661
-------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.356) (0.336) (0.315) (0.434) (0.491)
Return of capital ----- ----- 0.018) ----- -----
-------- ------- ------- ------- -------
Total dividends and distributions (0.356) 0.336) (0.333) (0.434) (0.491)
-------- ------- ------- ------- -------

Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
======== ======= ======= ======= =======

Total return(1) 1.76% 2.31% 2.12% 7.08% 8.16%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $189,845 $204,053 $249,845 $250,729 $208,152
Ratio of expenses to average net assets 0.82% 0.75% 0.75% 0.75% 0.89%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 1.12% 1.13% 1.14% 1.05% 1.08%
Ratio of net investment income to average net assets 3.32% 2.85% 2.57% 3.99% 4.92%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.02% 2.47% 2.18% 3.69% 4.73%
Portfolio turnover 259% 313% 483% 313% 386%

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects a waiver and payment of fees by
the manager and distributor, as applicable. Performance would have been
lower had the expense limitation not been in effect.

Delaware Limited-Term Government Fund Class B
Year Ended 12/31
2005 2004 2003 2002 2001
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430

Income (loss) from investment operations:
Net investment income 0.207 0.170 0.152 0.274 0.348
Net realized and unrealized gain (loss) on investments (0.132) 0.047) (0.044) 0.255 0.238
------- ------- ------- ------- -------
Total from investment operations 0.075 0.123 0.108 0.529 0.586
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.285) (0.263) (0.244) (0.359) (0.416)
Return of capital ----- ----- (0.014) ---- ----
------- ------- ------- ------- -------
Total dividends and distributions (0.285) (0.263) (0.258) (0.359) (0.416)
------- ------- ------- ------- -------

Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
======= ======= ======= ======= =======
Total return(1) 0.90% 1.44% 1.25% 6.17% 7.22%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $19,857 $27,559 $37,774 $50,326 $21,743
Ratio of expenses to average net assets 1.67% 1.60% 1.60% 1.60% 1.74%
Ratio of expenses to average net assets prior to expense
limitations and expenses paid indirectly 1.82% 1.83% 1.86% 1.90% 1.93%
Ratio of net investment income to average net assets 2.47% 2.00% 1.72% 3.14% 4.07%
Ratio of net investment income to average net assets prior to
expense limitations and expenses paid indirectly 2.32% 1.77% 1.46% 2.84% .88%
Portfolio turnover 259% 313% 483% 313% 386%

Delaware Limited-Term Government Fund Class C
Year Ended 12/31
2005 2004 2003 2002 2001
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430

Income (loss) from investment operations:
Net investment income 0.207 0.170 0.152 0.274 0.347
Net realized and unrealized gain (loss) on investments (0.132) (0.047) 0.044) 0.255 0.238
------- ------- ------- ------- -------
Total from investment operations 0.075 0.123 0.108 0.529 0.585
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.285) (0.263) (0.244) (0.359) (0.415)
Return of capital ----- ----- (0.014) ---- ----
------- ------- ------- ------- -------
Total dividends and distributions (0.285) (0.263) (0.258) (0.359) (0.415)
------- ------- ------- ------- -------

Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
======= ======= ======= ====== ======
Total return(1) 0.90% 1.44% 1.25% 6.16% 7.20%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $32,235 $49,709 $72,045 $71,189 $21,386
Ratio of expenses to average net assets 1.67% 1.60% 1.60% 1.60% 1.74%
Ratio of expenses to average net assets prior to expense
limitations and expenses paid indirectly 1.82% 1.83% 1.86% 1.90% 1.93%
Ratio of net investment income to average net assets 2.47% 2.00% 1.72% 3.14% 4.07%
Ratio of net investment income to average net assets prior to
expense limitations and expenses paid indirectly 2.32% 1.77% 1.46% 2.84% 3.88%
Portfolio turnover 259% 313% 483% 313% 386%

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value and does not reflect the impact of a sales
charge. Total investment return reflects a waiver and payment of fees by
the manager. Performance would have been lower had the expense limitation
not been in effect.

Delaware Limited-Term Government Fund
Class R
Year Ended 12/31
2005 2004 Period
6/2/03(1)
through
12/31/03
Net asset value, beginning of period $8.490 $8.630 $8.800

Income (loss) from investment operations:
Net investment income 0.244 0.205 0.074
Net realized and unrealized gain (loss) on investments (0.142) (0.048) (0.063)
------- ------- -------
Total from investment operations 0.102 0.157 0.011
------- ------- -------

Less dividends and distributions from:
Net investment income 0.322) (0.297) (0.165)
Return of capital ----- ----- 0.016)
------- ------- -------
Total dividends and distributions (0.322) (0.297) (0.181)
------- ------- -------

Net asset value, end of period $8.270 $8.490 $8.630
======= ======= =======
Total return(2) 1.34% 1.73% 0.14%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,860 $1,905 $1,499
Ratio of expenses to average net assets 1.23% 1.20% 1.20%
Ratio of expenses to average net assets prior to expense
limitations and expenses paid indirectly 1.42% 1.43% 1.38%
Ratio of net investment income to average net assets 2.91% 2.40% 1.86%
Ratio of net investment income to average net assets prior to
expense limitations and expenses paid indirectly 2.72% 2.17% 1.68%
Portfolio turnover 259% 313% 483%

(1) Date of commencement of operations. Ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value. Total investment return reflects waivers
and payment of fees by the manager and the distributor, as applicable.
Performance would have been lower had the expense limitation not been in
effect.

How to read the financial highlights

Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a
fund's investments; it is after expenses have been deducted.

Net realized and unrealized gain (loss) on investments
A realized gain occurs when we sell an investment at a profit, while a realized
loss occurs when we sell an investment at a loss. When an investment increases
or decreases in value but we do not sell it, we record an unrealized gain or
loss. The amount of realized gain per share, if any, that we pay to shareholders
would be listed under "Less dividends and distributions from: Net realized gain
on investments."

Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.

Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers, exclude front-end and contingent
deferred sales charges, and assume the shareholder has reinvested all dividends
and realized gains.

Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that clasFs of the fund.

Ratio of expenses to average net assets
The expense ratio is the percentage of net assets that a fund pays annually for
operating expenses and management fees. These expenses include accounting and
administration expenses, services for shareholders, and similar expenses.

Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income (loss) by average net
assets.

Portfolio turnover
This figure tells you the amount of trading activity in a fund's portfolio. A
turnover rate of 100% would occur if, for example, a fund bought and sold all of
the securities in its portfolio once in the course of a year or frequently
traded a single security. A high rate of portfolio turnover in any year may
increase brokerage commissions paid and could generate taxes for shareholders on
realized investment gains.

Glossary

How to use this glossary
This glossary includes definitions of investment terms, many of which are used
throughout the Prospectus. If you would like to know the meaning of an
investment term that is not explained in the text please check the glossary.

Amortized cost
Amortized cost is a method used to value a fixed-income security that starts
with the face value of the security and then adds or subtracts from that value
depending on whether the purchase price was greater or less than the value of
the security at maturity. The amount greater or less than the par value is
divided equally over the time remaining until maturity.

Appreciation
An increase in the value of an investment.

Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.

Bond
A debt security, like an IOU, issued by a company, municipality or government
agency. In return for lending money to the issuer, a bond buyer generally
receives fixed periodic interest payments and repayment of the loan amount on a
specified maturity date. A bond's price changes prior to maturity and typically
is inversely related to current interest rates. Generally, when interest rates
rise, bond prices fall, and when interest rates fall, bond prices rise. See
Fixed-income securities.

Bond ratings
Independent evaluations of creditworthiness, ranging from Aaa/AAA (highest
quality) to D (lowest quality). Bonds rated Baa/BBB or better are considered
investment grade. Bonds rated Ba/BB or lower are commonly known as junk bonds.
See also Nationally recognized statistical ratings organization.

Capital
The amount of money you invest.

Capital gains distributions
Payments to mutual fund shareholders of profits (realized gains) from the sale
of a fund's portfolio securities. Usually paid once a year; may be either
short-term gains or long-term gains.

Commission
The fee an investor pays to a financial advisor for advice and help in buying or
selling mutual funds, stocks, bonds or other securiFties.

Compounding
Earnings on an investment's previous earnings.

Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.

Contingent deferred sales charge (CDSC)
Fee charged by some mutual funds when shares are redeemed (sold back to the
fund) within a set number of years. An alternative method for investors to
compensate a financial advisor for advice and service, rather than an up-front
commission.

Corporate bond
A debt security issued by a corporation. See Bond.

Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.

Depreciation
A decline in an investment's value.

Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.

Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.

Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.

Expense ratio
A mutual fund's total operating expenses, expressed as a percentage of its total
net assets. Operating expenses are the costs of running a mutual fund, including
management fees, offices, staff, equipment and expenses related to maintaining
the fund's portfolio of securities and distributing its shares. They are paid
from the fund's assets before any earnings are distributed to shareholders.

Financial advisor
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.

Fixed-income securities
With fixed-income securities, the money you originally invest is paid back at a
pre-specified maturity date. These securities, which include government,
corporate or municipal bonds, as well as money market securities, typically pay
a fixed rate of return (often referred to as interest). See Bond.

Government securities
Securities issued by the U.S. government or its agencies. They include
Treasuries as well as agency-backed securities such as Fannie Maes.

Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).

Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.

Management fee
The amount paid by a mutual fund to the investment manager for management
services, expressed as an annual percentage of fthe fund's average daily net
assets.

Market capitalization
The value of a corporation determined by multiplying the current market price of
a share of common stock by the number of shares held by shareholders. A
corporation with one million shares outstanding and the market price per share
of $10 has a market capitalization of $10 million.

Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.

Merrill Lynch 1-3 Year U.S. Treasury Index
An unmanaged index of U.S. Treasury notes and bonds with maturities greater than
or equal to one year and less than three years. It does not include inflation
linked U.S. government bonds.

NASD
The National Association of Securities Dealers, Inc., which is responsible for
regulating the securities industry.

Nationally recognized statistical ratings organization (NRSRO)
A company that assesses the credit quality of bonds, commercial paper, preferred
and common stocks and municipal short-term issues, rating the probability that
the issuer of the debt will meet the scheduled interest payments and repay the
principal. Ratings are published by such companies as Moody's Investors Service,
Inc. (Moody's), Standard & Poor's, a division of the McGraw-Hill Companies, Inc.
(S&P) and Fitch, Inc. (Fitch).

Net assets
The total value of all the assets in a fund's portfolio, less any liabilities.

Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.

Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stock also often pays dividends at a fixed rate
and is sometimes convertible into common stock.

Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.

Prospectus
The officfial offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.

Redeem
To cash in your shares by selling them back to the mutual fund.

Risk
Generally defined as variability of value; also credit risk, inflation risk,
currency and interest rate risk. Different investments involve different types
and degrees of risk.

Sales charge
A commission thAt is charged on the purchase or redemption of fund shares sold
through financial advisors. May vary with the amount invested. Typically used to
compensate financial advisors for advice and service provided.

SEC (Securities and Exchange Commission)
Federal agency established by Congress to administer the laws governing the
securities industry, including mutual funds.

Share classes
Different classifications of shares. Mutual fund share classes offer a variety
of sales charge choices.

Signature guarantee
Certification by a bank, brokerage firm or other financial institution that a
customer's signature is valid. Signature guarantees can be provided by members
of the STAMP program.

Standard deviation
A measure of an investment's volatility; for mutual funds, measures how much a
fund's total return has typically varied from its historical average.

Statement of Additional Information (SAI)
A document that provides more information about a fund's organization,
management, investments, policies and risks.

Stock
An investment that represents a share of ownership (equity) in a corporation.
Stocks are often referred to as common stocks or equities.

Total return
An investment performance measurement, expressed as a percentage, based on the
combined earnings from dividends, capital gains and change in price over a given
period.

Uniform Gifts to Minors Act and Uniform Transfers to Minors Act
Federal and state laws that provide special tax advantages and a simple way to
transfer property to a minor.

VolatilitY
The tendency of an investment to go up or down in value by different magnitudes.
Investments that generally go up or down in value in relatively small amounts
are considered "low volatility" investments, whereas those investments that
generally go up or down in value in relatively large amounts are considered
"high volatility" investments.

Additional information about the Fund's investments is available in the Fund's
annual and semiannual reports to shareholders. In the Fund's shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Fund's performance during the period
covered by the report. You can find more information about the Fund in the
current Statement of Additional Information (SAI), which we have filed
electronically with the Securities and Exchange Commission (SEC) and which is
legally a part of this Prospectus (it is incorporated by reference). If you want
a free copy of the SAI, the annual or semiannual report, or if you have any
questions about investing in the Fund, you can write to us at 2005 Market
Street, Philadelphia, PA 19103-7094, or call toll-free 800 523-1918. The Fund's
SAI and annual and semiannual reports to shareholders are also available, free
of charge, through the Fund's internet Web site (www.delawareinvestments.com).
You may also obtain additional information about the Fund from your financial
advisor.

You can find reports and other information about the Fund on the EDGAR database
on the SEC Web site (www.sec.gov). You can also get copies of this information,
after payment of a duplicating fee, by e-mailing the SEC at publicinfo@sec.gov
or by writing to the Public Reference Section of the SEC, Washington, D.C.
20549-0102. Information about the Fund, including its SAI, can be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You can get
information on the Public Reference Room by calling the SEC at 202 551-8090.

Web site
www.delawareinvestments.com

E-mail
service@delinvest.com

Shareholder Service Center
800 523-1918

Call the Shareholder Service Center Monday to Friday, 8 a.m. to 7 p.m. Eastern Time:

o For fund information, literature, price, yield and performance figures.

o For information on existing regular investment accounts and retirement plan
accounts including wire investments, wire redemptions, telephone
redemptions and telephone exchanges.

Delaphone Service
800 362-FUND (800 362-3863)

o For convenient access to account information or current performance
information on all Delaware Investments(R)Funds seven days a week, 24 hours
a day, use this Touch-Tone(R)service.

--------------------------------------- ----------- --------
DELAWARE FUND SYMBOLS
--------------------------------------- ----------- --------
Delaware Limited-Term Government Fund CUSIP NASDAQ
--------------------------------------- ----------- --------
Class A 245912308 DTRIX
--------------------------------------- ----------- --------
Class B 245912605 DTIBX
--------------------------------------- ----------- --------
Class C 245912704 DTICX
--------------------------------------- ----------- --------
Class R 245912803 DLTRX
--------------------------------------- ----------- --------

Investment Company Act file number: 811-03363

R-022 [--] IVES 4/05

[DELAWARE INVESTMENTS LOGO]

Delaware Limited-Term Government Fund

Institutional Class

Prospectus
April 30, 2006

Fixed Income

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this Prospectus, and any
representation to the contrary is a criminal offense.

Table of contents

Fund profile page 2
Delaware Limited-Term Government Fund 2

How we manage the Fund page 5
Our investment strategies 5
The securities we typically invest in 6
The risks of investing in the Fund 9
Disclosure of portfolio holdings information 10

Who manages the Fund page 11
Investment manager 11
Portfolio managers 11
Who's who? 12

About your account page 13
Investing in the Fund 13
How to buy shares 13
Fair valuation 14
Document delivery 15
How to redeem shares 15
Account minimum 16
Exchanges 16
Frequent trading of Fund shares 16
Dividends, distributions and taxes 18
Certain management considerations 19

Financial highlights page 20
Glossary page 22
Additional information page 25

Profile: Delaware Limited-Term Government Fund

For a more complete discussion of risk, please see "The risks of investing in
the Fund" on page 9.

An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.

Who should not invest in the Fund

o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate,
especially over the short term.
o Investors who want an investment with a fixed share price, such as a money
market fund.

How has Delaware Limited-Term Government Fund performed?

This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how annual returns for the Fund's Institutional Class shares have
varied over the past ten calendar years, as well as the average annual returns
of the Institutional Class shares for one-year, five-year and ten-year periods.
The Fund's past performance (before and after taxes) is not necessarily an
indication of how it will perform in the future. The returns reflect expense
caps in effect during these periods. The returns would be lower without the
expense caps. Please see the footnotes on page 4 for additional information
about the expense caps.

[GRAPHIC OMITTED: BAR CHART SHOWING YEAR BY YEAR TOTAL RETURN (INSTITUTIONAL
CLASS)]

Year-by-year total return (Institutional Class)

------ ------ ------ ------ ------ ------ ------ ------ ------ ------
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
3.84% 5.39% 7.62% 1.22% 8.75% 8.34% 7.27% 2.27% 2.46% 1.91%
------ ------ ------ ------ ------ ------ ------ ------ ------ ------

During the periods illustrated in this bar chart, the Institutional Class'
highest quarterly return was 4.53% for the quarter ended December 31, 1998 and
its lowest quarterly return was -1.29% for the quarter ended June 30, 2004.

Average annual returns for periods ending 12/31/05

------------------------------------------------------------- -------- -------- ---------
1 year 5 years 10 years
------------------------------------------------------------- -------- -------- ---------
Return before taxes 1.91% 4.41% 4.87%
------------------------------------------------------------- -------- -------- ---------
Return after taxes on distributions 0.35% 2.64% 2.63%
------------------------------------------------------------- -------- -------- ---------
Return after taxes on distributions and sale of Fund shares 1.23% 2.70% 2.74%
------------------------------------------------------------- -------- -------- ---------
Merrill Lynch 1-3 Year U.S. Treasury Index 1.67% 3.67% 4.79%
(reflects no deduction for fees, expenses or taxes)
------------------------------------------------------------- -------- -------- ---------

Actual after-tax returns depend on the investor's individual tax situation and
may differ from the returns shown. After-tax returns are not relevant for shares
held in tax-deferred investment vehicles such as employer-sponsored 401(k) plans
and individual retirement accounts. The after-tax returns shown are calculated
using the highest individual federal marginal income tax rates in effect during
the Fund's lifetime and do not reflect the impact of state and local taxes. The
after-tax rate used is based on the current tax characterization of the elements
of the Fund's returns (e.g., qualified vs. non-qualified dividends) and may be
different than the final tax characterization of such elements. Past
performance, both before and after taxes, is not a guarantee of future results.

What are the Fund's fees and expenses?

--------------------------------------- ---------------------------------- -----
You do not pay sales charges Maximum sales charge (load) none
directly from your investments when imposed on purchases as a
you buy or sell shares of the percentage of offering price
Institutional Class. ---------------------------------- -----
Maximum contingent deferred none
sales charge (load) as a
percentage of original purchase
price or redemption price,
whichever is lower
---------------------------------- -----
Maximum sales charge (load) none
imposed on reinvested dividends
---------------------------------- -----
Redemption fees none
---------------------------------- -----
Exchange fees(1) none
--------------------------------------- ---------------------------------- -----

--------------------------------------- ---------------------------------- -----
Annual fund operating expenses are Management fees 0.50%
deducted from the Fund's assets. ---------------------------------- -----
Distribution and service (12b-1) none
fees
---------------------------------- -----
Other expenses(2) 0.30%
---------------------------------- -----
Total operating expenses 0.80%
---------------------------------- -----
Fee waivers and payments(3) (0.15%)
---------------------------------- -----
Net expenses 0.65%
---------------------------------- -----

--------------------------------------- ---------------------------------- -----
This example is intended to help you 1 year $66
compare the cost of investing in the ---------------------------------- -----
Fund to the cost of investing in 3 years $240
other mutual funds with similar ---------------------------------- -----
investment objectives. We show the 5 years $429
cumulative amount of Fund expenses on ---------------------------------- -----
a hypothetical investment of $10,000 10 years $976
with an annual 5% return over the ---------------------------------- -----
time shown.4 This example reflects
the net operating expenses with
expense waivers for the one-year
contractual period and the total
operating expenses without expense
waivers for years two through 10.
This is an example only, and does not
represent future expenses, which may
be greater or less than those shown
here.
---------------------------------------

(1) Exchanges are subject to the requirements of each Delaware
Investments(R)Fund. A front-end sales charge may apply if you exchange your
shares into a fund that has a front-end sales charge.
(2) "Other expenses" have been restated to reflect an expected decrease during
the current fiscal year because the Fund is not expected to convene a
shareholders' meeting and issue a proxy statement during the current fiscal
year.
(3) The investment manager has contracted to waive fees and pay expenses
through April 30, 2007 in order to prevent total operating expenses
(excluding any taxes, interest, brokerage fees, extraordinary expenses and
certain insurance costs) from exceeding 0.65% of average daily net assets.
(4) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here.

How we manage the Fund

We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.

We invest primarily in short- and intermediate-term fixed income securities
including:

The securities we typically invest in
Fixed-income securities offer the potential for greater income payments than
stocks, and also may provide capital appreciation.

--------------------------------------- ----------------------------------
Securities How we use them
--------------------------------------- ----------------------------------
Direct U.S. Treasury obligations We may invest without limit in
include Treasury bills, notes and U.S. Treasury securities,
bonds of varying maturities. U.S. although they are typically
Treasury securities are backed by the not our largest holding
"full faith and credit" of the United because they generally do not
States. offer as high a level of
current income as other
fixed-income securities.
--------------------------------------- ----------------------------------
Mortgage-backed securities: There is no limit on
Fixed-income securities that government-related
represent pools of mortgages, with mortgage-backed securities.
investors receiving principal and
interest payments as the underlying We may invest up to 35% of the
mortgage loans are paid back. Many Fund's net assets in
are issued and guaranteed against mortgage-backed securities
default by the U.S. government or its issued by private entities if at
agencies or instrumentalities, such the time they are issued they
as the Federal Home Loan Mortgage are 100% collateralized by
Corporation, Fannie Mae and the securities or certificates
Government National Mortgage issued or guaranteed by the U.S.
Association. Others are issued by government, its agencies or
private financial institutions, with instrumentalities. These
some fully collateralized by securities must be rated in one
certificates issued or guaranteed by of the two highest categories by
the government or its agencies or a nationally recognized
instrumentalities. statistical rating organization
(NRSRO) at the time of purchase.

--------------------------------------- ----------------------------------
Securities How we use them

--------------------------------------- ----------------------------------
Options and futures: Options At times when we anticipate
represent a right to buy or sell a adverse conditions, we may want
security or a group of securities at to protect gains on securities
an agreed upon price at a future without actually selling them.
date. The purchaser of an option may We might use options or futures
or may not choose to go through with to neutralize the effect of any
the transaction. The seller of an price declines, without selling
option, however, must go through with a bond or bonds, or as a hedge
the transaction if its purchaser against changes in interest
exercises the option. rates. We may also sell an
option contract (often referred
Futures contracts are agreements for to as "writing" an option) to
the purchase or sale of a security or earn additional income for the
a group of securities at a specified Fund.
price, on a specified date. Unlike
purchasing an option, a futures Use of these strategies can
contract must be executed unless it increase the operating costs of
is sold before the settlement date. the Fund and can lead to loss of
principal.
Certain options and futures may be
considered to be derivative
securities.
--------------------------------------- ----------------------------------
Restricted securities: Privately The Fund may invest in privately
placed securities whose resale is placed securities, including
restricted under U.S. securities laws. those that are eligible for
resale only among certain
institutional buyers without
registration, commonly known as
"Rule 144A Securities."
Restricted securities that are
determined to be illiquid may
not exceed the Fund's 10% limit
on illiquid securities, which is
described below.
--------------------------------------- ----------------------------------
Illiquid securities: Securities that The Fund may invest up to 10% of
do not have a ready market and cannot its net assets in illiquid
be easily sold within seven days at securities.
approximately the price at which a
fund has valued them.
--------------------------------------- ----------------------------------
Interest rate swap, index swap and We may use interest rate swaps
credit default swap agreements: In to adjust the Fund's sensitivity
an interest rate swap, a fund to interest rates or to hedge
receives payments from another party against changes in interest
based on a variable or floating rates. Index swaps may be used
interest rate, in return for making to gain exposure to markets that
payments based on a fixed interest the Fund invests in, such as the
rate. An interest rate swap can also corporate bond market. We may
work in reverse with a fund receiving also use index swaps as a
payments based on a fixed interest substitute for futures or
rate and making payments based on a options contracts if such
variable or floating interest rate. contracts are not directly
In an index swap, a fund receives available to the Fund on
gains or incurs losses based on the favorable terms. We may enter
total return of a specified index, in into credit default swaps in
exchange for making interest payments order to hedge against a credit
to another party. An index swap can event, to enhance total return
also work in reverse with a fund or to gain exposure to certain
receiving interest payments from securities or markets.
another party in exchange for
movements in the total return of a
specified index. In a credit default
swap, a fund may transfer the
financial risk of a credit event
occurring (a bond default,
bankruptcy, restructuring, etc.) on a
particular security or basket of
securities to another party by paying
that party a periodic premium;
likewise, a fund may assume the
financial risk of a credit event
occurring on a particular security or
basket of securities in exchange for
receiving premium payments from
another party. Interest rate swaps,
index swaps and credit default swaps
may be considered to be illiquid.
--------------------------------------- ----------------------------------

--------------------------------------- ----------------------------------
Risks How we strive to manage them
--------------------------------------- ----------------------------------
Interest rate risk is the risk that Interest rate risk is the most
securities will decrease in value if significant risk for this Fund.
interest rates rise. The risk is In striving to manage this risk,
greater for bonds with longer we monitor economic conditions
maturities than for those with and the interest rate
shorter maturities. environment. We keep the
average maturity of the
Swaps may be particularly sensitive portfolio as short as is
to interest rate changes. Depending prudent, in keeping with the
on the actual movements of interest Fund's objective to provide high
rates and how well the portfolio current income.
manager anticipates them, a fund
could experience a higher or lower We will not invest in swaps with
return than anticipated. maturities of more than two
years. Each business day we
will calculate the amount the
Fund must pay for swaps it holds
and will segregate enough cash
or other liquid securities to
cover that amount.
--------------------------------------- ----------------------------------
Market risk is the risk that all or a We maintain a long-term
majority of the securities in a investment approach and focus on
certain market - like the stock or high-quality individual bonds
bond market - will decline in value that we believe can provide a
because of factors such as economic steady stream of income
conditions, future expectations or regardless of interim
investor confidence. fluctuations in the bond
market. We generally do not buy
Index swaps are subject to the same and sell securities for
market risks as the investment market short-term purposes.
or sector that the index represents.
Depending on the actual movements of In evaluating the use of an
the index and how well the portfolio index swap, we carefully
manager forecasts those movements, a consider how market changes
fund could experience a higher or could affect the swap and how
lower return than anticipated. that compares investing directly
in the market the swap is
intended to represent.
--------------------------------------- ----------------------------------
Industry and security risk: Industry For non-government securities,
risk is the risk that the value of we limit the amount of the
securities in a particular industry Fund's assets invested in any
will decline because of changing one industry and in any
expectations for the performance of individual security or issuer.
that industry. Securities risk is the We also follow a rigorous
risk that the value of an individual selection process when choosing
stock or bond will decline because of securities for the portfolio.
changing expectations for the
performance of the individual company
issuing the stock or bond.
--------------------------------------- ----------------------------------
Credit risk is the possibility that a By focusing primarily on U.S.
bond's issuer (or an entity that Treasury securities and other
insures the bond) will be unable to securities that are backed by
make timely payments of interest and the U.S. government, we minimize
principal. the possibility that any of the
securities in our portfolio will
not pay interest or principal.
U.S. government securities are
generally considered to be of
the highest quality.

--------------------------------------- ----------------------------------
Risks How we strive to manage them
--------------------------------------- ----------------------------------
Prepayment risk: The risk that We take into consideration the
homeowners will prepay mortgages likelihood of prepayment when we
during periods of low interest rates, select mortgages. We may look
forcing a fund to reinvest its money for mortgage securities that
at interest rates that might be lower have characteristics that make
than those on the prepaid mortgage. them less likely to be prepaid,
Prepayment risk may also affect other such as low outstanding loan
types of debt securities, but balances or below-market
generally to a lesser extent than interest rates.
mortgage securities.
--------------------------------------- ----------------------------------
Liquidity risk is the possibility U.S. Treasuries and other U.S.
that securities cannot be readily government debt securities are
sold within seven days at typically the most liquid
approximately the price at which a securities available. Therefore,
fund values them. liquidity risk is not a
significant risk for this Fund.

Swap agreements will be treated
as illiquid securities, but most
swap dealers will be willing to
repurchase interest rate swaps
within seven days.

Disclosure of portfolio holdings information
A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's portfolio securities is available in the Fund's SAI.

Who manages the Fund

Investment manager
The Fund is managed by Delaware Management Company (the "Manager"), a series of
Delaware Management Business Trust, which is an indirect subsidiary of Delaware
Management Holdings, Inc. the Manager makes investment decisions for the Fund,
manages the Fund's business affairs and provides daily administrative services.
For its services to the Fund, the Manager was paid an aggregate fee of 0.35% of
average daily net assets for the last fiscal year, after giving effect to
waivers by the Manager.

Portfolio managers
Stephen R. Cianci and Paul Grillo have day-to-day responsibilities for making
investment decisions for the Fund.

The SAI provides additional information about the portfolio managers'
compensation, other accounts managed by the portfolio managers and the portfolio
managers' ownership of Fund shares.

Who's who?
This diagram shows the various organizations involved with managing,
administering and servicing the Delaware Investments(R)Funds.

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MANAGING, ADMINISTERING AND SERVICING THE DELAWARE INVESTMENTS FUNDS]

Board of Trustees
Custodian
Investment Manager JPMorgan Chase Bank
Delaware Management Company 4 Chase Metrotech Center
2005 Market Street The Funds Brooklyn, NY 11245
Philadelphia, PA 19103-7094

Service agent
Distributor Delaware Service Company, Inc.
Delaware Distributors, L.P. 2005 Market Street
2005 Market Street Philadelphia, PA 19103-7094
Philadelphia, PA 19103-7094

Financial intermediary wholesaler
Portfolio managers Lincoln Financial Distributors,
(see page 12 for details) Inc.
2001 Market Street
Philadelphia, PA 19103-7055

Financial advisors

Shareholders

Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.

Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.

Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker/dealers and are subject to NASD
rules governing mutual fund sales practices.

About your account

Investing in the Fund

Institutional Class shares are available for purchase only by the following:

o retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover Individual Retirement Accounts ("IRAs") from such plans;

o tax-exempt employee benefit plans of the Fund's Manager or its affiliates
and of securities dealer firms with a selling agreement with the
Distributor;

o institutional advisory accounts (including mutual funds) managed by the
Fund's Manager or its affiliates and clients of Delaware Investments
Advisers, an affiliate of the Manager, as well as affiliates, corporate
sponsors, subsidiaries, related employee benefit plans and rollover IRAs
of, or from, such institutional advisory accounts;

o a bank, trust company and similar financial institution investing for its
own account or for the account of its trust customers for whom the
financial institution is exercising investment discretion in purchasing
shares of the Class, except where the investment is part of a program that
requires payment to the financial institution of a Rule 12b-1 Plan fee;

o registered investment advisors investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least
$1,000,000 entrusted to the advisor for investment purposes. Use of
Institutional Class shares is restricted to advisors who are not affiliated
or associated with a broker or dealer and who derive compensation for their
services exclusively from their advisory clients;

o certain plans qualified under Section 529 of the Internal Revenue Code (the
"Code") for which the Fund's Manager, Distributor or service agent or one
or more of their affiliates provide record keeping, administrative,
investment management, marketing, distribution or similar services; and

o programs sponsored by financial intermediaries that require the purchase of
Institutional Class shares.

How to buy shares

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By exchange
You may exchange all or part of your investment in one or more Delaware
Investments(R)Funds for shares of other Delaware Investments(R) Funds. Please
keep in mind, however, that you may not exchange your shares for Class B, Class
C or Class R shares. To open an account by exchange, call your Client Services
Representative at 800 510-4015.

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Through your financial advisor
Your financial advisor can handle all the details of purchasing shares,
including opening an account. Your financial advisor may charge a separate fee
for this service.

We determine the NAV per share for each class of the Fund at the close of
regular trading on the NYSE on each Business Day. The NAV per share for each
class of the Fund is calculated by subtracting the liabilities of each class
from its total assets and dividing the resulting number by the number of shares
outstanding for that class. We generally price securities and other assets for
which market quotations are readily available at their market value. We price
fixed-income securities on the basis of valuations provided to us by an
independent pricing service that uses methods approved by the Board of Trustees.
We price any fixed-income securities that have a maturity of less than 60 days
at amortized cost, which approximates market value. For all other securities, we
use methods approved by the Board of Trustees that are designed to price
securities at their fair market value.

Document delivery
If you have an account in the same Delaware Investments(R)Fund as another person
or entity at your address, we are sending you one copy of the Fund's prospectus,
annual and semiannual reports to that address unless you opt otherwise. This
will help us reduce the printing and mailing expenses associated with the Fund.
We will continue to send one copy of each of these documents to that address
until you notify us that you wish individual materials. If you wish to receive
individual materials, please call your Client Services Representative at 800
510-4015. We will begin sending you individual copies of these documents 30 days
after receiving your request.

How to redeem shares

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By mail
You may redeem your shares (sell them back to the Fund) by mail by writing to:
Delaware Investments, 2005 Market Street, Philadelphia, PA 19103-7094. All
owners of the account must sign the request, and for redemptions of more than
$100,000, you must include a signature guarantee for each owner. You can also
fax your written request to 267 256-8990. Signature guarantees are also required
when redemption proceeds are going to an address other than the address of
record on the account.

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Through your financial advisor
Your financial advisor can handle all the details of redeeming your shares. Your
financial advisor may charge a separate fee for this service.

If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.

When you send us a properly completed request to redeem or exchange shares, and
we or an authorized agent receive the request before the close of regular
trading on the NYSE (normally 4:00 p.m. Eastern Time), you will receive the NAV
as next determined after we receive your request. If we receive your request
after the close of regular trading on the NYSE, you will receive the NAV next
determined on the next Business Day. You may have to pay taxes on the proceeds
from your sale of shares. We will send you a check, normally the next Business
Day, but no later than seven days after we receive your request to sell your
shares. If you purchased your shares by check, we will wait until your check has
cleared, which can take up to 15 days, before we send your redemption proceeds.

Through checkwriting
You may redeem Class A shares by writing checks of $500 or more. Checks must be
signed by all owners of the account unless you indicate otherwise on your
Investment Application. The checkwriting feature is not available for retirement
plans. Also, because dividends are declared daily, you may not close your
account by writing a check. When you write checks you are subject to bank
regulations and may be subject to a charge if the check amount exceeds the value
of your account.

Account minimum
If you redeem shares and your account balance falls below $250, the Fund may
redeem your account after 60 days' written notice to you.

Exchanges You may generally exchange all or part of your shares for shares, of
the same class in another Delaware Investments(R)Fund. If you exchange shares to
a fund that has a sales charge, you will pay any applicable sales charges on
your new shares. You do not pay sales charges on shares that you acquired
through the reinvestment of dividends. You may have to pay taxes on your
exchange. When you exchange sharFes, you are purchasing shares in another fund,
so you should be sure to get a copy of the fund's prospectus and read it
carefully before buying shares through an exchange. You may not exchange your
shares for Class B, Class C or Class R shares of another Delaware
Investments(R)Fund. We may refuse the purchase side of any exchange request, if,
in the investment 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.

Market timing of a fund occurs when investors make consecutive, rapid,
short-term "roundtrips" - that is, purchases into a fund followed quickly by
redemptions out of that fund. A short-term roundtrip is any redemption of fund
shares within 20 business days of a purchase of that fund's shares. If you make
a second such short-term roundtrip in a fund within the same calendar quarter as
a previous short-term roundtrip in that fund, you may be considered a market
timer. In determining whether market timing has occurred, the Fund will consider
short-term roundtrips to include rapid purchases and sales of Fund shares
through the exchange privilege. The Fund reserves the right to consider other
trading patterns to be market timing.

The Fund reserves the right to modify this policy at any time without notice,
including modifications to the Fund's monitoring procedures and the procedures
to close accounts to new purchases. Although the implementation of this policy
involves judgments that are inherently subjective, we seek to apply this policy
uniformly in all cases and to make judgments and applications that are
consistent with the interests of the Fund's shareholders. While we will take
actions designed to detect and prevent market timing, there can be no assurance
that such trading activity will be completely eliminated. Moreover, the Fund's
market timing policy does not require the Fund to take action in response to
frequent trading activity.

Risks of market timing
By realizing profits through short-term trading, shareholders that engage in
rapid purchases and sales or exchanges of the Fund's shares dilute the value of
shares held by long-term shareholders. Volatility resulting from excessive
purchases and sales or exchanges of Fund shares, especially involving large
dollar amounts, may disrupt efficient portfolio management. In particular, the
Fund may have difficulty implementing its long-term investment strategies if it
is forced to maintain a higher level of its assets in cash to accommodate
significant short-term trading activity. Excessive purchases and sales or
exchanges of the Fund's shares may also force the Fund to sell portfolio
securities at inopportune times to raise cash to accommodate short-term trading
activity. This could adversely affect the Fund's performance if, for example,
the Fund incurs increased brokerage costs and realization of taxable capital
gains without attaining any investment advantage.

may seek to engage in short-term trading to take advantage of these pricing
differences. Funds that may be adversely affected by such arbitrage include, in
particular, funds that significantly invest in small-cap securities, technology
and other specific industry sector securities, and in certain fixed-income
securities, such as high-yield bonds, asset-backed securities or municipal
bonds.

Limitations on ability to detect and curtail market timing Shareholders seeking
to engage in market timing may employ a variety of strategies to avoid detection
and, despite the efforts of the Fund and its agents to detect market timing in
Fund shares, there is no guarantee that the Fund will be able to identify these
shareholders or curtail their trading practices. In particular, the Fund may not
be able to detect market timing attributable to a particular investor who
effects purchase, redemption and/or exchange activity in Fund shares through
omnibus accounts. The difficulty of detecting market timing may be further
compounded if these entities utilize multiple tiers or omnibus accounts.

long you have owned your shares. A portion of income dividends designated by the
Fund may be qualified dividend income eligible for taxation by individual
shareholders at long-term capital gain rates provided certain holding period
requirements are met.

Certain management considerations

Manager of managers structure
At a shareholder meeting held on March 23, 2005 (or as adjourned), the Fund's
shareholders approved a "manager of managers" structure that would permit the
Manager to appoint and replace sub-advisors, enter into sub-advisory agreements,
and amend and terminate sub-advisory agreements with respect to the Fund,
subject to Board approval but without shareholder approval (the "Manager of
Managers Structure"). While the Manager does not currently expect to use the
Manager of Managers Structure with respect to the Fund, the Manager may, in the
future, recommend to the Fund's Board the establishment of the Manager of
Managers Structure by recommending the hiring of one or more sub-advisors to
manage all or a portion of the Fund's portfolio if it believes that doing so
would be likely to enhance the Fund's performance by introducing a different
investment style or focus.

Financial highlights

The financial highlights table is intended to help you understand the Fund's
financial performance. All "per share" information reflects financial results
for a single Fund share. This information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request by calling 800 510-4015.

Delaware Limited-Term Government Fund Institutional Class
Year ended 12/31
2005 2004 2003 2002 2001
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430

Income (loss) from investment operations:
Net investment income 0.291 0.256 0.234 0.364 0.437
Net realized and unrealized gain (loss) on investments (0.132) (0.047) (0.038) 0.255 0.238
------- ------- ------- ------- -------
Total from investment operations 0.159 0.209 0.196 0.619 0.675
------- ------- ------- ------- -------
Less dividends and distributions from:
Net investment income (0.369) (0.349) (0.328) (0.449) (0.505)
Return of capital ---- ---- (0.018) ---- ----
------- ------- ------- ------- -------
Total dividends and distributions (0.369) (0.349) (0.346) (0.449) (0.505)
------- ------- ------- ------- -------
Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
======= ======= ======= ======= =======

Total return(1) 1.91% 2.46% 2.27% 7.27% 8.34%

Ratios and supplemental data:
Net assets, end of period (000 omitted) $26,070 $21,732 $16,667 $13,289 $7,116
Ratio of expenses to average net assets 0.67% 0.60% 0.60% 0.60% 0.74%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly 0.82% 0.83% 0.86% 0.90% 0.93%
Ratio of net investment income to average net assets 3.47% 3.00% 2.72% 4.14% 5.07%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly 3.32% 2.77% 2.46% 3.84% 4.88%
Portfolio turnover 259% 313% 483% 313% 386%

(1) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividends and
distributions at net asset value. Total investment return reflects a waiver
and payment of fees by the manager. Performance would have been lower had
the expense limitation not been in effect.

How to read the financial highlights

Net investment income (loss)
Net investment income (loss) includes dividend and interest income earned from a
fund's investments; it is after expenses have been deducted.

Net asset value (NAV)
This is the value of a mutual fund share, calculated by dividing the net assets
by the number of shares outstanding.

Total return
This represents the rate that an investor would have earned or lost on an
investment in a fund. In calculating this figure for the financial highlights
table, we include applicable fee waivers and assume the shareholder has
reinvested all dividends and realized gains.

Net assets
Net assets represent the total value of all the assets in a fund's portfolio,
less any liabilities, that are attributable to that class of the fund.

Ratio of net investment income (loss) to average net assets
We determine this ratio by dividing net investment income (loss) by average net
assets.

Glossary

Appreciation
An increase in the value of an investment.

Average maturity
An average of when the individual bonds and other debt securities held in a
portfolio will mature.

Capital
The amount of money you invest.

Compounding
Earnings on an investment's previous earnings.

Consumer Price Index (CPI)
Measurement of U.S. inflation; represents the price of a basket of commonly
purchased goods.

Corporate bond
A debt security issued by a corporation. See Bond.

Cost basis
The original purchase price of an investment, used in determining capital gains
and losses.

Depreciation
A decline in an investment's value.

Diversification
The process of spreading investments among a number of different securities,
asset classes or investment styles to reduce the risks of investing.

Dividend distribution
Payments to mutual fund shareholders of dividends passed along from the fund's
portfolio of securities.

Duration
A measurement of a fixed-income investment's price volatility. The larger the
number, the greater the likely price change for a given change in interest
rates.

Financial advisor
Financial professional (e.g., broker, banker, accountant, planner or insurance
agent) who analyzes clients' finances and prepares personalized programs to meet
objectives.

Government securities
Securities issued by the U.S. government or its agencies. They include
Treasuries as well as agency-backed securities such as Fannie Maes.

Inflation
The increase in the cost of goods and services over time. U.S. inflation is
frequently measured by changes in the Consumer Price Index (CPI).

Investment goal
The objective, such as long-term capital growth or high current income, that a
mutual fund pursues.

Management fee
The amount paid by a mutual fund to the investment manager or management
services, expressed as an annual percentage of the fund' s average daily net
assets.

Maturity
The length of time until a bond issuer must repay the underlying loan principal
to bondholders.

NASD
The National Association of Securities Dealers, Inc., which is responsible for
regulating the securities industry.

Net assets
The total value of all the assets in a fund's portfolio, less any liabilities.

Net asset value (NAV)
The daily dollar value of one mutual fund share. Equal to a fund's net assets
divided by the number of shares outstanding.

Principal
Amount of money you invest (also called capital). Also refers to a bond's
original face value, due to be repaid at maturity.

Prospectus
The official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services and fees.