-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rc4+wOidcCbhe/DeKfL/3Mrisw+oqwqBBAX9U6+kcJ/bR18FdeXl+gg0Py5HpDUF qOBYgHTs14P/D8DU3B13Rg== 0001137439-07-000538.txt : 20071127 0001137439-07-000538.hdr.sgml : 20071127 20071127162527 ACCESSION NUMBER: 0001137439-07-000538 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20071127 DATE AS OF CHANGE: 20071127 EFFECTIVENESS DATE: 20071130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS CENTRAL INDEX KEY: 0000357059 IRS NUMBER: 236732199 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 002-75526 FILM NUMBER: 071269193 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC DATE OF NAME CHANGE: 19950828 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP TREASURY RESERVES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE TREASURY RESERVES DATE OF NAME CHANGE: 19880718 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS CENTRAL INDEX KEY: 0000357059 IRS NUMBER: 236732199 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03363 FILM NUMBER: 071269194 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC DATE OF NAME CHANGE: 19950828 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP TREASURY RESERVES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE TREASURY RESERVES DATE OF NAME CHANGE: 19880718

0000357059 S000002397 DELAWARE LIMITED-TERM GOVERNMENT FUND

C000006359 DELAWARE LIMITED-TERM GOVERNMENT FUND CLASS A DTRIX

C000006360 DELAWARE LIMITED-TERM GOVERNMENT FUND CLASS B DTIBX

C000006361 DELAWARE LIMITED-TERM GOVERNMENT FUND CLASS C DTICX

C000006362 DELAWARE LIMITED-TERM GOVERNMENT FUND CLASS R DLTRX

C000006363 DELAWARE LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL CLASS DTINX

485BPOS 1 body485b.htm

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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. 62 /X/

and/or

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

Amendment No. 62

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

2005 Market Street, Philadelphia, Pennsylvania 19103-7094
- --------------------------------------------------------------------------------
(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: November 30, 2007

It is proposed that this filing will become effective:

/ / immediately upon filing pursuant to paragraph (b)
- ------------
/X/ on November 30, 2007 pursuant to paragraph (b)
- ------------
/ / 60 days after filing pursuant to paragraph (a)(1)
- ------------
/ / on (date) pursuant to paragraph (a)(1)
- ------------
/ / 75 days after filing pursuant to paragraph (a)(2)
- ------------
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
- ------------

If appropriate:

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

--- C O N T E N T S ---

This Post-Effective Amendment No. 62 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
Financial Group
A member of Lincoln Financial Group

Delaware Limited-Term Diversified Income Fund

Class A o Class B o Class C o Class R

Prospectus
November 30, 2007

Fixed Income

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

Table of contents
Fund profile page 2
Delaware Limited-Term Diversified Income Fund 2

How we manage the Fund page 6
Our investment strategies 6
The securities we typically invest in 10
The risks of investing in the Fund 15
Disclosure of portfolio holdings information 19

Who manages the Fund page 20
Investment manager 20
Portfolio managers 20
Manager of managers structure 20
Who's who? 21

About your account page 23
Investing in the Fund 23
Choosing a share class 23
Dealer compensation 26
Payments to intermediaries 26
How to reduce your sales charge 27
Waivers of Contingent Deferred Sales Charges 29
How to buy shares 31
Fair valuation 32
Retirement plans 32
Document delivery 32
How to redeem shares 33
Account minimums 34
Special services 34
Frequent trading of Fund shares 35
Dividends, distributions, and taxes 37
Certain management considerations 38

Financial highlights page 39
Glossary page 44
Additional information Back cover

Profile: Delaware Limited-Term Diversified Income Fund

What is the Fund's investment objective?
Delaware Limited-Term Diversified Income Fund seeks maximum total return,
consistent with reasonable risk. Although the Fund will strive to achieve its
objective, there is no assurance that it will.

What are the Fund's main investment strategies?
Under normal circumstances, the Fund will invest at least 80% of its net assets
in investment-grade fixed income securities, including, but not limited to,
fixed income securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, and by U.S. corporations. Investment-grade fixed
income securities are securities rated at least BBB by Standard & Poor's (S&P)
or Fitch, Inc. (Fitch), Baa3 by Moody's Investors Service (Moody's), or
similarly rated by another nationally recognized statistical ratings
organization (NRSRO). The Fund will maintain an average effective duration from
one to three years. We will determine how much of the Fund's assets to allocate
among the different types of fixed income securities in which the Fund may
invest based on our evaluation of economic and market conditions and our
assessment of the returns and potential for appreciation that can be achieved
from various sectors of the fixed income market.

The corporate debt obligations in which the Fund may invest include bonds,
notes, debentures, and commercial paper of U.S. companies, and subject to the
limitations described below, non-U.S. companies. The Fund may also invest in a
variety of securities which are issued or guaranteed as to the payment of
principal and interest by the U.S. government, and by various agencies or
instrumentalities which have been established or are sponsored by the U.S.
government, and, subject to the limitations described below, securities issued
by foreign governments.

Additionally, the Fund may also invest in mortgage-back securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, government
sponsored corporations, and mortgage-backed securities issued by certain
private, non-government entities. The Fund may also invest in securities that
are backed by assets such as receivables on home equity and credit card loans,
automobile, mobile home, recreational vehicle and other loans, wholesale dealer
floor plans, and leases.

The Fund may invest up to 20% of its assets in below investment grade
securities. In general, the below investment grade securities that the Fund may
purchase in this sector will generally be rated BB or lower by S&P or Fitch, Ba
or lower by Moody's or similarly rated by another NRSRO.

The Fund may also invest up to 20% of its net assets in foreign securities,
including up to 10% of its net assets in securities of issuers located in
emerging markets. The Fund's total non-U.S. dollar currency exposure will be
limited, in the aggregate, to no more than 10% of net assets.

What are the main risks of investing in the Fund?
Investing in any mutual fund involves risk, including the risk that you may lose
part or all of the money you invest. The 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. The Fund will be affected primarily by changes in bond
prices and interest rates. The market value of fixed income securities generally
falls when interest rates rise.

Investments in high yield, high-risk or "junk" bonds entail certain risks,
including the risk of loss of principal, which may be greater than the risks
presented by investment-grade bonds and which should be considered by investors
contemplating an investment in the Fund. Among these risks are those that result
from the absence of a liquid secondary market and the dominance in the market of
institutional investors.

The Fund will also be affected by prepayment risk due to its holdings of
mortgage-backed securities. With prepayment risk, when homeowners prepay
mortgages during periods of low interest rates, the Fund may be forced to
re-deploy its assets in lower yielding securities.

The Fund's investments in securities issued by non-U.S. companies are generally
denominated in foreign currencies and involve certain risks not typically
associated with investing in bonds issued by U.S. companies, including political
instability, foreign economic conditions, and inadequate regulatory and
accounting standards. To the extent that the Fund invests in foreign fixed
income securities, the value of these securities may be adversely affected by
changes in U.S. or foreign interest rates, as well as changes in currency
exchange rates. In addition, investments in emerging markets are subject to
greater risks than investments in more developed countries, including risks of
political or economic instability, expropriation, adverse changes in tax laws,
and currency controls.

Moreover, there is substantially less publicly available information about
issuers in emerging markets than there is about issuers in developed markets,
and the information that is available tends to be of a lesser quality. Also,
emerging markets are typically less mature, less liquid, and subject to greater
price volatility than are developed markets. The Fund's investments in foreign
securities may also be subject to currency risk. Currency risk is the risk that
the value of an investment may be negatively affected by changes in foreign
currency exchange rates. Adverse changes in exchange rates may reduce or
eliminate any gains produced by investments that are denominated in foreign
currencies and may increase losses. If, and to the extent that, we invest in
forward foreign currency contracts or use other investments to hedge against
currency risks, the Fund will be subject to the special risks associated with
those activities.

For a more complete discussion of risk, please see "The risks of investing in
the Fund" on page 15.

Who should invest in the Fund
o Investors with intermediate or long-term financial goals
o Investors who would like an investment offering allocation across key types
of fixed income securities
o Investors seeking a fixed income investment focusing on total return

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
o Investors seeking current income

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

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

How has Delaware Limited-Term Diversified Income 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 10 calendar years, as well as the average annual returns of Class A, B,
C, and R shares for the one-year, five-year, and 10-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 certain of these periods. The returns
would be lower without the expense caps. Please see the footnotes on page 6 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)

- -------- ------- ------- -------- -------- ------- ------- -------- ------- -------
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- -------- ------- ------- -------- -------- ------- ------- -------- ------- -------
5.23% 7.46% 1.07% 8.59% 8.16% 7.08% 2.12% 2.31% 1.76% 3.76%
- -------- ------- ------- -------- -------- ------- ------- -------- ------- -------

As of September 30, 2007, the Fund's Class A shares had a calendar year-to-date
return of 3.69%. 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.

On August 15, 2007, the Fund's Board of Trustees (Board) approved changes to the
Fund's investment objective and strategies. These changes, which became
effective on November 30, 2007, allow the Fund to invest in a broader range of
fixed income securities, including U.S. government securities and foreign
government securities and corporate and high yield securities of domestic and
foreign issuers. Accordingly, the Fund no longer invests at least 80% of its net
assets in U.S. government securities. The historical returns shown above and
below do not reflect these changes.

Average annual returns for periods ending 12/31/06

- ---------------------------------------------- ----------- ---------- ---------------
1 year 5 years 10 years or
lifetime**
- ---------------------------------------------- ----------- ---------- ---------------
Class A return before taxes 0.95% 2.82% 4.42%
- ---------------------------------------------- ----------- ---------- ---------------
Class A return after taxes on distributions (0.59%) 1.27% 2.36%
- ---------------------------------------------- ----------- ---------- ---------------
Class A return after taxes on distributions
and sale of Fund shares 0.60% 1.48% 2.48%
- ---------------------------------------------- ----------- ---------- ---------------
Class B return before taxes* 0.90% 2.51% 4.26%
- ---------------------------------------------- ----------- ---------- ---------------
Class C return before taxes* 1.90% 2.51% 3.83%
- ---------------------------------------------- ----------- ---------- ---------------
Class R return before taxes 3.53% N/A 1.87%
- ---------------------------------------------- ----------- ---------- ---------------
Lehman Brothers 1-3 Year Government/Credit
Index*** 4.25% 3.27% 4.97%
- ---------------------------------------------- ----------- ---------- ---------------
Merrill Lynch 1-3 Year U.S. Treasury Index 3.96% 2.82% 4.69%
(reflects no deduction for fees, expenses,
or taxes)
- ---------------------------------------------- ----------- ---------- ---------------

The Fund's returns above are compared to the performance of the Lehman Brothers
1-3 Year Government/Credit Index and the Merrill Lynch 1-3 Year U.S. Treasury
Index. The Lehman Brothers 1-3 Year Government/Credit Index is a market
value-weighted index of government fixed-rate debt issues and investment-grade
U.S. and foreign fixed-rate debt issues with dollar-weighted average maturities
between one and three years. The Merrill Lynch 1-3 Year U.S. Treasury Index is
an 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. You should remember that, unlike the Fund, the Indices are
unmanaged and do 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 periods presented 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 five
years. If shares were not redeemed, the returns for Class B would be 2.89%,
2.51%, and 4.26% for the one-, five-, and 10-year periods, respectively;
and the returns for Class C would be 2.89%, 2.51%, and 3.83% for the one-,
five-, and 10-year periods, respectively.

** Lifetime returns are shown if the Fund or Class existed for less than 10
years. The Index returns shown for Class A, Class B, and Class C shares are
for the 10-year period because Class A, Class B, and Class C shares
commenced operations more than 10 years ago. The Index returns shown for
Class R shares are for the lifetime period because the inception date for
the Class R shares of the Fund was June 2, 2003. The Index returns for the
Class R lifetime period were 2.29% and 2.03% for the Lehman Brothers 1-3
Year Government/Credit Index and Merrill Lynch 1-3 Year Treasury Index,
respectively. The Index reports returns on a monthly basis as of the last
day of the month. As a result, the Index returns for Class R lifetime
reflect the returns from June 30, 2003 through December 31, 2006.

*** The Lehman Brothers 1-3 Year Government/Credit Index is replacing the
Merrill Lynch 1-3 Year Treasury Index as the Fund's benchmark. As a result
of the changes in the Fund's investment objective and strategies, as
described above, the investment manager (Manager) believes that the Lehman
1-3 Year Government/Credit Index is a more accurate benchmark of the Fund's
investments. The Merrill Lynch 1-3 Year Treasury Index may be excluded from
this comparison in the future.

What are the Fund's fees and expenses?

- ------------------------ ------------------------------- -------- ---------- -------- ---------
Sales charges are fees CLASS A B C R
paid directly from ------------------------------- -------- ---------- -------- ---------
your investments when Maximum sales charge (load)
you buy or sell shares imposed on purchases as a
of the Fund. You do percentage of offering price 2.75% none none none
not pay sales charges ------------------------------- -------- ---------- -------- ---------
when you buy or sell Maximum contingent deferred
Class R shares. sales charge (load) as a
percentage of original
purchase price or redemption
price, whichever is lower none(1) 2.00%(2) 1.00%(3) none
------------------------------- -------- ---------- -------- ---------
Maximum sales charge (load) none none none none
imposed on reinvested
dividends
------------------------------- -------- ---------- -------- ---------
Redemption fees none none none none
------------------------------- -------- ---------- -------- ---------
Exchange fees(4) none none none none
- ------------------------ ------------------------------- -------- ---------- -------- ---------

- ------------------------ ------------------------------- -------- ------------ -------- ---------
Annual fund operating CLASS A B C R
expenses are deducted ------------------------------- -------- ---------- -------- ---------
from the Fund's assets. Management fees(5) 0.50% 0.50% 0.50% 0.50%
------------------------------- -------- ---------- -------- ---------
Distribution and service 0.30%(6) 1.00% 1.00% 0.60%(7)
(12b-1) fees
------------------------------- -------- ---------- -------- ---------
Other expenses(8) 0.33% 0.33% 0.33% 0.33%
------------------------------- -------- ---------- -------- ---------
Total annual fund operating 1.13% 1.83% 1.83% 1.43%
expenses
------------------------------- -------- ---------- -------- ---------
Fee waivers and payments (0.14%) (0.14%) (0.14%) (0.24%)
------------------------------- -------- ---------- -------- ---------
Net expenses 0.99% 1.69% 1.69% 1.19%
- ------------------------ ------------------------------- -------- ---------- -------- ---------

- ------------------------ ---------- ------- -------- ---------- -------- ---------- ----------
This example is CLASS A B(9) B(9) C C R
intended to help you (if (if
compare the cost of redeemed) redeemed)
investing in the Fund ---------- ------- -------- ---------- -------- ---------- ----------
to the cost of 1 year $373 $172 $372 $172 $272 $121
investing in other ---------- ------- -------- ------------------- ---------- ----------
mutual funds with 3 years $611 $562 $662 $562 $562 $429
similar investment ---------- ------- -------- ------------------- ---------- ----------
objectives. We show 5 years $867 $977 $977 $977 $977 $759
the cumulative amount ---------- ------- -------- ------------------- ---------- ----------
of Fund expenses on a 10 years $1,600 $1,706 $1,706 $2,136 $2,136 $1,692
hypothetical ---------- ------- -------- ------------------- ---------- ----------
investment of $10,000
with an annual 5%
return over the time
shown. The Fund's
actual rate of return
may be greater or less
than the hypothetical
5% return we use here.
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 (NAV). However, if you buy the shares through a financial advisor who
is paid a commission, a contingent deferred sales charge (CDSC) will apply
to redemptions made within one year of purchase. Additional Class A
purchase options that involve a CDSC 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 CDSC 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%
CDSC.
(4) 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.
(5) The Manager has contracted to waive all or a portion of its investment
advisory fees and/or reimburse expenses from May 1, 2007 through April 30,
2008 in order to prevent total annual fund operating expenses (excluding
any 12b-1 plan expenses, taxes, interest, inverse floater program expenses,
brokerage fees, certain insurance costs, and non-routine expenses or costs,
including, but not limited to, those relating to reorganizations,
litigation, certain Trustee retirement plan expenses, conducting
shareholder meetings, and liquidations (collectively, "non-routine
expenses")) from exceeding 0.69% of the Fund's average daily net assets.
For purposes of these waivers and reimbursements, non-routine expenses may
also include such additional costs and expenses as may be agreed upon from
time to time by the Fund's Board and the Manager. These expense waivers and
reimbursements apply only to expenses paid directly by the Fund.
(6) The Fund's distributor (Distributor) has voluntarily agreed to waive the
Class A shares' 12b-1 fees from May 1, 2007 until such time as the waiver
is discontinued to no more than 0.15% of the Fund's average daily net
assets. The waiver may be discontinued at any time because it is voluntary.
The distribution and service fees shown in the annual fund operating
expenses table above do not reflect the Distributor's voluntary waiver. The
following table shows operating expenses that are based on the most
recently completed fiscal year and reflects the Distributor's current fee
waivers and payments.

-------------------------------- ---------------------------- ----------
Annual fund operating expenses CLASS A
are deducted from the Fund's ---------------------------- ----------
assets. Management fees 0.50%
---------------------------- ----------
Distribution and service
(12b-1) fees 0.30%
---------------------------- ----------
Other expenses 0.33%
---------------------------- ----------
Total annual fund operating
expenses 1.13%
---------------------------- ----------
Fee waivers and payments (0.29%)
---------------------------- ----------
Net expenses 0.84%
-------------------------------- ---------------------------- ----------

(7) The Distributor has contracted to limit the Class R shares' 12b-1 fees from
May 1, 2007 through April 30, 2008 to no more than 0.50% of the Fund's
average daily net assets.

(8) "Other expenses" have been restated to reflect a reduction in non-routine
expenses incurred during the period.

(9) 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. Securities
in which the Fund may invest include, but are not limited to, the following:

o Securities issued or guaranteed by the U.S. government, such as U.S.
Treasuries;
o Securities issued by U.S. government agencies or instrumentalities,
such as securities of the Government National Mortgage Association
(GNMA);
o Investment-grade and below investment-grade corporate bonds;
o Non-agency mortgage-backed securities, asset-backed securities,
commercial mortgage-backed securities, collateralized mortgage
obligations, and real estate mortgage investment conduits;
o Securities of foreign issuers in both developed and emerging markets,
denominated in foreign currencies and U.S. dollars;
o Loan participations; and
o Short-term investments.

Under normal circumstances, the Fund will invest at least 80% of its net assets
in investment-grade fixed income securities. The Fund may invest in debt
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and by U.S. corporations. The corporate debt obligations in
which the Fund may invest include bonds, notes, debentures, and commercial paper
of U.S. companies. The U.S. government securities in which the Fund may invest
include a variety of securities which are issued or guaranteed as to the payment
of principal and interest by the U.S. government, and by various agencies or
instrumentalities which have been established or are sponsored by the U.S.
government.

The Fund may also invest in mortgage-back securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, or by government sponsored
corporations. Other mortgage-backed securities in which the Fund may invest are
issued by certain private, non-government entities. The Fund may also invest in
securities that are backed by assets such as receivables on home equity and
credit card loans, automobile, mobile home, recreational vehicle and other
loans, wholesale dealer floor plans, and leases.

The Fund maintains an average effective duration from one to three years.

The Fund may also invest up to 20% of its net assets in below-investment-grade
securities. The Fund may invest in domestic corporate debt obligations,
including notes, which may be convertible or non-convertible, commercial paper,
units consisting of bonds with stock or warrants to buy stock attached,
debentures and convertible debentures. The Fund will invest in both rated and
unrated bonds. Unrated bonds may be more speculative in nature than rated bonds.

The Fund may also invest up to 20% of its net assets in foreign securities,
including up to 10% of its net assets in securities of issuers located in
emerging markets. The Manager will limit non-U.S. dollar-denominated securities
to no more than 20% of net assets. The Fund's total non-U.S. dollar currency
exposure will be limited, in the aggregate, to no more than 10% of net assets.
These fixed income securities may include foreign government securities, debt
obligations of foreign companies, and securities issued by supranational
entities. A supranational entity is an entity established or financially
supported by the national governments of one or more countries to promote
reconstruction or development. Examples of supranational entities include, among
others, the International Bank for Reconstruction and Development (more commonly
known as the World Bank), the European Economic Community, the European
Investment Bank, the Inter-Development Bank, and the Asian Development Bank.

The Fund may invest in sponsored and unsponsored American Depositary Receipts,
European Depositary Receipts, or Global Depositary Receipts. The Fund may also
invest in zero coupon bonds and may purchase shares of other investment
companies.

The Fund will invest in both rated and unrated foreign securities.

The Fund may invest in securities issued in any currency and may hold foreign
currencies. Securities of issuers within a given country may be denominated in
the currency of another country or in multinational currency units, such as the
Euro. The Fund may, from time to time, purchase or sell foreign currencies
and/or engage in forward foreign currency transactions in order to expedite
settlement of Fund transactions and to minimize currency value fluctuations.

The Fund's investment objective is non-fundamental. This means that the Board
may change the Fund's objective without obtaining shareholder approval. If the
objective were changed, we would notify shareholders at least 60 days before the
change in the objective 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 U.S.
include Treasury bills, notes, and Treasury securities, although they
bonds of varying maturities. U.S. are typically not our largest holding
Treasury securities are backed by the because they generally do not offer
"full faith and credit" of the United as high a level of current income as
States. other fixed income securities.
- ----------------------------------------- --------------------------------------
Mortgage-backed securities: Fixed There is no limit on
income securities that represent pools government-related mortgage-backed
of mortgages, with investors receiving securities.
principal and interest payments as the
underlying mortgage loans are paid We may invest in mortgage-backed
back. Many are issued and guaranteed securities issued or guaranteed by
against default by the U.S. government the U.S. government, its agencies or
or its agencies or instrumentalities, instrumentalities or by
such as the Federal Home Loan Mortgage government-sponsored corporations.
Corporation, Fannie Mae, and GNMA.
Others are issued by private financial We may also invest in mortgage-backed
institutions, with some fully securities that are secured by the
collateralized by certificates issued underlying collateral of the private
or guaranteed by the government or its issuer. Such securities are not
agencies or instrumentalities. 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).
- ----------------------------------------- --------------------------------------
Asset-backed securities: Bonds or notes We may invest in asset-backed
backed by accounts receivable including securities rated in one of the four
home equity, automobile, or credit highest rating categories by an NRSRO.
loans.
- ----------------------------------------- --------------------------------------
Corporate bonds: Debt obligations We may invest in corporate bonds.
issued by a corporation.
- ----------------------------------------- --------------------------------------
High yield corporate bonds: Debt Emphasis is typically on those rated
obligations issued by a corporation and BB or Ba by an NRSRO.
rated lower than investment grade by an
NRSRO such as S&P or Moody's. High We carefully evaluate an individual
yield bonds (also known as "junk company's financial situation, its
bonds") are issued by corporations that management, the prospects for its
have lower credit quality and may have industry, and the technical factors
difficulty repaying principal and related to its bond offering. We seek
interest. to identify those companies that we
believe will be able to repay their
debt obligations in spite of poor
ratings. We may invest in unrated
bonds if we believe their credit
quality is comparable to the rated
bonds we are permitted to invest in.
Unrated bonds may be more speculative
in nature than rated bonds. We may
not invest more than 20% of the
Fund's net assets in high yield
securities.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Securities How we use them
- ----------------------------------------- --------------------------------------
Collateralized mortgage obligations We may invest in CMOs and REMICs.
(CMOs) and real estate mortgage Certain CMOs and REMICs may have
investment conduits (REMICs): CMOs are variable or floating interest rates
privately issued mortgage-backed bonds and others may be stripped. Stripped
whose underlying value is the mortgages mortgage securities are generally
that are collected into different pools considered illiquid and to such
according to their maturity. They are extent, together with any other
issued by U.S. government agencies and illiquid investments, will not exceed
private issuers. REMICs are privately 15% of the Fund's net assets, which
issued mortgage-backed bonds whose is the Fund's limit on investments in
underlying value is a fixed pool of illiquid securities. In addition,
mortgages secured by an interest in subject to certain quality and
real property. Like CMOs, REMICs offer collateral limitations, we may invest
different pools according to the up to 20% of the Fund's total assets
underlying mortgages' maturity. in CMOs and REMICs issued by private
entities that are not collateralized
by securities issued or guaranteed by
the U.S. government, its agencies, or
instrumentalities, so called
"non-agency mortgage-backed
securities."
- ----------------------------------------- --------------------------------------
Short-term debt investments: These We may invest in these instruments
instruments include: (1) time deposits, either as a means to achieve the
certificates of deposit, and bankers Fund's investment objective or, more
acceptances issued by a U.S. commercial commonly, as temporary defensive
bank; (2) commercial paper of the investments or pending investment in
highest quality rating; (3) short-term the Fund's principal investment
debt obligations with the highest securities. When investing all or a
quality rating; (4) U.S. government significant portion of the Fund's
securities; and (5) repurchase assets in these instruments, the Fund
agreements collateralized by the may not be able to achieve its
instruments described in (1) - (4) investment objective.
above.
- ----------------------------------------- --------------------------------------
Time deposits: Time deposits are We will not purchase time deposits
non-negotiable deposits maintained in a maturing in more than seven days and
banking institution for a specified time deposits maturing from two
period of time at a stated interest business days (as defined below)
rate. through seven calendar days will not
exceed 15% of the total assets of the
Fund.
- ----------------------------------------- --------------------------------------
Zero coupon bond and pay-in-kind (PIK) We may purchase fixed income
bonds: Zero coupon bonds are debt securities, including zero coupon
obligations which do not entitle the bonds and PIK bonds, consistent with
holder to any periodic payments of the Fund's investment objective.
interest prior to maturity or a
specified date when the securities
begin paying current interest, and
therefore are issued and traded at a
discount from their face amounts or par
value. PIK bonds pay interest through
the issuance to holders of additional
securities.
- ----------------------------------------- --------------------------------------
Foreign securities: Debt issued by a We may invest up to 20% of the Fund's
non-U.S. company or a government other net assets in securities of foreign
than the United States or by an agency, companies or governments.
instrumentality, or political
subdivision of such government.
- ----------------------------------------- --------------------------------------
Foreign currency transactions: A Although we value the Fund's assets
forward foreign currency exchange daily in terms of U.S. dollars, we do
contract involves an obligation to not intend to convert its holdings of
purchase or sell a specific currency on foreign currencies into U.S. dollars
a fixed future date at a price that is on a daily basis. We may, however,
set at the time of the contract. The from time to time, purchase or sell
future date may be any number of days foreign currencies and/or engage in
from the date of the contract as agreed forward foreign currency transactions
by the parties involved. in order to expedite settlement of
Fund transactions and to minimize
currency value fluctuations.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Securities How we use them
- ----------------------------------------- --------------------------------------
American Depositary Receipts (ADRs), We may invest in sponsored and
European Depositary Receipts (EDRs) and unsponsored ADRs. ADRs in which the
Global Depositary Receipts (GDRs): Fund may invest will be those that
ADRs are receipts issued by a are actively traded in the United
depositary (usually a U.S. bank) and States.
EDRs and GDRs are receipts issued by a
depositary outside of the U.S. (usually In conjunction with the Fund's
a non-U.S. bank or trust company or a investments in foreign securities, we
foreign branch of a U.S. bank). may also invest in sponsored and
Depositary receipts represent an unsponsored EDRs and GDRs.
ownership interest in an underlying
security that is held by the
depositary. Generally, the underlying
security represented by an ADR is
issued by a foreign issuer and the
underlying security represented by an
EDR or GDR may be issued by a foreign
or U.S. issuer. Sponsored depositary
receipts are issued jointly by the
issuer of the underlying security and
the depositary, and unsponsored
depositary receipts are issued by the
depositary without the participation of
the issuer of the underlying security.
Generally, the holder of the depositary
receipt is entitled to all payments of
interest, dividends, or capital gains
that are made on the underlying
security.
- ----------------------------------------- --------------------------------------
Loan participations: An interest in a We may invest without restriction in
loan or other direct indebtedness, such loan participations that meet our
as an assignment, that entitles the credit standards. We perform our own
acquiror of such interest to payments independent credit analysis on each
of interest, and/or other amounts due borrower and on the collateral
under the structure of the loan or securing each loan. We consider the
other direct indebtedness. In addition nature of the industry in which the
to being structured as secured or borrower operates, the nature of the
unsecured loans, such investments could borrower's assets, and the general
be structured as novations or quality and creditworthiness of the
assignments or represent trade or other borrower. We may invest in loan
claims owed by a company to a supplier. participations in order to enhance
total return, to affect
diversification, or to earn
additional income. We will not use
loan participations for reasons
inconsistent with the Fund's
investment objective.
- ----------------------------------------- --------------------------------------
Repurchase agreements: An agreement Typically, we use repurchase
between a buyer of securities, such as agreements as a short-term investment
a fund, and a seller of securities, in for the Fund's cash position. In
which the seller agrees to buy the order to enter into these repurchase
securities back within a specified time agreements, the Fund must have
at the same price the buyer paid for collateral of at least 102% of the
them, plus an amount equal to an agreed repurchase price. We will only enter
upon interest rate. Repurchase into repurchase agreements in which
agreements are often viewed as the collateral is comprised of U.S.
equivalent to cash. government securities.
- ----------------------------------------- ---------------------------------------
Options and futures: Options represent At times when we anticipate adverse
a right to buy or sell a security or a conditions, we may want to protect
group of securities at an agreed upon gains on securities without actually
price at a future date. The purchaser selling them. We might use options or
of an option may or may not choose to futures to neutralize the effect of
go through with the transaction. The any price declines, without selling a
seller of an option, however, must go bond or bonds, or as a hedge against
through with the transaction if its changes in interest rates. We may
purchaser exercises the option. also sell an option contract (often
referred to as "writing" an option)
Futures contracts are agreements for to earn additional income for the
the purchase or sale of a security or a Fund.
group of securities at a specified
price, on a specified date. Unlike Use of these strategies can increase
purchasing an option, a futures the operating costs of the Fund and
contract must be executed unless it is can lead to loss of principal.
sold before the settlement date.
The Fund has claimed an exclusion
Certain options and futures may be from the definition of the term
considered to be derivative securities. "commodity pool operator" under the
Commodity Exchange Act (CEA) and,
therefore, is not subject to
registration or regulation as a
commodity pool operator under the CEA.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Securities How we use them
- ----------------------------------------- --------------------------------------
Restricted securities: Privately placed We may invest in privately placed
securities whose resale is restricted securities, including those that are
under U.S. securities laws. eligible for resale only among
certain institutional buyers without
registration, which are commonly
known as "Rule 144A Securities."
Restricted securities that are
determined to be illiquid may not
exceed the Fund's 15% limit on
illiquid securities.
- ----------------------------------------- --------------------------------------
Illiquid securities: Securities that do We may invest up to 15% of the Fund's
not have a ready market and cannot be net assets in illiquid securities.
easily sold within seven days at
approximately the price at which a fund
has valued them. Illiquid securities
include repurchase agreements maturing
in more than seven days.
- ----------------------------------------- --------------------------------------
Interest rate swap, index swap, and We may use interest rate swaps to
credit default swap agreements: In an adjust the Fund's sensitivity to
interest rate swap, a fund receives interest rates or to hedge against
payments from another party based on a changes in interest rates. Index
variable or floating interest rate, in swaps may be used to gain exposure to
return for making payments based on a markets that the Fund invests in,
fixed interest rate. An interest rate such as the corporate bond market.
swap can also work in reverse with a We may also use index swaps as a
fund receiving payments based on a substitute for futures or options
fixed interest rate and making payments contracts if such contracts are not
based on a variable or floating directly available to the Fund on
interest rate. favorable terms. We may enter into
credit default swaps in order to
In an index swap, a fund receives gains hedge against a credit event, to
or incurs losses based on the total enhance total return, or to gain
return of a specified index, in exposure to certain securities or
exchange for making interest payments markets.
to another party. An index swap can
also work in reverse with a fund Use of these strategies can increase
receiving interest payments from the operating costs of the Fund and
another party in exchange for movements lead to loss of principal.
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.
- ----------------------------------------- --------------------------------------

We may also invest in other securities, including certificates of deposit and
obligations of both U.S. and foreign banks, 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
We may borrow money from banks as a temporary measure for extraordinary or
emergency purposes or to facilitate redemptions. We 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 objective.

Lending securities
We may lend up to 25% of the Fund's assets to qualified broker/dealers or
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 the 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
We 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. We
will designate cash or securities in amounts sufficient to cover the Fund's
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
principal 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 We will not invest in swaps with
securities will decrease in value if maturities of more than 10 years.
interest rates rise. The risk is Each business day (as defined below),
greater for bonds with longer we will calculate the amount the Fund
maturities than for those with shorter must pay for swaps it holds and will
maturities. segregate enough cash or other liquid
securities to cover that amount.
Swaps may be particularly sensitive to
interest rate changes. Depending on
the actual movements of interest rates
and how well the portfolio manager
anticipates them, a fund could
experience a higher or lower return
than anticipated.
- ----------------------------------------- --------------------------------------
Market risk is the risk that all or a We maintain a long-term investment
majority of the securities in a certain approach and focus on securities that
market-- like the stock or bond market we believe can continue to provide
- --will decline in value because of returns over an extended time frame
economic conditions, future regardless of interim market
expectations, or investor confidence. fluctuations. Generally, we do not
try to predict overall market
Index swaps are subject to the same movements.
market risks as the investment market
or sector that the index represents. In evaluating the use of an index
Depending on the actual movements of swap for the Fund, we carefully
the index and how well the portfolio consider how market changes could
manager forecasts those movements, a affect the swap and how that compares
fund could experience a higher or lower to our investing directly in the
return than anticipated. market the swap is intended to
represent. When selecting dealers
with whom we would make interest rate
or index swap agreements for the
Fund, we focus on those dealers with
high-quality ratings and do careful
credit analysis before engaging in
the transaction.
- ----------------------------------------- --------------------------------------
Industry and security risk: Industry We limit the amount of the Fund's
risk is the risk that the value of assets invested in any one industry
securities in a particular industry and in any individual security or
will decline because of changing issuer. We also follow a rigorous
expectations for the performance of selection process when choosing
that industry. securities for the portfolio.

Security risk is the risk that the
value of an individual stock or bond
will decline because of changing
expectations for the performance of the
individual company issuing the stock or
bond.
- ----------------------------------------- --------------------------------------

Investing in so-called "junk" or "high It is likely that protracted periods
yield" bonds entails the risk of of economic uncertainty would cause
principal loss, which may be greater increased volatility in the market
than the risk involved in prices of high yield bonds, an
investment-grade bonds. High yield increase in the number of high yield
bonds are sometimes issued by companies bond defaults, and corresponding
whose earnings at the time the bond is volatility in the Fund's NAV.
issued are less than the projected debt
payments on the bonds. Our holdings of high-quality,
investment-grade bonds are less
A protracted economic downturn may subject to credit risk and may help
severely disrupt the market for high to balance any credit problems
yield bonds, adversely affect the value experienced by individual high yield
of outstanding bonds, and adversely bond issuers.
affect the ability of high yield
issuers to repay principal and When selecting dealers with whom we
interest. would make interest rate or index
swap agreements, 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 during likelihood of prepayment when we
periods of low interest rates, forcing select mortgages. We may look for
a fund to reinvest its money at mortgage securities that have
interest rates that might be lower than characteristics that make them less
those on the prepaid mortgage. likely to be prepaid, such as low
Prepayment risk may also affect other outstanding loan balances or
types of debt securities, but generally below-market interest rates.
to a lesser extent than mortgage
securities.
- ----------------------------------------- --------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid
securities cannot be readily sold securities to no more than 15% of the
within seven days at approximately the Fund's net assets.
price at which a fund has valued them.
- ----------------------------------------- --------------------------------------
Derivatives risk is the possibility We will use derivatives for defensive
that a fund may experience a purposes, such as to protect gains or
significant loss if it employs a hedge against potential losses in the
derivatives strategy (including a portfolio without actually selling a
strategy involving swaps such as security, to neutralize the impact of
interest rate swaps, index swaps, and interest rate changes, to affect
credit default swaps) related to a diversification, or to earn
security or a securities index and that additional income.
security or index moves in the opposite
direction from what the 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.
- ----------------------------------------- --------------------------------------
Currency risk is the risk that the The Fund, which has exposure to
value of an investment may be global and international investments,
negatively affected by changes in may be affected by changes in
foreign currency exchange rates. currency rates and exchange control
Adverse changes in exchange rates may regulations and may incur costs in
reduce or eliminate any gains produced connection with conversions between
by investments that are denominated in currencies. To hedge this currency
foreign currencies and may increase risk associated with investments in
losses. non-U.S. dollar-denominated
securities, we may invest in forward
foreign currency contracts. These
activities pose special risks which
do not typically arise in connection
with investments in U.S. securities.
In addition, we may engage in foreign
currency options and futures
transactions.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Risks How we strive to manage them
- ----------------------------------------- --------------------------------------
Foreign risk is the risk that foreign We attempt to reduce the risks
securities may be adversely affected by presented by such investments by
political instability, changes in conducting world-wide fundamental
currency exchange rates, foreign research, including country visits.
economic conditions, or inadequate In addition, we monitor current
regulatory and accounting standards. economic and market conditions and
trends, the political and regulatory
environment, and the value of
currencies in different countries in
an effort to identify the most
attractive countries and securities.
Additionally, when currencies appear
significantly overvalued compared to
average real exchange rates, we may
hedge exposure to those currencies
for defensive purposes.
- ----------------------------------------- --------------------------------------
Emerging markets risk is the We may invest a portion of the Fund's
possibility that the risks associated assets in securities of issuers
with international investing will be located in emerging markets. We
greater in emerging markets than in cannot eliminate these risks but will
more developed foreign markets because, attempt to reduce these risks through
among other things, emerging markets portfolio diversification, credit
may have less stable political and analysis, and attention to trends in
economic environments. In addition, in the economy, industries and financial
many emerging markets there is markets, and other relevant factors.
substantially less publicly available We will limit investments in emerging
information about issuers and the markets, in the aggregate, to no more
information that is available tends to than 10% of the Fund's net assets.
be of a lesser quality. Economic
markets and structures tend to be less
mature and diverse and the securities
markets, which are subject to less
government regulation or supervision,
may also be smaller, less liquid, and
subject to greater price volatility.
- ----------------------------------------- --------------------------------------
Foreign government securities risk We attempt to reduce the risks
involves the ability of a foreign associated with investing in foreign
government or government-related issuer governments by limiting the portion
to make timely principal and interest of the Fund's assets that may be
payments on its external debt invested in such securities. We will
obligations. This ability to make not invest more than 20% of the
payments will be strongly influenced by Fund's net assets in foreign
the issuer's balance of payments, securities.
including export performance, its
access to international credits and
investments, fluctuations in interest
rates, and the extent of its foreign
reserves.
- ----------------------------------------- --------------------------------------
Legislative and regulatory risk: The We monitor the status of regulatory
United States Congress has, from time and legislative proposals to evaluate
to time, taken or considered any possible effects they might have
legislative actions that could on the Fund's portfolio.
adversely affect the high yield bond
market. For example, Congressional
legislation has, with some exceptions,
generally prohibited federally insured
savings and loan institutions from
investing in high yield securities.
Regulatory actions have also affected
the high yield market. Similar actions
in the future could reduce liquidity
for high yield securities, reduce the
number of new high yield securities
being issued and could make it more
difficult for the Fund to attain its
investment objective.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Risks How we strive to manage them
- ----------------------------------------- --------------------------------------
Zero coupon and PIK bonds: Zero coupon We may invest in zero coupon and PIK
and PIK bonds are generally considered bonds to the extent consistent with
to be more interest sensitive than the Fund's investment objective. We
income-bearing bonds, to be more cannot eliminate the risks of zero
speculative than interest-bearing coupon bonds, but we do try to
bonds, and to have certain tax address them by monitoring economic
consequences which could, under certain conditions, especially interest rate
circumstances be adverse to the Fund. trends and their potential impact on
For example, the Fund accrues, and is the Fund.
required to distribute to shareholders,
income on its zero coupon bonds.
However, the Fund may not receive the
cash associated with this income until
the bonds are sold or mature. If the
Fund does not have sufficient cash to
make the required distribution of
accrued income, the Fund could be
required to sell other securities in
its portfolio or to borrow to generate
the cash required.
- ----------------------------------------- --------------------------------------
Loans and other direct indebtedness These risks may not be completely
risk involves the risk that a fund will eliminated, but we will attempt to
not receive payment of principal, reduce them through portfolio
interest, and other amounts due in diversification, credit analysis, and
connection with these investments and attention to trends in the economy,
will depend primarily on the financial industries, and financial markets.
condition of the borrower. Loans that Should we determine that any of these
are fully secured offer a fund more securities may be illiquid, these
protection than an unsecured loan in would be subject to the Fund's
the event of non-payment of scheduled restriction on illiquid securities.
interest or principal, although there
is no assurance that the liquidation of
collateral from a secured loan would
satisfy the corporate borrower's
obligation, or that the collateral can
be liquidated. Some loans or claims may
be in default at the time of purchase.
Certain of the loans and the other
direct indebtedness acquired by a fund
may involve revolving credit facilities
or other standby financing commitments
which obligate a fund to pay additional
cash on a certain date or on demand.
These commitments may require a fund to
increase its investment in a company at
a time when that fund might not
otherwise decide to do so (including at
a time when the company's financial
condition makes it unlikely that such
amounts will be repaid). To the extent
that a fund is committed to advance
additional funds, it will at all times
hold and maintain in a segregated
account cash or other high-grade debt
obligations in an amount sufficient to
meet such commitments.

As a fund may be required to rely upon
another lending institution to collect
and pass onto a fund amounts payable
with respect to the loan and to enforce
a fund's rights under the loan and
other direct indebtedness, an
insolvency, bankruptcy, or
reorganization of the lending
institution may delay or prevent a fund
from receiving such amounts. The highly
leveraged nature of many such loans and
other direct indebtedness may make such
loans and other direct indebtedness
especially vulnerable to adverse
changes in economic or market
conditions. Investments in such loans
and other direct indebtedness may
involve additional risk to a fund.
- ----------------------------------------- ---------------------------------------

- ----------------------------------------- --------------------------------------
Risks How we strive to manage them
- ----------------------------------------- --------------------------------------
Valuation risk: A less liquid We will strive to manage this risk by
secondary market, as described above, carefully evaluating individual bonds
makes it more difficult for a fund to and by limiting the amount of the
obtain precise valuations of the high Fund's assets that can be allocated
yield securities in its portfolio. to privately placed high yield
During periods of reduced liquidity, securities.
judgment plays a greater role in
valuing high yield securities.

- ----------------------------------------- --------------------------------------

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 (Manager), a series of
Delaware Management Business Trust, which is a 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, net of waivers, of
0.32% of average daily net assets during the last fiscal year.

A discussion of the basis for the Board's approval of the Fund's investment
advisory contract is available in the Fund's semiannual report to shareholders
for the period ended June 30, 2007.

Portfolio managers
Paul Grillo and Roger A. Early have day-to-day responsibilities for making
investment decisions for the Fund.

Paul Grillo, CFA, Senior Vice President, Senior Portfolio Manager Mr. Grillo is
a member of the firm's taxable fixed income portfolio management team with
primary responsibility for portfolio construction and strategic asset
allocation. He joined Delaware Investments in 1992, and also serves as a
mortgage-backed and asset-backed securities analyst. Previously, Mr. Grillo
served as a mortgage strategist and trader at Dreyfus Corporation. He also
worked as a mortgage strategist and portfolio manager at Chemical Investment
Group and as a financial analyst at Chemical Bank. Mr. Grillo holds a bachelor's
degree in business management from North Carolina State University and an MBA
with a concentration in finance from Pace University.

Roger A. Early, CPA, CFA, CFP, Senior Vice President, Senior Portfolio Manager
Mr. Early is a member of the firm's taxable fixed income portfolio management
team with primary responsibility for portfolio construction and strategic asset
allocation. Mr. Early re-joined Delaware Investments in March 2007. During his
previous tenure at the firm, from 1994 to 2001, he was a senior portfolio
manager in the same area, and he left Delaware Investments as head of its U.S.
investment grade fixed income group. Mr. Early most recently worked at Chartwell
Investment Partners, where he served as a senior portfolio manager in fixed
income from 2003 to 2007. He also worked at Turner Investments from 2002 to
2003, where he served as chief investment officer for fixed income, and
Rittenhouse Financial from 2001 to 2002. He joined Delaware Investments in 1994
after 10 years at Federated Investors. Mr. Early earned his bachelor's degree in
economics from The Wharton School of the University of Pennsylvania and an MBA
with concentrations in finance and accounting from the University of Pittsburgh.
He is a member of The CFA Society of Philadelphia.

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

Manager of managers structure
The Fund and the Manager have received an exemptive order from the U.S.
Securities and Exchange Commission (SEC) to operate under a manager of managers
structure that permits the Manager, with the approval of the Board, to appoint
and replace sub-advisors, enter into sub-advisory agreements, and materially
amend and terminate sub-advisory agreements on behalf of the Fund without
shareholder approval (Manager of Managers Structure). Under the Manager of
Managers Structure, the Manager has ultimate responsibility, subject to
oversight by the Fund's Board, for overseeing the Fund's sub-advisors and
recommending to the Board their hiring, termination, or replacement. The SEC
order does not apply to any sub-advisor that is affiliated with the Fund or the
Manager. 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.

The Manager of Managers Structure enables the Fund to operate with greater
efficiency and without incurring the expense and delays associated with
obtaining shareholder approvals for matters relating to sub-advisors or
sub-advisory agreements. The Manager of Managers Structure does not permit an
increase in the overall management and advisory fees payable by the Fund without
shareholder approval. Shareholders will be notified of any changes made to
sub-advisors or sub-advisory agreements within 90 days of the change.

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

[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED IN
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS(R) FUNDS]

Board of Trustees
Investment manager Custodian
Delaware Management Company Mellon Bank, N.A.
2005 Market Street One Mellon Center
Philadelphia, PA 19103-7094 The Fund Pittsburg, PA 15285

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

Financial intermediary wholesaler
Lincoln Financial Distributors, Inc.
2001 Market Street
Philadelphia, PA 19103-7055
Portfolio managers
(see page 20 for details)
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 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 investment manager performs. Most management
contracts provide for the investment manager to receive an annual fee based on a
percentage of the fund's average daily net assets. The investment 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 that
segregates fund securities from other bank assets.

Distributor Most mutual funds continuously offer new shares to the public
through distributors that are regulated as broker/dealers and are subject to the
Financial Industry Regulatory Authority (FINRA) rules governing mutual fund
sales practices.

Financial intermediary wholesaler Pursuant to a contractual arrangement with the
distributor, the financial intermediary wholesaler 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 a 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 reduced 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 voluntarily 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 CDSC, 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 NAV, the percentage
rate of sales charge, and rounding.

- -------------------------------- ------------------------ ------------------------
Sales charge as % Sales charge as % of
Amount of purchase of offering price net amount 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 None (Limited CDSC
may apply)* may apply)*
- -------------------------------- ------------------------ ------------------------

* There is no front-end sales charge when you purchase $1 million or more of
Class A shares. However, if the Delaware Distributors, L.P. (the
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 after your purchase, unless a specific
waiver of the Limited CDSC applies. The Limited CDSC will be paid to the
Distributor and will be assessed on an amount equal to the lesser of: (1)
the NAV at the time the Class A shares being redeemed were purchased; or
(2) the NAV of such Class A shares at the time of redemption. For purposes
of this formula, the "NAV at the time of purchase" will be the NAV 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 "NAV of such shares at the time of
redemption" will be the NAV 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.

As of May 31, 2007, no new or subsequent investments, including investments
through automatic investment plans and by qualified retirement plans (such as
401(k) plans, 403(b) plans, or 457 plans), are allowed in Class B shares of the
Fund, except through a reinvestment of dividends or capital gains or permitted
exchanges. Existing shareholders of Class B shares may continue to hold their
Class B shares, reinvest dividends into Class B shares, and exchange their Class
B shares of one Delaware Investments(R) Fund for Class B shares of another Fund,
as permitted by existing exchange privileges. Existing Class B shareholders
wishing to make subsequent purchases in the Fund's shares will be permitted to
invest in other classes of the Fund, subject to that class' pricing structure
and eligibility requirements, if any.

For Class B shares outstanding as of May 31, 2007 and Class B shares acquired
upon reinvestment of dividends or capital gains, all Class B share attributes,
including the CDSC schedules, conversion to Class A schedule, and distribution
and service (12b-1) fees, will continue in their current form. However, as of
May 31, 2007, the reinvestment of redeemed shares with respect to Class B shares
(which, as described in the prospectus, permits you to reinvest within 12 months
of selling your shares and have any CDSC you paid on such shares credited back
to your account) has been discontinued. In addition, because the Fund's or its
Distributor's ability to assess certain sales charges and fees is dependent on
the sale of new shares, the termination of new purchases of Class B shares could
ultimately lead to the elimination and/or reduction of such sales charges and
fees. The Fund may not be able to provide shareholders with advance notice of
the reduction in these sales charges and fees. You will be notified via a
Prospectus Supplement if there are any changes to any attributes, sales charges,
or fees.

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 CDSC 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 CDSC of 2.00%. The CDSC is 1.00% during the
second and third years, and 0% thereafter.

o In determining whether the CDSC applies to a redemption of Class B Shares,
it will be assumed that shares held for more than three years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the three-year
period. For further information on how the CDSC is determined, please see
"Calculation of Contingent Deferred Sales Charges-- Class B and Class C"
below.

o Under certain circumstances, the CDSC may be waived; please see "Waivers of
Contingent Deferred Sales Charges" below for further information.

o 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 Five years after you buy them, Class B shares automatically convert to
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.
Orders that exceed $100,000 will be rejected. 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 CDSC of 1.00% if
you redeem your shares within 12 months after you buy them.

o In determining whether the CDSC 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 CDSC is determined, please see
"Calculation of Contingent Deferred Sales Charges - Class B and Class C"
below.

o Under certain circumstances the CDSC 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 to
another class.

o You may purchase only up to $1,000,000 of Class C shares at any one time.
Orders that exceed $1,000,000 will be rejected. 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 CDSC.

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 to
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) individual
retirement account (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 IRAs, SEP/IRAs, SAR/SEP IRAs, Roth IRAs, 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
CDSCs are charged as a percentage of the dollar amount subject to the CDSC. The
charge will be assessed on an amount equal to the lesser of the NAV at the time
the shares being redeemed were purchased or the NAV of those shares at the time
of redemption. No CDSC will be imposed on increases in NAV above the initial
purchase

price, nor will a CDSC be assessed on redemptions of shares acquired through
reinvestment of dividends or capital gains distributions. For purposes of this
formula, the "NAV at the time of purchase" will be the NAV at purchase of Class
B shares or Class C shares of the Fund, even if those shares are later exchanged
for shares of another Delaware Investments(R) Fund. In the event of an exchange
of the shares, the "NAV of such shares at the time of redemption" will be the
NAV 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
$100,000 2.35% - - -
- ---------------------------- ------------- ------------- ------------ -------------
$100,000 but less than
$250,000 1.75% - - -
- ---------------------------- ------------- ------------- ------------ -------------
$250,000 but less than
$1,000,000 0.75% - - -
- ---------------------------- ------------- ------------- ------------ -------------
$1,000,000 but less than
$5,000,000 0.75% - - -
- ---------------------------- ------------- ------------- ------------ -------------
$5,000,000 but less than
$25,000,000 0.50% - - -
- ---------------------------- ------------- ------------- ------------ -------------
$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 voluntarily
agreed to limit this amount to 0.15% from May 1, 2007 until the waiver is
discontinued. The waiver may be discontinued at any time because it is
voluntary. 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 five years, Class B shares
automatically convert to 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 may pay 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. Alternatively, certain intermediaries may not be
eligible to receive the up-front commission of 1.00%, but may receive the
full 1.00% 12b-1 fee upon sales of Class C shares.
(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% from May 1, 2007 through April 30,
2008. 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%.

Payments to intermediaries
The Distributor, Lincoln Financial Distributors, Inc., and their affiliates may
pay additional compensation (at their own expense and not as an expense of the
Fund) to certain affiliated or unaffiliated brokers, dealers, or other financial
intermediaries (Financial Intermediaries) in connection with the sale or
retention of Fund shares and/or shareholder servicing, including providing the
Fund with "shelf space" or a higher profile with the Financial Intermediary's
consultants, sales persons, and customers (distribution assistance). The level
of payments made to a qualifying Financial Intermediary in any given year will
vary. To the extent permitted by SEC and FINRA rules and other applicable laws
and regulations, the Distributor may pay, or allow its affiliates to pay, other
promotional incentives or payments to Financial Intermediaries.

If a mutual fund sponsor or distributor makes greater payments for distribution
assistance to your Financial Intermediary with respect to distribution of shares
of that particular mutual fund than sponsors or distributors of other mutual
funds make to your Financial Intermediary with respect to the distribution of
the shares of their mutual funds, your Financial Intermediary and its
salespersons may have a financial incentive to favor sales of shares of the
mutual fund making the higher payments over shares of other mutual funds or over
other investment options. In addition, depending on the arrangements in place at
any particular time, a Financial Intermediary may also have a financial
incentive for recommending a particular share class over other share classes.
You should consult with your Financial Intermediary and review carefully any
disclosure provided by such Financial Intermediary as to compensation it
receives in connection with investment products it recommends or sells to you.
In certain instances, the payments could be significant and may cause a conflict
of interest for your Financial Intermediary. Any such payments will not change
the NAV or the price of the Fund's shares.

For more information, please see the Fund's SAI.

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 Through a Letter of X Although the Letter of Intent and
Intent Intent, you agree to Rights of Accumulation do not
invest a certain apply to the purchase of Class B
amount in Delaware and Class C shares, you can
Investments(R) Funds combine your purchase of Class A
(except money market shares with your purchase of
funds with no sales Class B and Class C shares to
charge) over a fulfill your Letter of Intent or
13-month period to qualify for Rights of
qualify for reduced Accumulation.
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 Up to 12 months after For Class A, For Class Not available.
of Redeemed you redeem shares, you will not B, your
Shares you can reinvest the have to pay an account
proceeds without additional will be
paying a sales charge. front-end credited
sales charge. with the
CDSC you
previously
paid on the
amount you
are
reinvesting.
Your
schedule
for CDSCs
and
conversion
to Class A
will not
start over
again; it
will pick
up from the
point at
which you
redeemed
your shares.
- ---------------- ------------------------- ------------------ -----------------------------------

Buying Class A shares at Net Asset Value

Class A shares of the Fund may be purchased at NAV 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 the
Manager's 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 NAV.

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 NAV.

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 the Delaware Investments(R) Funds.

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

o Purchases for the benefit of the clients of brokers, dealers, and
registered investment managers if such brokers, dealers, or investment
managers 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 accounts of their
trust customers if they are not eligible to purchase shares of the Fund's
Institutional Class, if applicable.

o Purchases by retirement plans that are maintained on retirement platforms
sponsored by financial intermediary firms, provided the financial
intermediary firms have 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

The Fund's applicable CDSCs may be waived under the following circumstances:

- --------------------------------------- -------------- -------------- ---------------
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 NAV of the shares held in
the account is less than the
then-effective minimum account size.
- --------------------------------------- -------------- -------------- ---------------
Distributions to participants or X Not Not available.
beneficiaries from a retirement plan available.
qualified under Section 401(a) of the
Internal Revenue Code of 1986, as
amended (Code).
- --------------------------------------- -------------- -------------- ---------------
Redemptions pursuant to the direction X Not Not available.
of a participant or beneficiary of a 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, Coverdell Education
Savings Account, 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
Treas. Reg.&sect;1.401(k)-1(d)(3) and
Section 457(d)(1)(A)(iii) 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, Coverdell Education
Savings Account, 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 available.
benefit plans to pay benefits. 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 Treas. Reg.
- --------------------------------------- -------------- -------------- ---------------

* 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 CDSC 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 on the Delaware Investments(R) Funds' Web site at
www.delawareinvestments.com. Additional information on sales charges can be
found in the Fund's SAI, which is available upon request.

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, P.O. Box
219656, Kansas City, MO 64121-9656. 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.

Please note that all purchases by mail into your account or into a new account
will not be accepted until such purchase orders are received by Delaware
Investments at P.O. Box 219656, Kansas City, MO 64121-9656 for investments by
regular mail or 430 W. 7th Street, Kansas City, MO 64105 for investments by
overnight courier service. Please do not send purchase orders to 2005 Market
Street, Philadelphia, PA 19103-7094.

[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.

[GRAPHIC OMITTED: SYMBOL OF A KEYPAD]

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 $25 or more, 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 an authorized agent or we 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 a
fund's 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 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. Because the
Fund invests in foreign securities that may trade on days when the Fund is not
open for business, the value of such securities may change on days when the
shareholder will not be able to purchase or redeem Fund shares. 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. We price 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 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
traded primarily 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 send 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 to receive 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 documents 30 days after receiving your request.

About your account (continued)

How to redeem shares

[GRAPHIC OMITTED: SYMBOL OF A PERSON]

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.

[GRAPHIC OMITTED: SYMBOL OF AN ENVELOPE]

By mail
You may redeem your shares by mail by writing to: Delaware Investments, P.O. Box
219656, Kansas City, MO 64121-9656. All owners of the account must sign the
request. 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.

Please note that all redemption requests from your account by mail will not be
accepted until such redemption orders are received by Delaware Investments at
P.O. Box 219656, Kansas City, MO 64121-9656 for redemptions by regular mail or
430 W. 7th Street, Kansas City, MO 64105 for redemptions by overnight courier
service. Please do not send redemption requests to 2005 Market Street,
Philadelphia, PA 19103-7094.

[GRAPHIC OMITTED: SYMBOL OF A TELEPHONE]

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. 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.

[GRAPHIC OMITTED: SYMBOL OF A JAGGED LINE]

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.

[GRAPHIC OMITTED: SYMBOL OF A KEYPAD]

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.

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
an authorized agent or we receive the request before the close of regular
trading on the NYSE (normally 4:00 p.m. Eastern Time), you will receive the NAV
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 CDSCs. 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 CDSC 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 CDSC 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 CDSC at the time of the exchange. If you later redeem those shares,
the purchase price for purposes of the CDSC 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 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 may 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 the 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) Funds' 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 CDSC.
Under some 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 of another Delaware Investments(R) Fund without paying a front-end sales
charge or a CDSC 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 CDSC as the
shares you originally purchased. The holding period for the CDSC will also
remain the same, with the amount of time you held your original shares being
credited toward the holding period of your new shares. You 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 objective 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(SM) On Demand Service has a minimum transfer of $25 and a maximum
transfer of $100,000, 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 CDSC for Class A shares and the CDSC 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 subject to the
applicable CDSC, 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 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.

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 and may be selectively
applied, we seek 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. If the Fund elects not to take any action in response to frequent
trading, such frequent trading activity could continue.

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.

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 a fund
calculates its NAV (normally 4:00 p.m. Eastern Time). Developments that occur
between the closing of the foreign market and a 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
a 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 have financial intermediaries apply the Fund's monitoring
procedures to these omnibus accounts and to the individual participants in such
accounts. However, to the extent that a financial intermediary is not able or
willing to monitor or enforce the Fund's frequent trading policy with respect to
an omnibus account, the Fund or its agents may require the financial
intermediary to impose its frequent trading policy, rather than the Fund's
policy, to shareholders investing in the Fund through the financial
intermediary.

A financial intermediary may impose different requirements or have additional
restrictions on the frequency of trading than the Fund. Such restrictions may
include without limitation, requiring the trades to be placed by U.S. mail,
prohibiting purchases for a designated period of time (typically 30 to 90 days)
by investors who have recently purchased or redeemed Fund shares and similar
restrictions. The Fund's ability to impose such restrictions with respect to
accounts traded through particular financial intermediaries may vary depending
on systems capabilities, applicable contractual and legal restrictions, and
cooperation of those financial intermediaries.

You should consult your financial intermediary regarding the application of such
restrictions and to determine whether your financial intermediary imposes any
additional or different limitations. 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 qualified as a regulated investment
company under the 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 realized capital gains, if any, twice each year. The amount of
any distribution will vary, and there is no guarantee the Fund will pay either
an income dividend or a capital gains 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 calendar year.
Distributions declared in December to shareholders of record in such month, but
paid in January, are taxable as if they were paid in December. The Fund 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. Use the information on your corrected Form 1099-DIV,
not the information on your statement, for tax returns.

Avoid "Buying A Dividend." If you are a taxable investor and 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. Because the income of the Fund primarily is derived from
investments earning interest rather than dividend income, generally none or only
a small portion of the income dividends paid to you by the Fund may be qualified
dividend income eligible for taxation by individuals at long-term capital gain
rates if 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 at a 30% or lower treaty tax rate and U.S. estate
tax, and are subject to special U.S. tax certification requirements.

Receipt of excess inclusion income by the Fund. Income received by the Fund from
certain equity interests in mortgage pooling vehicles is treated as "excess
inclusion income." The Fund may derive such income from investment in REMIC
residual interests or, indirectly, through an investment in REITs that hold such
interests or otherwise qualify as taxable mortgage pools. In general, this
income is required to be reported to Fund shareholders that are not disqualified
organizations (as defined below) in proportion to dividends paid with the same
consequences as if the shareholders directly received the excess inclusion
income. Excess inclusion income: (i) may not be offset with net operating
losses; (ii) represents unrelated business taxable income (UBTI) in the hands of
a tax-exempt shareholder that is not a disqualified organization; and (iii) is
subject to withholding tax, without regard to otherwise applicable exemptions or
rate reductions, to the extent such income is allocable to a shareholder who is
not a U.S. person. The Fund must pay the tax on its excess inclusion income that
is allocable to "disqualified organizations," which are generally certain
cooperatives, governmental entities, and tax-exempt organizations that are not
subject to tax on UBTI. To the extent that the Fund shares owned by a
disqualified organization are held in record name by a broker/dealer or other
nominee, the Fund must inform the broker/dealer or other nominee of the excess
inclusion income allocable to them and the broker/dealer or other nominee must
pay the tax on the portion of the Fund's excess inclusion income allocable to
them on behalf of the disqualified organizations.

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 from similar investment vehicles,
such as 529 Plans. A "529 Plan" is a college savings program that operates under
Section 529 of the 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.

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. The information for each of the fiscal years ended
December 31 presented below 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 Diversified Income Fund Class A
Year ended 12/31
Six months
ended
6/30/07(5) 2006 2005 2004 2003 2002
(unaudited)
Net asset value, beginning of period $8.210 $8.270 $8.480 $8.620 $8.770 $8.600

Income (loss) from investment
operations:
Net investment income 0.174 0.284 0.278 0.244 0.222 0.349
Net realized and unrealized gain
(loss) on investments (0.052) 0.019 (0.132) (0.048) (0.039) 0.255
------- -------- -------- -------- -------- --------
Total from investment operations 0.122 0.303 0.146 0.196 0.183 0.604
------- -------- -------- -------- -------- --------

Less dividends and distributions
from:
Net investment income (0.192) (0.363) (0.356) (0.336) (0.315) (0.434)
Return of capital ----- ----- ----- ----- (0.018) -----
------- -------- -------- -------- -------- --------
Total dividends and distributions (0.192) (0.363) (0.356) (0.336) (0.333) (0.434)
------- -------- -------- -------- -------- --------

Net asset value, end of period $8.140 $8.210 $8.270 $8.480 $8.620 $8.770
======= ======== ======== ======== ======== ========

Total return 1.50%(2) 3.76%(2) 1.76%(2) 2.31%(2) 2.12%(2) 7.08%(2)

Ratios and supplemental data:
Net assets, end of period (000
omitted) $168,899 $173,362 $189,845 $204,053 $249,845 $250,729
Ratio of expenses to average net
assets 0.82% 0.81% 0.82% 0.75% 0.75% 0.75%
Ratio of expenses to average net
assets prior to expense
limitation and expenses paid
indirectly 1.16% 1.14% 1.12% 1.13% 1.14% 1.05%
Ratio of net investment income to
average net assets 4.42% 3.46% 3.32% 2.85% 2.57% 3.99%
Ratio of net investment income to
average net assets prior to
expense limitation and expenses
paid indirectly 4.08% 3.13% 3.02% 2.47% 2.18% 3.69%
Portfolio turnover 251% 276% 259% 313% 483% 313%

(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 and does not reflect the impact of a sales
charge. Total investment return reflects waivers and payment of fees by the
manager and distributor, as applicable. Performance would have been lower
had the expense limitation not been in effect.

(3) 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.

(4) The portfolio turnover is representative of the entire Fund for the year
ended December 31, 2003.

(5) Ratios and portfolio turnover have been annualized and total return has not
been annualized.

Delaware Limited-Term Diversified Income Fund Class B
Year ended 12/31
Six months
ended
6/30/07(5) 2006 2005 2004 2003 2002
(unaudited)
Net asset value, beginning of period $8.210 $8.270 $8.480 $8.620 $8.770 $8.600

Income (loss) from investment
operations:
Net investment income 0.140 0.215 0.207 0.170 0.152 0.274
Net realized and unrealized gain
(loss) on investments (0.052) 0.019 (0.132) (0.047) (0.044) 0.255
------- -------- -------- -------- -------- --------
Total from investment operations 0.088 0.234 0.075 0.123 0.108 0.529
------- -------- -------- -------- -------- --------

Less dividends and distributions
from:
Net investment income (0.158) (0.294) (0.285) (0.263) (0.244) (0.359)
Return of capital ---- ----- ----- ----- (0.014) ----
------- -------- -------- -------- -------- --------
Total dividends and distributions (0.158) (0.294) (0.285) (0.263) (0.258) (0.359)
------- -------- -------- -------- -------- --------

Net asset value, end of period $8.140 $8.210 $8.270 $8.480 $8.620 $8.770
======= ======== ======== ======== ======== ========

Total return 1.07%(2) 2.89%(2) 0.90%(2) 1.44%(2) 1.25%(2) 6.17%(2)

Ratios and supplemental data:
Net assets, end of period (000
omitted) $7,884 $11,674 $19,857 $27,559 $37,774 $50,326
Ratio of expenses to average net
assets 1.67% 1.66% 1.67% 1.60% 1.60% 1.60%
Ratio of expenses to average net
assets prior to expense
limitations and expenses paid
indirectly 1.86% 1.84% 1.82% 1.83% 1.86% 1.90%
Ratio of net investment income to
average net assets 3.57% 2.61% 2.47% 2.00% 1.72% 3.14%
Ratio of net investment income to
average net assets prior to
expense limitations and
expenses paid indirectly 3.38% 2.43% 2.32% 1.77% 1.46% 2.84%
Portfolio turnover 251% 276% 259% 313% 483% 313%

Delaware Limited-Term Diversified Income Fund Class C
Year ended 12/31
Six months
ended
6/30/07(5) 2006 2005 2004 2003 2002
(unaudited)
Net asset value, beginning of period $8.210 $8.270 $8.480 $8.620 $8.770 $8.600

Net asset value, end of period $8.140 $8.210 $8.270 $8.480 $8.620 $8.770
======= ======== ======== ======== ======== ========

Total return 1.07%(2) 2.89%(2) 0.90%(2) 1.44%(2) 1.25%(2) 6.16%(2)

Ratios and supplemental data:
Net assets, end of period (000
omitted) $19,489 $21,716 $32,235 $49,709 $72,045 $71,189
Ratio of expenses to average net
assets 1.67% 1.66% 1.67% 1.60% 1.60% 1.60%
Ratio of expenses to average net
assets prior to expense
limitations and expenses paid
indirectly 1.86% 1.84% 1.82% 1.83% 1.86% 1.90%
Ratio of net investment income to
average net assets 3.57% 2.61% 2.47% 2.00% 1.72% 3.14%
Ratio of net investment income to
average net assets prior to
expense limitations and
expenses paid indirectly 3.38% 2.43% 2.32% 1.77% 1.46% 2.84%
Portfolio turnover 251% 276% 259% 313% 483% 313%

Delaware Limited-Term Diversified Income Fund Class R
Year ended 12/31

Period
Six months 6/2/03(1)
ended through
6/30/07(5) 2006 2005 2004 12/31/03
(unaudited)
Net asset value, beginning of period $8.220 $8.270 $8.490 $8.630 $8.800

Income (loss) from investment
operations:
Net investment income 0.160 0.255 0.244 0.205 0.074
Net realized and unrealized gain
(loss) on investments (0.052) 0.029 (0.142) (0.048) (0.063)
------- -------- -------- -------- --------
Total from investment operations 0.108 0.284 0.102 0.157 0.011
------- -------- -------- -------- --------

Less dividends and distributions
from:
Net investment income (0.178) (0.334) (0.322) (0.297) (0.165)
Return of capital ---- ----- ----- ----- (0.016)
------- -------- -------- -------- --------
Total dividends and distributions (0.178) (0.334) (0.322) (0.297) (0.181)
------- -------- -------- -------- --------

Net asset value, end of period $8.150 $8.220 $8.270 $8.490 $8.630
======= ======== ======== ======== ========

Total return 1.32%(3) 3.53%(3) 1.34%(3) 1.73%(3) 0.14%(3)

Ratios and supplemental data:
Net assets, end of period (000
omitted) $2,028 $1,876 $1,860 $1,905 $1,499
Ratio of expenses to average net
assets 1.17% 1.16% 1.23% 1.20% 1.20%
Ratio of expenses to average net
assets prior to expense
limitations and expenses paid
indirectly 1.46% 1.44% 1.42% 1.43% 1.38%
Ratio of net investment income to
average net assets 4.07% 3.11% 2.91% 2.40% 1.86%
Ratio of net investment income to
average net assets prior to
expense limitations and expense
paid indirectly 3.78% 2.83% 2.72% 2.17% 1.68%
Portfolio turnover 251% 276% 259% 313% 483%(4)

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 calculated 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 class of the fund.

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

Ratio of net investment income (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 rating 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 investment advice and help
in buying or selling mutual funds, stocks, bonds, or other securities.

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 a 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 a 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
a fund's portfolio of securities and distributing its shares. They are paid from
a 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.

FINRA
The Financial Industry Regulatory Authority is the largest non-governmental
regulator for all securities firms doing business in the United States.

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, and 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 objective
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 a 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 a 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.

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

Net asset value (NAV)
The total value of one mutual fund share, generally equal to a fund's net assets
divided by the number of shares outstanding.

Preferred stock
Preferred stock has preference over common stock in the payment of dividends and
liquidation of assets. Preferred stocks also often pay dividends at a fixed rate
and are 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 official offering document that describes a mutual fund, containing
information required by the SEC, such as investment objectives, policies,
services, and fees.

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

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

Sales charge
Charge on the purchase or redemption of fund shares sold through financial
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
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 SAI, which we have filed electronically with the SEC and which is
legally a part of this Prospectus (it is incorporated by reference). If you want
a free copy of the SAI or the annual or semiannual report, or if you have any
questions about investing in the Fund, you can write to us at P.O. Box 219656,
Kansas City, MO 64121-9656 by regular mail or 430 W. 7th Street, Kansas City, MO
64105 by overnight courier service, or call toll-free 800 523-1918. Please do
not send any correspondence to 2005 Market Street, Philadelphia, PA 19103-7094.
The Fund's SAI and annual and semiannual reports to shareholders are also
available, free of charge, through the Fund's 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.

Contact information
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 Diversified Income 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

PR-022 [12/06] CGI
MF-07-03-157
PO 11749

Delaware
Investments(R)
A member of Lincoln Financial Group

Delaware Limited-Term Diversified Income Fund

Institutional Class

Prospectus
November 30, 2007

Fixed Income

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

Table of contents
Fund profile page 2
Delaware Limited-Term Diversified Income Fund 2

How we manage the Fund page 7
Our investment strategies 7
The securities we typically invest in 9
The risks of investing in the Fund 14
Disclosure of portfolio holdings information 18

Who manages the Fund page 19
Investment manager 19
Portfolio managers 19
Manager of managers structure 19
Who's who? 20

About your account page 22
Investing in the Fund 22
Payments to intermediaries 22
How to buy shares 23
Fair valuation 23
Document delivery 24
How to redeem shares 25
Account minimum 25
Exchanges 25
Frequent trading of Fund shares 26
Dividends, distributions, and taxes 27
Certain management considerations 29

Financial highlights page 30
Glossary page 32
Additional information Back cover

Profile: Delaware Limited-Term Diversified Income Fund

For a more complete discussion of risk, please see "The risks of investing in
the Fund" on page 14.

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.

How has Delaware Limited-Term Diversified Income 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 10 calendar years, as well as the average annual returns of
the Institutional Class shares for the one-, five-, and 10-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 certain of these periods. The returns would be lower
without the expense caps. Please see the footnotes on page 5 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)

- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------
5.39% 7.62% 1.22% 8.75% 8.34% 7.27% 2.27% 2.46% 1.91% 3.92%
- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------

As of September 30, 2007, the Fund's Class A shares had a calendar year-to-date
return of 3.81%. 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 12/31/06

- ----------------------------------------- ------------- ----------- ------------
1 year 5 years 10 years
- ----------------------------------------- ------------- ----------- ------------
Return before taxes 3.92% 3.55% 4.88%
- ----------------------------------------- ------------- ----------- ------------
Return after taxes on distributions 2.27% 1.93% 2.75%
- ----------------------------------------- ------------- ----------- ------------
Return after taxes on distributions
and sale of Fund shares 2.52% 2.07% 2.84%
- ----------------------------------------- ------------- ----------- ------------
Lehman Brothers 1-3 Year Government/
Credit Index* 4.25% 3.27% 4.97%
- ----------------------------------------- ------------- ----------- ------------
Merrill Lynch 1-3 Year U.S. Treasury
Index 3.96% 2.82% 4.69%
(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 periods presented 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.

* The Lehman Brothers 1-3 Year Government/Credit Index is replacing the Merrill
Lynch 1-3 Year Treasury Index as the Fund's benchmark. As a result of the
changes in the Fund's investment objective and strategies, as described above,
the investment manager (Manager) believes that the Lehman 1-3 Year
Government/Credit Index is a more accurate benchmark of the Fund's investments.
The Merrill Lynch 1-3 Year Treasury Index may be excluded from this comparison
in the future.

What are the Fund's fees and expenses?

- --------------------------- --------------------------------- -----------------
You do not pay sales CLASS INSTITUTIONAL
charges directly from --------------------------------- -----------------
your investments when you Maximum sales charge (load) none
buy or sell shares of the imposed on purchases as a
Institutional Class. percentage of offering price
--------------------------------- -----------------
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 CLASS INSTITUTIONAL
expenses are deducted --------------------------------- -----------------
from the Fund's assets. Management fees(2) 0.50%
--------------------------------- -----------------
Distribution and service none
(12b-1) fees
--------------------------------- -----------------
Other expenses(3) 0.33%
--------------------------------- -----------------
Total annual fund operating 0.83%
expenses
--------------------------------- -----------------
Fee waivers and payments (0.14%)
--------------------------------- -----------------
Net expenses 0.69%
- --------------------------- --------------------------------- -----------------

- --------------------------- -------------------------------- -------------------
This example is intended CLASS INSTITUTIONAL
to help you compare the -------------------------------- -------------------
cost of investing in the 1 year $70
Fund to the cost of -------------------------------- -------------------
investing in other mutual 3 years $251
funds with similar -------------------------------- -------------------
investment objectives. We 5 years $447
show the cumulative amount -------------------------------- -------------------
of Fund expenses on a 10 years $1,012
hypothetical investment of
$10,000 with an annual 5%
return over the time
shown. The Fund's actual
rate of return may be
greater or less than the
hypothetical 5% return we
use here. 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) The Manager has contracted to waive all or a portion of its investment
advisory fees and/or reimburse expenses from May 1, 2007 through April 30,
2008 in order to prevent total annual fund operating expenses (excluding
any 12b-1 plan expenses, taxes, interest, inverse floater program expenses,
brokerage fees, certain insurance costs, and non-routine expenses or costs,
including, but not limited to, those relating to reorganizations,
litigation, certain Trustee retirement plan expenses, conducting
shareholder meetings, and liquidations (collectively, "non-routine
expenses")) from exceeding 0.69% of the

Fund's average daily net assets. For purposes of these waivers and
reimbursements, non-routine expenses may also include such additional costs
and expenses as may be agreed upon from time to time by the Fund's Board
and the Manager. These expense waivers and reimbursements apply only to
expenses paid directly by the Fund.
(3) "Other expenses" have been restated to reflect a reduction in non-routine
expenses incurred during the period.

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. Securities
in which the Fund may invest include, but are not limited to, the following:

o Securities issued or guaranteed by the U.S. government, such as U.S.
Treasuries;
o Securities issued by U.S. government agencies or instrumentalities, such as
securities of the Government National Mortgage Association (GNMA);
o Investment-grade and below investment-grade corporate bonds;
o Non-agency mortgage-backed securities, asset-backed securities, commercial
mortgage-backed securities, collateralized mortgage obligations, and real
estate mortgage investment conduits;
o Securities of foreign issuers in both developed and emerging markets,
denominated in foreign currencies and U.S. dollars;
o Loan participations; and
o Short-term investments.

The Fund maintains an average effective duration from one to three years.

The Fund will invest in both rated and unrated foreign securities.

such as the Euro. The Fund may, from time to time, purchase or sell foreign
currencies and/or engage in forward foreign currency transactions in order to
expedite settlement of Fund transactions and to minimize currency value
fluctuations.

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 U.S.
include Treasury bills, notes, and Treasury securities, although they are
bonds of varying maturities. U.S. typically not our largest holding
Treasury securities are backed by the because they generally do not offer as
"full faith and credit" of the United high a level of current income as other
States. fixed income securities.
- ----------------------------------------- -----------------------------------------
Mortgage-backed securities: Fixed There is no limit on government-related
income securities that represent pools mortgage-backed securities.
of mortgages, with investors receiving
principal and interest payments as the We may invest in mortgage-backed
underlying mortgage loans are paid securities issued or guaranteed by the
back. Many are issued and guaranteed U.S. government, its agencies or
against default by the U.S. government instrumentalities or by
or its agencies or instrumentalities, government-sponsored corporations.
such as the Federal Home Loan Mortgage
Corporation, Fannie Mae, and GNMA. We may also invest in mortgage-backed
Others are issued by private financial securities that are secured by the
institutions, with some fully underlying collateral of the private
collateralized by certificates issued issuer. Such securities are not
or guaranteed by the government or its government securities and are not
agencies or instrumentalities. 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).
- ----------------------------------------- -----------------------------------------
Asset-backed securities: Bonds or notes We may invest in asset-backed securities
backed by accounts receivable including rated in one of the four highest rating
home equity, automobile, or credit categories by an NRSRO.
loans.
- ----------------------------------------- -----------------------------------------
Corporate bonds: Debt obligations We may invest in corporate bonds.
issued by a corporation.
- ----------------------------------------- -----------------------------------------
High yield corporate bonds: Debt Emphasis is typically on those rated BB
obligations issued by a corporation and or Ba by an NRSRO.
rated lower than investment grade by an
NRSRO such as S&P or Moody's. High We carefully evaluate an individual
yield bonds (also known as "junk company's financial situation, its
bonds") are issued by corporations that management, the prospects for its
have lower credit quality and may have industry, and the technical factors
difficulty repaying principal and related to its bond offering. We seek to
interest. identify those companies that we believe
will be able to repay their debt
obligations in spite of poor ratings. We
may invest in unrated bonds if we
believe their credit quality is
comparable to the rated bonds we are
permitted to invest in. Unrated bonds
may be more speculative in nature than
rated bonds. We may not invest more
than 20% of the Fund's net assets in
high yield securities.
- ----------------------------------------- -----------------------------------------

- ----------------------------------------- -----------------------------------------
Securities How we use them
- ----------------------------------------- -----------------------------------------
Collateralized mortgage obligations We may invest in CMOs and REMICs.
(CMOs) and real estate mortgage Certain CMOs and REMICs may have
investment conduits (REMICs): CMOs are variable or floating interest rates and
privately issued mortgage-backed bonds others may be stripped. Stripped
whose underlying value is the mortgages mortgage securities are generally
that are collected into different pools considered illiquid and to such extent,
according to their maturity. They are together with any other illiquid
issued by U.S. government agencies and investments, will not exceed 15% of the
private issuers. REMICs are privately Fund's net assets, which is the Fund's
issued mortgage-backed bonds whose limit on investments in illiquid
underlying value is a fixed pool of securities. In addition, subject to
mortgages secured by an interest in certain quality and collateral
real property. Like CMOs, REMICs offer limitations, we may invest up to 20% of
different pools according to the the Fund's total assets in CMOs and
underlying mortgages' maturity. REMICs issued by private entities that
are not collateralized by securities
issued or guaranteed by the U.S.
government, its agencies, or
instrumentalities, so called "non-agency
mortgage-backed securities."
- ----------------------------------------- -----------------------------------------
Short-term debt investments: These We may invest in these instruments
instruments include: (1) time deposits, either as a means to achieve the Fund's
certificates of deposit, and bankers investment objective or, more commonly,
acceptances issued by a U.S. commercial as temporary defensive investments or
bank; (2) commercial paper of the pending investment in the Fund's
highest quality rating; (3) short-term principal investment securities. When
debt obligations with the highest investing all or a significant portion
quality rating; (4) U.S. government of the Fund's assets in these
securities; and (5) repurchase instruments, the Fund may not be able to
agreements collateralized by the achieve its investment objective.
instruments described in (1) - (4)
above.
- ----------------------------------------- -----------------------------------------
Time deposits: Time deposits are We will not purchase time deposits
non-negotiable deposits maintained in a maturing in more than seven days and
banking institution for a specified time deposits maturing from two business
period of time at a stated interest days (as defined below) through seven
rate. calendar days will not exceed 15% of the
total assets of the Fund.
- ----------------------------------------- -----------------------------------------
Zero coupon bond and pay-in-kind (PIK) We may purchase fixed income securities,
bonds: Zero coupon bonds are debt including zero coupon bonds and PIK
obligations which do not entitle the bonds, consistent with the Fund's
holder to any periodic payments of investment objective.
interest prior to maturity or a
specified date when the securities
begin paying current interest, and
therefore are issued and traded at a
discount from their face amounts or par
value. PIK bonds pay interest through
the issuance to holders of additional
securities.
- ----------------------------------------- -----------------------------------------
Foreign securities: Debt issued by a We may invest up to 20% of the Fund's
non-U.S. company or a government other net assets in securities of foreign
than the United States or by an agency, companies or governments.
instrumentality, or political
subdivision of such government.
- ----------------------------------------- -----------------------------------------
Foreign currency transactions: A Although we value the Fund's assets
forward foreign currency exchange daily in terms of U.S. dollars, we do
contract involves an obligation to not intend to convert its holdings of
purchase or sell a specific currency on foreign currencies into U.S. dollars on
a fixed future date at a price that is a daily basis. We may, however, from
set at the time of the contract. The time to time, purchase or sell foreign
future date may be any number of days currencies and/or engage in forward
from the date of the contract as agreed foreign currency transactions in order
by the parties involved. to expedite settlement of Fund
transactions and to minimize currency
value fluctuations.
- ----------------------------------------- -----------------------------------------

- ----------------------------------------- -----------------------------------------
Securities How we use them
- ----------------------------------------- -----------------------------------------
American Depositary Receipts (ADRs), We may invest in sponsored and
European Depositary Receipts (EDRs) and unsponsored ADRs. ADRs in which the
Global Depositary Receipts (GDRs): Fund may invest will be those that are
ADRs are receipts issued by a actively traded in the United States.
depositary (usually a U.S. bank) and
EDRs and GDRs are receipts issued by a In conjunction with the Fund's
depositary outside of the U.S. (usually investments in foreign securities, we
a non-U.S. bank or trust company or a may also invest in sponsored and
foreign branch of a U.S. bank). unsponsored EDRs and GDRs.
Depositary receipts represent an
ownership interest in an underlying
security that is held by the
depositary. Generally, the underlying
security represented by an ADR is
issued by a foreign issuer and the
underlying security represented by an
EDR or GDR may be issued by a foreign
or U.S. issuer. Sponsored depositary
receipts are issued jointly by the
issuer of the underlying security and
the depositary, and unsponsored
depositary receipts are issued by the
depositary without the participation of
the issuer of the underlying security.
Generally, the holder of the depositary
receipt is entitled to all payments of
interest, dividends, or capital gains
that are made on the underlying
security.
- ----------------------------------------- -----------------------------------------
Loan participations: An interest in a We may invest without restriction in
loan or other direct indebtedness, such loan participations that meet our credit
as an assignment, that entitles the standards. We perform our own
acquiror of such interest to payments independent credit analysis on each
of interest, and/or other amounts due borrower and on the collateral securing
under the structure of the loan or each loan. We consider the nature of the
other direct indebtedness. In addition industry in which the borrower operates,
to being structured as secured or the nature of the borrower's assets, and
unsecured loans, such investments could the general quality and creditworthiness
be structured as novations or of the borrower. We may invest in loan
assignments or represent trade or other participations in order to enhance total
claims owed by a company to a supplier. return, to affect diversification, or to
earn additional income. We will not use
loan participations for reasons
inconsistent with the Fund's investment
objective.
- ----------------------------------------- -----------------------------------------
Repurchase agreements: An agreement Typically, we use repurchase agreements
between a buyer of securities, such as as a short-term investment for the
a fund, and a seller of securities, in Fund's cash position. In order to enter
which the seller agrees to buy the into these repurchase agreements, the
securities back within a specified time Fund must have collateral of at least
at the same price the buyer paid for 102% of the repurchase price. We will
them, plus an amount equal to an agreed only enter into repurchase agreements in
upon interest rate. Repurchase which the collateral is comprised of
agreements are often viewed as U.S. government securities.
equivalent to cash.
- ----------------------------------------- -----------------------------------------
Options and futures: Options represent At times when we anticipate adverse
a right to buy or sell a security or a conditions, we may want to protect gains
group of securities at an agreed upon on securities without actually selling
price at a future date. The purchaser them. We might use options or futures to
of an option may or may not choose to neutralize the effect of any price
go through with the transaction. The declines, without selling a bond or
seller of an option, however, must go bonds, or as a hedge against changes in
through with the transaction if its interest rates. We may also sell an
purchaser exercises the option. option contract (often referred to as
"writing" an option) to earn additional
Futures contracts are agreements for income for the Fund.
the purchase or sale of a security or a
group of securities at a specified Use of these strategies can increase the
price, on a specified date. Unlike operating costs of the Fund and can lead
purchasing an option, a futures to loss of principal.
contract must be executed unless it is
sold before the settlement date. The Fund has claimed an exclusion from
the definition of the term "commodity
Certain options and futures may be pool operator" under the Commodity
considered to be derivative securities. Exchange Act (CEA) and, therefore, is
not subject to registration or
regulation as a commodity pool operator
under the CEA.
- ----------------------------------------- -----------------------------------------

- ----------------------------------------- -----------------------------------------
Securities How we use them
- ----------------------------------------- -----------------------------------------
Restricted securities: Privately placed We may invest in privately placed
securities whose resale is restricted securities, including those that are
under U.S. securities laws. eligible for resale only among certain
institutional buyers without
registration, which are commonly known
as "Rule 144A Securities." Restricted
securities that are determined to be
illiquid may not exceed the Fund's 15%
limit on illiquid securities.
- ----------------------------------------- -----------------------------------------
Illiquid securities: Securities that do We may invest up to 15% of the Fund's
not have a ready market and cannot be net assets in illiquid securities.
easily sold within seven days at
approximately the price at which a fund
has valued them. Illiquid securities
include repurchase agreements maturing
in more than seven days.
- ----------------------------------------- -----------------------------------------
Interest rate swap, index swap, and We may use interest rate swaps to adjust
credit default swap agreements: In an the Fund's sensitivity to interest rates
interest rate swap, a fund receives or to hedge against changes in interest
payments from another party based on a rates. Index swaps may be used to gain
variable or floating interest rate, in exposure to markets that the Fund
return for making payments based on a invests in, such as the corporate bond
fixed interest rate. An interest rate market. We may also use index swaps as
swap can also work in reverse with a a substitute for futures or options
fund receiving payments based on a contracts if such contracts are not
fixed interest rate and making payments directly available to the Fund on
based on a variable or floating favorable terms. We may enter into
interest rate. credit default swaps in order to hedge
against a credit event, to enhance total
In an index swap, a fund receives gains return, or to gain exposure to certain
or incurs losses based on the total securities or markets.
return of a specified index, in
exchange for making interest payments Use of these strategies can increase the
to another party. An index swap can operating costs of the Fund and lead to
also work in reverse with a fund loss of principal.
receiving interest payments from
another party in exchange for movements
in the total return of a specified
index.

Interest rate swaps, index swaps, and
credit default swaps may be considered
to be illiquid.
- ----------------------------------------- ------------------------------------------

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
principal 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 We will not invest in swaps with
securities will decrease in value if maturities of more than 10 years.
interest rates rise. The risk is Each business day (as defined below),
greater for bonds with longer we will calculate the amount the Fund
maturities than for those with shorter must pay for swaps it holds and will
maturities. segregate enough cash or other liquid
securities to cover that amount.
Swaps may be particularly sensitive to
interest rate changes. Depending on
the actual movements of interest rates
and how well the portfolio manager
anticipates them, a fund could
experience a higher or lower return
than anticipated.
- ----------------------------------------- --------------------------------------
Market risk is the risk that all or a We maintain a long-term investment
majority of the securities in a certain approach and focus on securities that
market -- like the stock or bond market we believe can continue to provide
- -- will decline in value because of returns over an extended time frame
economic conditions, future regardless of interim market
expectations, or investor confidence. fluctuations. Generally, we do not
try to predict overall market
Index swaps are subject to the same movements.
market risks as the investment market
or sector that the index represents. In evaluating the use of an index swap
Depending on the actual movements of for the Fund, we carefully consider
the index and how well the portfolio how market changes could affect the
manager forecasts those movements, a swap and how that compares to our
fund could experience a higher or lower investing directly in the market the
return than anticipated. swap is intended to represent. When
selecting dealers with whom we would
make interest rate or index swap
agreements for the Fund, we focus on
those dealers with high-quality
ratings and do careful credit analysis
before engaging in the transaction.
- ----------------------------------------- --------------------------------------
Industry and security risk: Industry We limit the amount of the Fund's
risk is the risk that the value of assets invested in any one industry
securities in a particular industry and in any individual security or
will decline because of changing issuer. We also follow a rigorous
expectations for the performance of selection process when choosing
that industry. securities for the portfolio.

- ----------------------------------------- --------------------------------------
Risks How we strive to manage them
- ----------------------------------------- --------------------------------------
Credit risk is the possibility that a Our careful, credit-oriented bond
bond's issuer (or an entity that selection and our commitment to hold a
insures the bond) will be unable to diversified selection of high yield
make timely payments of interest and bonds are designed to manage this risk
principal.
It is likely that protracted periods
Investing in so-called "junk" or "high of economic uncertainty would cause
yield" bonds entails the risk of increased volatility in the market
principal loss, which may be greater prices of high yield bonds, an
than the risk involved in increase in the number of high yield
investment-grade bonds. High yield bond defaults, and corresponding
bonds are sometimes issued by companies volatility in the Fund's NAV.
whose earnings at the time the bond is
issued are less than the projected debt Our holdings of high-quality,
payments on the bonds. investment-grade bonds are less
subject to credit risk and may help to
A protracted economic downturn may balance any credit problems
severely disrupt the market for high experienced by individual high yield
yield bonds, adversely affect the value bond issuers.
of outstanding bonds, and adversely
affect the ability of high yield When selecting dealers with whom we
issuers to repay principal and would make interest rate or index swap
interest. agreements, 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 during likelihood of prepayment when we
periods of low interest rates, forcing select mortgages. We may look for
a fund to reinvest its money at mortgage securities that have
interest rates that might be lower than characteristics that make them less
those on the prepaid mortgage. likely to be prepaid, such as low
Prepayment risk may also affect other outstanding loan balances or
types of debt securities, but generally below-market interest rates.
to a lesser extent than mortgage
securities.
- ----------------------------------------- --------------------------------------
Liquidity risk is the possibility that We limit exposure to illiquid
securities cannot be readily sold securities to no more than 15% of the
within seven days at approximately the Fund's net assets.
price at which a fund has valued them.
- ----------------------------------------- --------------------------------------
Derivatives risk is the possibility We will use derivatives for defensive
that a fund may experience a purposes, such as to protect gains or
significant loss if it employs a hedge against potential losses in the
derivatives strategy (including a portfolio without actually selling a
strategy involving swaps such as security, to neutralize the impact of
interest rate swaps, index swaps, and interest rate changes, to affect
credit default swaps) related to a diversification, or to earn additional
security or a securities index and that income.
security or index moves in the opposite
direction from what the 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.
- ----------------------------------------- --------------------------------------
Currency risk is the risk that the The Fund, which has exposure to global
value of an investment may be and international investments, may be
negatively affected by changes in affected by changes in currency rates
foreign currency exchange rates. and exchange control regulations and
Adverse changes in exchange rates may may incur costs in connection with
reduce or eliminate any gains produced conversions between currencies. To
by investments that are denominated in hedge this currency risk associated
foreign currencies and may increase with investments in non-U.S.
losses. dollar-denominated securities, we may
invest in forward foreign currency
contracts. These activities pose
special risks which do not typically
arise in connection with investments
in U.S. securities. In addition, we
may engage in foreign currency options
and futures transactions.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Foreign risk is the risk that foreign We attempt to reduce the risks
securities may be adversely affected by presented by such investments by
political instability, changes in conducting world-wide fundamental
currency exchange rates, foreign research, including country visits. In
economic conditions, or inadequate addition, we monitor current economic
regulatory and accounting standards. and market conditions and trends, the
political and regulatory environment,
and the value of currencies in
different countries in an effort to
identify the most attractive countries
and securities. Additionally, when
currencies appear significantly
overvalued compared to average real
exchange rates, we may hedge exposure
to those currencies for defensive
purposes.
- ----------------------------------------- --------------------------------------
Emerging markets risk is the We may invest a portion of the Fund's
possibility that the risks associated assets in securities of issuers
with international investing will be located in emerging markets. We cannot
greater in emerging markets than in eliminate these risks but will attempt
more developed foreign markets because, to reduce these risks through
among other things, emerging markets portfolio diversification, credit
may have less stable political and analysis, and attention to trends in
economic environments. In addition, in the economy, industries and financial
many emerging markets there is markets, and other relevant factors.
substantially less publicly available We will limit investments in emerging
information about issuers and the markets, in the aggregate, to no more
information that is available tends to than 10% of the Fund's net assets.
be of a lesser quality. Economic
markets and structures tend to be less
mature and diverse and the securities
markets, which are subject to less
government regulation or supervision,
may also be smaller, less liquid, and
subject to greater price volatility.
- ----------------------------------------- --------------------------------------
Foreign government securities risk We attempt to reduce the risks
involves the ability of a foreign associated with investing in foreign
government or government-related issuer governments by limiting the portion of
to make timely principal and interest the Fund's assets that may be invested
payments on its external debt in such securities. We will not
obligations. This ability to make invest more than 20% of the Fund's net
payments will be strongly influenced by assets in foreign securities.
the issuer's balance of payments,
including export performance, its
access to international credits and
investments, fluctuations in interest
rates, and the extent of its foreign
reserves.
- ----------------------------------------- --------------------------------------
Legislative and regulatory risk: The We monitor the status of regulatory
United States Congress has, from time and legislative proposals to evaluate
to time, taken or considered any possible effects they might have
legislative actions that could on the Fund's portfolio.
adversely affect the high yield bond
market. For example, Congressional
legislation has, with some exceptions,
generally prohibited federally insured
savings and loan institutions from
investing in high yield securities.
Regulatory actions have also affected
the high yield market. Similar actions
in the future could reduce liquidity
for high yield securities, reduce the
number of new high yield securities
being issued and could make it more
difficult for the Fund to attain its
investment objective.
- ----------------------------------------- --------------------------------------

- ----------------------------------------- --------------------------------------
Risks How we strive to manage them
- ----------------------------------------- --------------------------------------
Zero coupon and PIK bonds: Zero coupon We may invest in zero coupon and PIK
and PIK bonds are generally considered bonds to the extent consistent with
to be more interest sensitive than the Fund's investment objective. We
income-bearing bonds, to be more cannot eliminate the risks of zero
speculative than interest-bearing coupon bonds, but we do try to address
bonds, and to have certain tax them by monitoring economic
consequences which could, under certain conditions, especially interest rate
circumstances be adverse to the Fund. trends and their potential impact on
For example, the Fund accrues, and is the Fund.
required to distribute to shareholders,
income on its zero coupon bonds.
However, the Fund may not receive the
cash associated with this income until
the bonds are sold or mature. If the
Fund does not have sufficient cash to
make the required distribution of
accrued income, the Fund could be
required to sell other securities in
its portfolio or to borrow to generate
the cash required.
- ----------------------------------------- --------------------------------------
Loans and other direct indebtedness These risks may not be completely
risk involves the risk that a fund will eliminated, but we will attempt to
not receive payment of principal, reduce them through portfolio
interest, and other amounts due in diversification, credit analysis, and
connection with these investments and attention to trends in the economy,
will depend primarily on the financial industries, and financial markets.
condition of the borrower. Loans that Should we determine that any of these
are fully secured offer a fund more securities may be illiquid, these
protection than an unsecured loan in would be subject to the Fund's
the event of non-payment of scheduled restriction on illiquid securities.
interest or principal, although there
is no assurance that the liquidation of
collateral from a secured loan would
satisfy the corporate borrower's
obligation, or that the collateral can
be liquidated. Some loans or claims may
be in default at the time of purchase.
Certain of the loans and the other
direct indebtedness acquired by a fund
may involve revolving credit facilities
or other standby financing commitments
which obligate a fund to pay additional
cash on a certain date or on demand.
These commitments may require a fund to
increase its investment in a company at
a time when that fund might not
otherwise decide to do so (including at
a time when the company's financial
condition makes it unlikely that such
amounts will be repaid). To the extent
that a fund is committed to advance
additional funds, it will at all times
hold and maintain in a segregated
account cash or other high-grade debt
obligations in an amount sufficient to
meet such commitments.

- ----------------------------------------- --------------------------------------
Risks How we strive to manage them
- ----------------------------------------- --------------------------------------
Valuation risk: A less liquid We will strive to manage this risk by
secondary market, as described above, carefully evaluating individual bonds
makes it more difficult for a fund to and by limiting the amount of the
obtain precise valuations of the high Fund's assets that can be allocated to
yield securities in its portfolio. privately placed high yield securities
During periods of reduced liquidity,
judgment plays a greater role in
valuing high yield securities.
- ----------------------------------------- --------------------------------------

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

A discussion of the basis for the Board's approval of the Fund's investment
advisory contract is available in the Fund's semiannual report to shareholders
for the period ended June 30, 2007.

Portfolio managers
Paul Grillo and Roger A. Early have day-to-day responsibilities for making
investment decisions for the Fund.

Paul Grillo, CFA, Senior Vice President, Senior Portfolio Manager
Mr. Grillo is a member of the firm's taxable fixed income portfolio management
team with primary responsibility for portfolio construction and strategic asset
allocation. He joined Delaware Investments in 1992, and also serves as a
mortgage-backed and asset-backed securities analyst. Previously, Mr. Grillo
served as a mortgage strategist and trader at Dreyfus Corporation. He also
worked as a mortgage strategist and portfolio manager at Chemical Investment
Group and as a financial analyst at Chemical Bank. Mr. Grillo holds a bachelor's
degree in business management from North Carolina State University and an MBA
with a concentration in finance from Pace University.

The Fund's 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 in managing,
administering, and servicing the Delaware Investments(R) Funds.

[GRAPHIC OMITTED: DIAGRAM SHOWING THE VARIOUS ORGANIZATIONS INVOLVED IN
MANAGING, ADMINISTERING, AND SERVICING THE DELAWARE INVESTMENTS(R) FUNDS]

Board of Trustees
Investment manager Custodian
Delaware Management Company Mellon Bank, N.A.
2005 Market Street One Mellon Center
Philadelphia, PA 19103-7094 The Fund Pittsburg, PA 15285

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

Financial intermediary wholesaler
Lincoln Financial Distributors, Inc.
2001 Market Street
Philadelphia, PA 19103-7055
Portfolio managers
(see page 19 for details)
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 that
segregates fund securities from other bank assets.

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 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 Delaware
Distributors, L.P. (Distributor);

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

o a bank, trust company, or 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 managers investing on behalf of clients that consist
solely of institutions and high net worth individuals having at least
$1,000,000 entrusted to the investment manager for investment purposes. Use
of the Institutional Class shares is restricted to investment managers 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
(Code) for which the Fund's Manager, Distributor, or service agent or one
or more of their affiliates provide recordkeeping, administrative,
investment management, marketing, distribution, or similar services; or

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

For more information, please see the Fund's SAI.

How to buy shares

[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, P.O. Box
219656, Kansas City, MO 64121-9656. 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]

[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 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 800 362-7500.

[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.

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.

Document delivery
If you have an account in the same Delaware Investments(R) Fund as another
person or entity at your address, we send one copy of the Fund's prospectus and
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 to receive individual materials. If you wish
to receive individual materials, please call your Client Services Representative
at 800 362-7500. We will begin sending you individual copies of these documents
30 days after receiving your request.

How to redeem shares

[GRAPHIC OMITTED: SYMBOL OF AN ENVELOPE]

By mail
You may redeem your shares (sell them back to the Fund) by mail by writing to:
Delaware Investments, P.O. Box 219656, Kansas City, MO 64121-9656. All owners of
the account must sign the request. 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.

[GRAPHIC OMITTED: SYMBOL OF A TELEPHONE]

[GRAPHIC OMITTED: SYMBOL OF A JAGGED LINE]

[GRAPHIC OMITTED: SYMBOL OF A PERSON]

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
an authorized agent or we receive the request before the close of regular
trading on the NYSE (normally 4:00 p.m. Eastern Time), you will receive the NAV
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 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.

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 of 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 shares, you are purchasing shares in another fund, so you should be
sure to get a copy of the fund's prospectus and read it carefully before buying
shares through an exchange. You may not exchange your shares for Class A, 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 Manager's judgment, the Fund would be unable
to invest effectively in accordance with its investment objective and policies
or would otherwise potentially be adversely affected.

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.

in fund share prices that are based on closing prices of foreign securities
established some time before a fund calculates its own share price.

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.

Certain management considerations

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. The information for each of the fiscal years ended
December 31 presented below 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 800 362-7500.

Delaware Limited-Term Diversified Income Fund Institutional Class
Year ended 12/31
Six months
ended
6/30/07(2) 2006 2005 2004 2003 2002
(unaudited)
Net asset value, beginning of period $8.21 $8.270 $8.480 $8.620 $8.770 $8.600

Income (loss) from investment
operations:
Net investment income 0.181 0.297 0.291 0.256 0.234 0.364
Net realized and unrealized gain
(loss) on investments (0.052) 0.019 (0.132) (0.047) (0.038) 0.255
------- ------- ------- ------- ------- -------
Total from investment operations 0.129 0.316 0.159 0.209 0.196 0.619
------- ------- ------- ------- ------- -------

Less dividends and distributions
from:
Net investment income (0.199) (0.376) (0.369) (0.349) (0.328) (0.449)
Return of capital ---- ---- ---- ---- (0.018) ----
------- ------- ------- ------- ------- -------
Total dividends and distributions (0.199) (0.376) (0.369) (0.349) (0.346) (0.449)
------- ------- ------- ------- ------- -------

Net asset value, end of period $8.14 $8.210 $8.270 $8.480 $8.620 $8.770
======= ======= ======= ======= ======= =======

Total return(1) 1.57% 3.92% 1.91% 2.46% 2.27% 7.27%

Ratios and supplemental data:
Net assets, end of period (000
omitted) $9,079 $21,873 $26,070 $21,732 $16,667 $13,289
Ratio of expenses to average net
assets 0.67% 0.66% 0.67% 0.60% 0.60% 0.60%
Ratio of expenses to average net
assets prior to expense
limitation and expenses paid
indirectly 0.86% 0.84% 0.82% 0.83% 0.86% 0.90%
Ratio of net investment income
to average net assets 4.57% 3.61% 3.47% 3.00% 2.72% 4.14%
Ratio of net investment income
to average net assets prior to
expense limitation and expenses
paid indirectly 4.38% 3.43% 3.32% 2.77% 2.46% 3.84%
Portfolio turnover 251% 276% 259% 313% 483% 313%

(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.

(2) Ratios and portfolio turnover have been annualized and total return has not
been annualized.

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 calculated 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.