DELAWARE GROUP DELCHESTER HIGH YIELD BOND FUND INC, 485APOS, 1996-10-17

DELAWARE GROUP DELCHESTER HIGH YIELD BOND FUND INC
485APOS, 1996-10-17

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<PAGE>

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

File No. 2-37707

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]

Pre-Effective Amendment No. _____ [ ]

Post-Effective Amendment No. 55 [X]

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

Amendment No. 55

DELAWARE GROUP INCOME FUNDS, INC.
(formerly, Delaware Group Delchester High-Yield Bond Fund, Inc.)
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

1818 Market Street, Philadelphia, Pennsylvania 19103
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (215) 255-2923
--------------

George M. Chamberlain, Jr., 1818 Market Street, Philadelphia, PA 19103
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)

Approximate Date of Public Offering: December 30, 1996
-----------------

It is proposed that this filing will become effective:

_____ immediately upon filing pursuant to paragraph (b)

_____ on (date) pursuant to paragraph (b)

_____ 60 days after filing pursuant to paragraph (a)(1)

__X__ on December 30, 1996 pursuant to paragraph (a)(1)

_____ 75 days after filing pursuant to paragraph (a)(2)

_____ on (date) pursuant to paragraph (a)(2) of Rule 485

Registrant has registered an indefinite amount of securities
under the Securities Act of 1933 pursuant to Section 24(f)
of the Investment Company Act of 1940. Registrant's 24f-2 Notice
for its most recent fiscal year was filed on September 20, 1996.

<PAGE>

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

This Post-Effective Amendment No. 55 to Registration File No. 2-37707 includes
the following:

1. Facing Page

2. Contents Page

3. Cross-Reference Sheet

4. Part A - Prospectuses and Supplement*

5. Part B - Statement of Additional Information*

6. Part C - Other Information*

7. Signatures

* This Post-Effective Amendment relates to the Registrant's three series of
shares and their classes: Delchester Fund - Delchester Fund A Class,
Delchester Fund B Class, Delchester Fund C Class and Delchester Fund
Institutional Class; Strategic Income Fund - Strategic Income Fund A Class,
Strategic Income Fund B Class, Strategic Income Fund C Class and Strategic
Income Fund Institutional Class; and High-Yield Opportunities Fund -
High-Yield Opportunities Fund A Class, High-Yield Opportunities Fund B
Class, High-Yield Opportunities Fund C Class and High-Yield Opportunities
Fund Institutional Class. Shares of each Series are described in separate
prospectuses, however, they share a common Statement of Additional
Information and Part C. The Registrant's Delchester Fund A Class, B Class
and C Class Prospectus and Delchester Fund Institutional Class Prospectus,
and Strategic Income Fund Institutional Class Prospectus each dated
September 30, 1996 are incorporated into this filing by reference to the
electronic filing of those Prospectuses made pursuant to Rule 485(b) on
September 27, 1996. The Registrant's Strategic Income Fund A Class, B Class
and C Class Prospectus dated September 30, 1996 (as revised October 4,
1996) is incorporated into this filing by reference to the electronic
filing of that Prospectus made pursuant to Rule 497(e) on October 8, 1996.

<PAGE>

CROSS-REFERENCE SHEET*

PART A**
<TABLE>
<CAPTION>

Location in
Item No. Description Prospectuses
- -------- ----------- ------------

Delchester Fund
A Class/ Institutional
B Class/ Class
C Class

<S> <C> <C> <C>
1 Cover Page...................................................... Cover Page Cover Page

2 Synopsis........................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses

3 Condensed Financial Information................................. Financial Financial
Highlights Highlights

4 General Description of Registrant .............................. Investment Investment
Objective and Objective and
Policies; Policies; Shares;
Shares; Other Investment
Other Policies and Risk
Investment Considerations
Policies
and Risk
Considerations

5 Management of the Fund ......................................... Management of Management of the
the Fund Fund

6 Capital Stock and Other Securities ............................. The Delaware Dividends and
Difference; Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares

</TABLE>

<PAGE>

CROSS-REFERENCE SHEET*

PART A**
(Continued)

Location in
Item No. Description Prospectuses
- -------- ----------- ------------

Delchester Fund
A Class/ Institutional
B Class/ Class
C Class

<S> <C> <C> <C>
7 Purchase of Securities Being Offered.................................. Cover; Cover;
How to Buy How to Buy
Shares; Shares;
Calculation of Net Asset Value;
Offering Price Management of
and Net Asset the Fund
Value;
Management of
the Fund

8 Redemption or Repurchase.............................................. How to Buy How to Buy
Shares; Shares;
Redemption Redemption
and Exchange and Exchange

9 Legal Proceedings..................................................... None None
</TABLE>

* This filing relates to Registrant's Delchester Fund A Class, Delchester
Fund B Class, Delchester Fund C Class and Delchester Fund Institutional
Class of Delchester Fund; Strategic Income Fund A Class, Strategic Income
Fund B Class, Strategic Income Fund C Class and Strategic Income Fund
Institutional Class of Strategic Income Fund; and High-Yield Opportunities
Fund A Class, High-Yield Opportunities Fund B Class, High-Yield
Opportunities Fund C Class and High-Yield Opportunities Fund Institutional
Class of High-Yield Opportunities Fund. Shares of each Series are described
in separate prospectuses, however, they share a common Statement of
Additional Information and Part C.

** The Registrant's Delchester Fund A Class, B Class and C Class Prospectus
and Delchester Fund Institutional Class Prospectus each dated September 30,
1996, are incorporated into this filing by reference to the electronic
filing of those Prospectuses made pursuant to Rule 485(b) on September 27,
1996.

<PAGE>

CROSS-REFERENCE SHEET*

PART A **
(Continued)

Location in
Item No. Description Prospectuses
- -------- ----------- ------------

Strategic Income Fund
A Class/ Institutional
B Class/ Class
C Class

<S> <C> <C> <C>
1 Cover Page...................................................... Cover Page Cover Page

2 Synopsis........................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses

3 Condensed Financial Information................................. N/A N/A

4 General Description of Registrant .............................. Investment Investment
Objective and Objective and
Policies; Policies; Shares;
Shares; Other Other Investment
Investment Policies and Risk
Policies and Considerations
Risk
Considerations

5 Management of the Fund ......................................... Management of Management of the
the Fund Fund

6 Capital Stock and Other Securities ............................. The Delaware Dividends and
Difference; Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares

</TABLE>

<PAGE>

CROSS-REFERENCE SHEET*

PART A**
(Continued)

Location in
Item No. Description Prospectuses
- -------- ----------- ------------

Strategic Income Fund
A Class/ Institutional
B Class/ Class
C Class

<S> <C> <C> <C>
7 Purchase of Securities Being Offered............................ Cover; Cover;
How to How to
Buy Shares; Buy Shares;
Calculation of Calculation of
Offering Price Net Asset Value
and Net Asset Per Share;
Value Management of
Per Share; the Fund
Management of
the Fund

8 Redemption or Repurchase........................................ How to Buy How to Buy
Shares; Shares;
Redemption and Redemption and
Exchange Exchange

9 Legal Proceedings............................................... None None

</TABLE>

** The Registrant's Strategic Income Fund A Class, B Class, and C Class
Prospectus dated September 30, 1996 (as revised October 4, 1996) and
Strategic Income Fund Institutional Class Prospectus dated September 30,
1996, are incorporated into this filing by reference to the electronic
filing of those Prospectuses made pursuant to Rule 497(e) on October 8,
1996 and Rule 485(b) on September 27, 1996, respectively.

<PAGE>

CROSS-REFERENCE SHEET*

PART A
(Continued)
<TABLE>
<CAPTION>

Location in
Item No. Description Prospectuses
- -------- ----------- ------------

High-Yield
Opportunities Fund
A Class/ Institutional
B Class/ Class
C Class

<S> <C> <C> <C>
1 Cover Page...................................................... Cover Page Cover Page

2 Synopsis........................................................ Synopsis; Synopsis;
Summary of Summary of
Expenses Expenses

3 Condensed Financial Information................................. N/A N/A

5 Management of the Fund ......................................... Management of Management of the
the Fund Fund

6 Capital Stock and Other Securities ............................. The Delaware Dividends and
Difference; Distributions;
Dividends and Taxes; Shares
Distributions;
Taxes; Shares
</TABLE>

<PAGE>

CROSS-REFERENCE SHEET*

PART A
(Continued)

Location in
Item No. Description Prospectuses
- -------- ----------- ------------

High-Yield
Opportunities Fund
A Class/ Institutional
B Class/ Class
C Class

8 Redemption or Repurchase........................................ How to Buy How to Buy
Shares; Shares;
Redemption and Redemption and
Exchange Exchange

9 Legal Proceedings............................................... None None
</TABLE>

<PAGE>

CROSS REFERENCE SHEET

PART B
<TABLE>
<CAPTION>

Location in Statement
Item No. Description of Additional Information
- -------- ----------- -------------------------

<S> <C> <C>
10 Cover Page...................................................... Cover Page

11 Table of Contents............................................... Table of Contents

12 General Information and History................................. General Information

13 Investment Objectives and Policies.............................. Investment Objectives
and Policies

14 Management of the Registrant.................................... Officers and Directors

15 Control Persons and Principal Holders
of Securities................................................... Officers and Directors

16 Investment Advisory and Other Services.......................... Plans Under Rule 12b-1
for the Fund Classes
(under Purchasing Shares);
Investment Management
Agreements and
Sub-Advisory Agreement;
Officers and Directors;
General Information;
Financial Statements

17 Brokerage Allocation............................................ Trading Practices
and Brokerage

18 Capital Stock and Other Securities.............................. Capitalization and
Noncumulative Voting
(under General Information)

19 Purchase, Redemption and Pricing of
Securities Being Offered........................................ Purchasing Shares;
Determining Offering Price
and Net Asset Value;
Redemption and Repurchase;
Exchange Privilege

20 Tax Status...................................................... Taxes

21 Underwriters ................................................... Purchasing Shares

22 Calculation of Performance Data................................. Performance Information

23 Financial Statements............................................ Financial Statements

</TABLE>

<PAGE>

CROSS REFERENCE SHEET

PART C

Location in
Item No. Description Part C
- -------- ----------- ------

24 Financial Statements and Exhibits................... Item 24

25 Persons Controlled by or under Common
Control with Registrant............................. Item 25

26 Number of Holders of Securities..................... Item 26

27 Indemnification..................................... Item 27

28 Business and Other Connections of
Investment Adviser.................................. Item 28

29 Principal Underwriters.............................. Item 29

30 Location of Accounts and Records.................... Item 30

31 Management Services................................. Item 31

32 Undertakings........................................ Item 32

<PAGE>

The Registrant's Delchester Fund A Class, B Class and C Class Prospectus and
Delchester Fund Institutional Class Prospectus; and Strategic Income Fund
Institutional Class Prospectus each dated September 30, 1996, are incorporated
into this filing by reference to the electronic filing of those Prospectuses
made pursuant to Rule 485(b) on September 27, 1996. The Registrant's Strategic
Income Fund A Class, B Class and C Class Prospectus dated September 30, 1996 (as
revised October 4, 1996) is incorporated into this filing by reference to the
electronic filing of that Prospectus made pursuant to Rule 497(e) on October 8,
1996.

<PAGE>

SUBJECT TO COMPLETION

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

HIGH-YIELD OPPORTUNITIES FUND

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

A CLASS
B CLASS
C CLASS

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

PROSPECTUS

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

DECEMBER , 1996

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

DELAWARE
GROUP
---------

<PAGE>

The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, contact your financial adviser or call Delaware Group at
800-523-4640.

INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245

<PAGE>

HIGH-YIELD OPPORTUNITIES FUND PROSPECTUS
A CLASS SHARES DECEMBER , 1996
B CLASS SHARES
C CLASS SHARES

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

1818 Market Street, Philadelphia, PA 19103

For Prospectus and Performance:
Nationwide 800-523-4640

Information on Existing Accounts:
(SHAREHOLDERS ONLY)
Nationwide 800-523-1918

Dealer Services:
(BROKER/DEALERS ONLY)
Nationwide 800-362-7500

Representatives of Financial Institutions:
Nationwide 800-659-2259

This Prospectus describes the High-Yield Opportunities Fund A Class of
shares ("Class A Shares"), the High-Yield Opportunities Fund B Class of shares
("Class B Shares") and the High-Yield Opportunities Fund C Class of shares
("Class C Shares") (individually, a "Class" and collectively, the "Classes") of
the High-Yield Opportunities Fund series (the "Fund") of Delaware Group Income
Funds, Inc. ("Income Funds, Inc."), a professionally-managed mutual fund of the
series type. The investment objective of the Fund is to seek to provide
investors with total return and, as a secondary objective, high current income.

The Fund invests up to 100% of its assets in lower rated fixed-income
securities, commonly known as "junk bonds," which involve greater risks,
including default risks, than higher rated fixed-income securities. Purchasers
should carefully assess these risks before investing in the Fund. See Investment
Objective and Policies, Risk Factors, and Appendix B--Ratings.

This Prospectus sets forth information that you should read and
consider before you invest. Please retain it for future reference. Part B of
Income Funds, Inc.'s registration statement, dated December , 1996, as it may be
amended from time to time, contains additional information about the Fund and
has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above telephone numbers.

-1-

<PAGE>

The Fund also offers the High-Yield Opportunities Fund Institutional
Class, which is available for purchase only by certain investors. A prospectus
for the High-Yield Opportunities Fund Institutional Class can be obtained by
writing to Delaware Distributors, L.P. at the above address or by calling the
above numbers.

TABLE OF CONTENTS

Cover Page Retirement Planning
Synopsis Classes of Shares
Summary of Expenses How to Buy Shares
Investment Objective and Policies Redemption and Exchange
Suitability Dividends and Distributions
Investment Strategy Taxes
Risk Factors Calculation of Offering Price and
Youth and Volatility of the Net Asset Value Per Share
High-Yield Market Management of the Fund
Redemptions Other Investment Policies and
Liquidity and Valuation Risk Considerations
The Delaware Difference Appendix A--Investment Illustrations
Plans and Services Appendix B--Ratings
Appendix C--Classes Offered

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

BE SURE TO CONSULT YOUR FINANCIAL ADVISER WHEN MAKING INVESTMENTS. MUTUAL FUNDS
CAN BE A VALUABLE PART OF YOUR FINANCIAL PLAN; HOWEVER, SHARES OF THE FUND ARE
NOT FDIC OR NCUSIF INSURED, ARE NOT GUARANTEED BY ANY BANK OR ANY CREDIT UNION,
ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT
RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK
OR CREDIT UNION DEPOSITS.

-2-

<PAGE>

SYNOPSIS

Investment Objective
The investment objective of the Fund is to seek to provide investors
with total return and, as a secondary objective, high current income. The Fund
seeks to achieve its objective by investing principally in corporate bonds rated
BB or lower by Standard & Poor's Ratings Group ("S&P") or Ba or lower by Moody's
Investors Service, Inc. ("Moody's"), or similarly rated by another
nationally-recognized statistical rating organization, or, if unrated (which may
be more speculative in nature than rated bonds), judged to be of comparable
quality by the Manager (as defined below). The Fund may also invest in U.S. and
foreign government securities and commercial paper. For further details, see
Investment Objective and Policies.

Risk Factors
The Fund invests primarily in high-yield securities ("junk bonds") and
greater risks may be involved with an investment in the Fund than an investment
in a mutual fund comprised primarily of investment grade bonds. See Risk
Factors.

Investment Manager, Distributor and Service Agent
Delaware Management Company, Inc. (the "Manager") furnishes investment
management services to the Fund, subject to the supervision and direction of
Income Funds, Inc.'s Board of Directors. The Manager provides investment
management services to certain other funds in the Delaware Group. Delaware
Distributors, L.P. (the "Distributor") is the national distributor for the Fund
and for all of the other mutual funds in the Delaware Group. Delaware Service
Company, Inc. (the "Transfer Agent") is the shareholder servicing, dividend
disbursing, accounting services and transfer agent for the Fund and for all of
the other mutual funds in the Delaware Group. See Summary of Expenses and
Management of the Fund for other information regarding the Manager and the fees
payable under the Fund's Investment Management Agreement.

Sales Charges
The price of Class A Shares includes a maximum front-end sales charge
of 4.75% of the offering price, which is equivalent to 4.91% of the amount
invested, based on an initial net asset value of $5.50 per share. The front-end
sales charge is reduced on certain transactions of at least $100,000 but under
$1,000,000. There is no front-end sales charge on purchases of $1,000,000 or
more. Class A Shares are subject to annual 12b-1 Plan expenses.

The price of Class B Shares is equal to the net asset value per share.
Class B Shares are subject to a contingent deferred sales charge ("CDSC") of:
(i) 4% if shares are redeemed within two years of purchase; (ii) 3% if shares
are redeemed during the third or fourth year following purchase; (iii) 2% if
shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
subject to annual 12b-1 Plan expenses for approximately eight years after
purchase. See Deferred Sales Charge Alternative - Class B Shares and Automatic
Conversion of Class B Shares under Classes of Shares.

The price of Class C Shares is equal to the net asset value per share.
Class C Shares are subject to a CDSC of 1% if shares are redeemed within 12
months of purchase. Class C Shares are subject to annual 12b-1 Plan expenses for
the life of the investment.

See Classes of Shares and Distribution (12b-1) and Service under
Management of the Fund.

-3-

<PAGE>

Purchase Amounts
Generally, the minimum initial investment in any Class is $1,000.
Subsequent investments must generally be at least $100.

Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. An investor may exceed these maximum purchase
limitations for Class B Shares and Class C Shares by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and Class A Shares are subject to lower annual 12b-1 Plan expenses than
Class B and Class C Shares and generally are not subject to a CDSC. The minimum
and maximum purchase amounts for retirement plans may vary. See How to Buy
Shares.

Redemption and Exchange
Class A Shares of the Fund may be redeemed or exchanged at the net
asset value calculated after receipt of the redemption or exchange request.
Neither the Fund nor the Distributor assesses a charge for redemptions or
exchanges of Class A Shares, except for certain redemptions of shares purchased
at net asset value, which may be subject to a CDSC if a dealer's commission was
paid in connection with such purchases. See Front-End Sales Charge Alternative -
Class A Shares under Classes of Shares.

Class B Shares and Class C Shares may be redeemed or exchanged at the
net asset value calculated after receipt of the redemption or exchange request
subject, in the case of redemptions, to any applicable CDSC. Neither the Fund
nor the Distributor assesses any charges other than the CDSC for redemptions or
exchanges of Class B or Class C Shares. There are certain limitations on an
investor's ability to exchange shares between the various classes of shares that
are offered. See Redemption and Exchange.

Open-End Investment Company
Income Funds, Inc., which was organized as a Maryland corporation in
1983, is an open-end management investment company. The Fund's portfolio of
assets is diversified as defined by the Investment Company Act of 1940 (the
"1940 Act"). Income Funds, Inc. was previously organized as a Delaware
corporation in 1970. See Shares under Management of the Fund.

-4-

<PAGE>

SUMMARY OF EXPENSES

A general comparison of the sales arrangements and other expenses
applicable to Class A, Class B and Class C Shares follows:

Class A Class B Class C
Shareholder Transaction Expenses Shares Shares Shares
- -------------------------------------------------------------------------------

Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price). . . . . . . . . 4.75% None None

Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price) . . . None None None

Maximum Contingent Deferred Sales
Charge (as a percentage of
original purchase price or
redemption proceeds,
as applicable). . . . . . . . . . . None* 4.00%* 1.00%*

Redemption Fees. . . . . . . . . . . . None** None** None**

Annual Operating Expenses
(as a percentage of Class A Class B Class C
average daily net assets) Shares Shares Shares
- -------------------------------------------------------------------------------

Management Fees . . . . . . . . . . .
(after voluntary waivers) 0.00% 0.00% 0.00%

12b-1 Plan Expenses
(including service fees)
(after voluntary waivers). . . . . 0.00%+/+++ 0.00%+/+++ 0.00%+/+++

Other Operating Expenses. . . . . . . 1.25%+++ 1.25%+++ 1.25%+++
----- ----- -----
Total Operating Expenses . . . .
(after voluntary waivers) 1.25%+++ 1.25%+++ 1.25%+++
===== ===== =====

The purpose of the above tables is to assist the investor in
understanding the various costs and expenses that an investor in each Class will
bear directly or indirectly.

*Class A purchases of $1 million or more may be made at net asset
value. However, if in connection with any such purchase a dealer commission is
paid to the financial adviser through whom such purchase is effected, a CDSC of
1% will be imposed on certain redemptions within 12 months of purchase ("Limited
CDSC"). Class B Shares are subject to a CDSC of: (i) 4% if shares are redeemed
within two years of purchase; (ii) 3% if shares are redeemed during the third or
fourth year following purchase; (iii) 2% if shares are redeemed during the fifth
year following purchase; (iv) 1% if shares are redeemed during the sixth year
following purchase; and (v) 0% thereafter. Class C Shares are subject to a

-5-

<PAGE>

CDSC of 1% if the shares are redeemed within 12 months of purchase. See
Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value under Redemption and Exchange; Deferred Sales
Charge Alternative - Class B Shares and Level Sales Charge Alternative - Class C
Shares under Classes of Shares.

**CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.

+Class A Shares, Class B Shares and Class C Shares are subject to separate 12b-1
Plans. Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted by rules of the National Association
of Securities Dealers, Inc. (the "NASD"). The annual 12b-1 Plan expenses for
the Class A Shares have been set by the Board of Directors at .25% of the
average daily net assets of such Class. The maximum annual 12b-1 Plan expenses
permitted under the 12b-1 Plan for Class A Shares are .30% of the average daily
net assets of such Class. The Distributor has elected voluntarily to waive its
right to receive 12b-1 Plan fees (including service fees) from the commencement
of the public offering of the Classes through ____________, 199__. See
Distribution (12b-1) and Service under Management of the Fund.

+++"Total Operating Expenses" and "Other Operating Expenses" for the Class A
Shares, the Class B Shares and the Class C Shares are based on estimated amounts
for the first full fiscal year of the Classes, after giving effect to the
voluntary expense waiver. The Manager has elected voluntarily to waive that
portion, if any, of the annual management fees payable by the Fund and to pay
certain expenses of the Fund to the extent necessary to ensure that the Total
Operating Expenses of each Class of the Fund, excluding each such Class' 12b-1
fees, do not exceed 1.25%, from the commencement of the public offering of the
Classes through ___________, 199__. If the voluntary expense waivers were not in
effect, it is estimated that for the first full year, the Total Operating
Expenses, as a percentage of average daily net assets, would be 2.32%, 3.07%,
and 3.07%, respectively, for the Class A Shares, the Class B Shares and the
Class C Shares, reflecting management fees of .60%.

For expense information about the High-Yield Opportunities Fund
Institutional Class of shares, see the separate prospectus relating to that
class.

-6-

<PAGE>

The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, (2) redemption and no redemption at the end of each time period
and (3) for Class B Shares and Class C Shares, payment of a CDSC at the time of
redemption, if applicable.

Assuming Redemption Assuming No Redemption
1 year 3 years 1 year 3 years
------ ------- ------ -------
Class A Shares $15(1) $ 47 $15 $47

Class B Shares(2) $63 $100 $23 $70

Class C Shares $33 $ 70 $23 $70

(1) Generally, no redemption charge is assessed upon redemption of Class A
Shares. Under certain circumstances, however, a Limited CDSC, which has
not been reflected in this calculation, may be imposed on certain
redemptions within 12 months of purchase. See Contingent Deferred Sales
Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.

(2) At the end of approximately eight years after purchase, Class B Shares
will be automatically converted into Class A Shares. The example above
does not assume conversion of Class B Shares since it reflects figures
only for one and three years. See Automatic Conversion of Class B
Shares under Classes of Shares for a description of the automatic
conversion feature.

This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.

-7-

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The objective of the Fund is to seek total return and, as a secondary
objective, high current income. The Fund seeks to achieve its objective by
investing primarily in corporate bonds rated BB or lower by S&P or Ba or lower
by Moody's, or similarly rated by another nationally-recognized statistical
rating organization or, if unrated (which may be more speculative in nature than
rated bonds), judged to be of comparable quality by the Manager. See Appendix B
for more rating information and Risk Factors and Other Investment Policies and
Risk Considerations for a description of the risks associated with investing in
lower-rated fixed-income securities.

SUITABILITY
The Fund may be suitable for the investor interested in total return
with the potential for high current income. The net asset value per share of
each Class may fluctuate in response to the condition of individual companies
and general market and economic conditions and, as a result, the Fund is not
appropriate for a short-term investor. The Fund cannot assure a specific rate of
return or yield, or that principal will be protected. However, through the
cautious selection and supervision of its portfolio, the Manager will strive to
achieve the Fund's objective.

The types of securities in which the Fund may invest are subject to
price fluctuations particularly due to changes in interest rates and economic
conditions. Investors should consider asset value fluctuation, as well as yield,
in making an investment decision. While investments in unrated, lower-rated and
certain restricted securities have the potential for greater price appreciation
and higher yields, they are more speculative and increase the credit risk of the
Fund's portfolio. Changes in the market value of portfolio securities will not
affect interest income from such securities, but will be reflected in a Class'
net asset value. In addition, investments in foreign fixed-income securities
involve special risks, including those related to currency fluctuations, as well
as to political, economic and social situations different from and potentially
more volatile than those in the United States. Investors should be willing to
accept the risks, including the risk of net asset value fluctuations, associated
with investing in these types of securities. See Risk Factors and Other
Investment Policies and Risk Considerations for a complete discussion of the
risk factors affecting the Fund's portfolio securities.

Investors should not consider a purchase of Fund shares as equivalent
to a complete investment program. The Delaware Group includes a family of funds,
generally available through registered investment dealers, which may be used in
concert to create a more complete investment program.

Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which the Fund invests.

INVESTMENT STRATEGY
The Fund will invest at least 80% of its assets at the time of purchase
in: (1) Corporate Bonds. The Fund will invest in corporate bonds that may be
rated BB or lower by S&P or Ba or lower by Moody's, or similarly rated by
another nationally-recognized statistical rating organization, or if unrated
(which may be more speculative in nature than rated bonds), judged to be of
comparable quality by the Manger; (2) Government Securities. Securities of, or
guaranteed by, the U.S. and foreign governments, their agencies or
instrumentalities; or (3) Commercial Paper. Commercial paper of companies
having, at

-8-

<PAGE>

the time of purchase, an issue of outstanding debt securities rated as described
above or commercial paper rated A-1 or A-2 by S&P or rated P-1 or P-2 by Moody's
or, if unrated, judged to be of comparable quality by the Manager.

The Fund may acquire zero coupon bonds and, to a lesser extent,
pay-in-kind (PIK) bonds. See Zero Coupon Bonds and Pay-In-Kind Bonds under Other
Investment Policies and Risk Considerations. The Fund may also invest in other
types of income-producing securities, including common stocks and preferred
stocks, some of which may have convertible features or attached warrants and
which may be speculative. See Convertible, Debt and Non-Traditional Equity
Securities under Other Investment Policies and Risk Considerations.

The Fund may purchase privately-placed debt and other securities the
resale of which is restricted under applicable securities laws. Such securities
may be less liquid than securities that are not subject to resale restrictions.
The Fund will not purchase illiquid assets, if more than 15% of its net assets
would consist of such illiquid securities. See Restricted/Illiquid Securities
under Other Investment Policies and Risk Considerations.

The Fund may invest up to 15% of its total assets in securities of
issuers domiciled in foreign countries. See Foreign Investment Information under
Other Investment Policies and Risk Considerations.

The Fund may hold cash or invest in short-term debt securities and
other money market instruments when, in the Manager's opinion, such holdings are
prudent given then prevailing market conditions or pending investment in other
types of securities. All these short-term investments will be of the highest
quality as determined by a nationally-recognized statistical rating organization
(e.g., AAA by S&P or Aaa by Moody's) or, if unrated, judged to be of comparable
quality as determined by the Manager. See Short-Term Investments under Other
Investment Policies and Risk Considerations.

The Manager does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Manager may take advantage of short-term opportunities that are
consistent with its investment objective.

* * *

For a description of the Fund's other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.

Although the Fund will constantly strive to attain its objective, there
can be no assurance that is will be attained.

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<PAGE>

The Fund's designation as an open-end investment company and as a
diversified fund, may not be changed unless authorized by the vote of a majority
of the Fund's outstanding voting securities. A "majority vote of the outstanding
voting securities" is the vote by the holders of the lesser of a) 67% or more of
the Fund's voting securities present in person or represented by proxy if the
holders of more than 50% of the outstanding voting securities of the Fund are
present or represented by proxy; or b) more than 50% of the outstanding voting
securities. Part B lists other more specific investment restrictions of the Fund
which may not be changed without a majority shareholder vote.

The investment policies of the Fund that are not identified above or in
Part B as fundamental are not fundamental and may be changed by the Board of
Directors of Income Funds, Inc. without a shareholder vote.

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<PAGE>

RISK FACTORS

Generally
The Fund invests principally in fixed-income securities. The market
values of fixed-income securities generally fall when interest rates rise and,
conversely, rise when interest rates fall. Lower-rated and unrated fixed-income
securities tend to reflect short-term corporate and market developments to a
greater extent than higher-rated fixed-income securities, which react primarily
to fluctuations in the general level of interest rates. These lower-rated or
unrated securities generally have a greater potential for price appreciation and
can offer higher yields, but, as a result of factors such as reduced
creditworthiness of issuers, increased risk of default and a more limited and
less liquid secondary market, are subject to greater volatility and risk of loss
of income and principal than are higher-rated securities. The Manager will
attempt to reduce such risk through portfolio diversification, credit analysis,
and attention to trends in the economy, industries and financial markets.

High-Yield Securities
The Fund may invest primarily in bonds rated BB or lower by S&P or Ba
or lower by Moody's, and in bonds of comparable quality. See Appendix B to this
Prospectus for more rating information. Investing in these so-called "junk"
bonds or "high-yield" bonds entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved in investment grade
securities, and which should be considered by investors contemplating an
investment in the Fund. High-yield bonds are sometimes issued by companies whose
earnings at the time of issuance are less than the projected debt service on the
junk bonds. In addition to the considerations discussed elsewhere in this
Prospectus, the risks of lower-rated bonds include the following:

Youth and Volatility of the High-Yield Market. Although the market for
high-yield bonds has been in existence for many years, including periods of
economic downturns, the high-yield market grew rapidly during the long economic
expansion which took place in the United States during the 1980s. During the
economic expansion, the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings increased dramatically. As a
result, the high-yield market grew substantially during the economic expansion.
Although experts disagree on the impact recessionary periods have had and will
have on the high-yield market, some analysts believe a protracted economic
downturn would severely disrupt the market for high-yield bonds, would adversely
affect the value of outstanding bonds and would adversely affect the ability of
high-yield issuers to repay principal and interest. Those analysts cite
volatility experienced in the high-yield market in the past as evidence for
their position. It is likely that protracted periods of economic uncertainty
would result in increased volatility in the market prices of high-yield bonds,
an increase in the number of high-yield bond defaults and corresponding
volatility in the Fund's net asset value.

Redemptions. If, as a result of volatility in the high-yield market or
other factors, the Fund experiences substantial net redemptions of the Fund's
shares for a sustained period of time, the Fund may be required to sell
securities without regard to the investment merits of the securities to be sold.
If the Fund sells a substantial number of securities to generate proceeds for
redemptions, the asset base of the Fund will decrease and the Fund's expense
ratios may increase.

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<PAGE>

Liquidity and Valuation. The secondary market for high-yield securities
is currently dominated by institutional investors, including mutual funds and
certain financial institutions. There is generally no established retail
secondary market for high-yield securities. As a result, the secondary market
for high-yield securities is more limited and less liquid than other secondary
securities markets. The high-yield secondary market is particularly susceptible
to liquidity problems when the institutions which dominate it temporarily cease
buying bonds for regulatory, financial or other reasons, such as the savings and
loan crisis. A less liquid secondary market may have an adverse effect on the
Fund's ability to dispose of particular issues, when necessary, to meet the
Fund's liquidity needs or in response to a specific economic event, such as the
deterioration in the creditworthiness of the issuer. In addition, a less liquid
secondary market makes it more difficult for the Fund to obtain precise
valuations of the high-yield securities in its portfolio. During periods
involving such liquidity problems, judgment plays a greater role in valuing
high-yield securities than is normally the case. The secondary market for
high-yield securities is also generally considered to be more likely to be
disrupted by adverse publicity and investor perceptions than the more
established secondary securities markets. The Fund's privately placed high-yield
securities are particularly susceptible to the liquidity and valuation risks
outlined above.

See High-Yield, High Risk Securities under Other Investment Policies
and Risk Considerations for further information about high-yield securities.

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<PAGE>

THE DELAWARE DIFFERENCE

PLANS AND SERVICES
The Delaware Difference is our commitment to provide you with superior
information and quality service on your investments in the Delaware Group of
funds.

SHAREHOLDER PHONE DIRECTORY

Investor Information Center
800-523-4640

Fund Information, Literature Price, Yield and Performance Figures

Shareholder Service Center
800-523-1918

Information on Existing Regular Investment Accounts and Retirement Plan
Accounts, Wire Investments, Wire Liquidations, Telephone
Liquidations and Telephone Exchanges

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

Performance Information
You can call the Investor Information Center at any time for current
yield information. Current yield and total return information may also be
included in advertisements and information given to shareholders. Yields are
computed on an annual basis over a 30-day period.

Shareholder Services
During business hours, you can call the Delaware Group's Shareholder
Service Center. Our representatives can answer any questions about your account,
the Fund, various service features and other funds in the Delaware Group.

Delaphone Service
Delaphone is an account inquiry service for investors with
Touch-Tone(R) phone service. It enables you to get information on your account
faster than the mailed statements and confirmations. Delaphone also provides
current performance information on the Fund, as well as other funds in the
Delaware Group. Delaphone is available seven days a week, 24 hours a day.

Dividend Payments
Dividends, capital gains and other distributions are automatically
reinvested in your account, unless you elect to receive them in cash. You may
also elect to have the dividends earned in one fund automatically invested in
another Delaware Group fund with a different investment objective, subject to
certain exceptions and limitations.

-13-

<PAGE>

For more information, see Additional Methods of Adding to Your
Investment - Dividend Reinvestment Plan under How to Buy Shares or call the
Shareholder Service Center.

MoneyLine Direct Deposit Service
If you elect to have your dividends and distributions paid in cash and
such dividends and distributions are in an amount of $25 or more, you may choose
the MoneyLine Direct Deposit Service and have such payments transferred from
your Fund account to your predesignated bank account. See Dividends and
Distributions. In addition, you may elect to have your Systematic Withdrawal
Plan payments transferred from your Fund account to your predesignated bank
account through this service. See Systematic Withdrawal Plans under Redemption
and Exchange. Your funds will normally be credited to your bank account two
business days after the payment date. There are no fees for this service. You
can initiate the MoneyLine Direct Deposit Service by completing an Authorization
Agreement. If your name and address are not identical to the name and address on
your Fund account, you must have your signature guaranteed. This service is not
available for retirement plans.

Statements and Confirmations
You will receive quarterly statements of your account summarizing all
transactions during the period. A confirmation statement will be sent following
all transactions other than those involving a reinvestment of dividends. You
should examine statements and confirmations immediately and promptly report any
discrepancy by calling the Shareholder Service Center.

Duplicate Confirmations
If your financial adviser or investment dealer is noted on your
investment application, we will send a duplicate confirmation to him or her.
This makes it easier for your adviser to help you manage your investments.

Tax Information
Each year, Income Funds, Inc. will mail to you information on the tax
status of your dividends and distributions.

Right of Accumulation
With respect to Class A Shares, the Right of Accumulation feature
allows you to combine the value of your current holdings of Class A Shares,
Class B Shares and Class C Shares of the Fund with the dollar amount of new
purchases of Class A Shares of the Fund to qualify for a reduced front-end sales
charge on such purchases of Class A Shares. Under the Combined Purchases
Privilege, you may also include certain shares that you own in other funds in
the Delaware Group. See Classes of Shares.

Letter of Intention
The Letter of Intention feature permits you to obtain a reduced
front-end sales charge on purchases of Class A Shares by aggregating certain of
your purchases of Delaware Group fund shares over a 13-month period. See
Classes of Shares and Part B.

12-Month Reinvestment Privilege
The 12-Month Reinvestment Privilege permits you to reinvest proceeds
from a redemption of Class A Shares, within one year of the date of the
redemption, without paying a front-end sales charge. See Part B.

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<PAGE>

Exchange Privilege
The Exchange Privilege permits shareholders to exchange all or part of
their shares into shares of the other funds in the Delaware Group, subject to
certain exceptions and limitations. For additional information on exchanges, see
Investing by Exchange under How to Buy Shares and Redemption and Exchange.

Wealth Builder Option
You may elect to invest in the Fund through regular liquidations of
shares in your accounts in other funds in the Delaware Group. Investments under
this feature are exchanges and are therefore subject to the same conditions and
limitations as other exchanges of Fund shares. See Additional Methods of Adding
to Your Investment - Wealth Builder Option and Investing by Exchange under How
to Buy Shares, and Redemption and Exchange.

Delaware Group Asset Planner
Delaware Group Asset Planner is an asset allocation service that gives
investors, working with a professional financial adviser, the ability to more
easily design and maintain investments in a diversified selection of Delaware
Group mutual funds. The Asset Planner service offers a choice of four
predesigned allocation strategies (each with a different risk/reward profile)
made up of separate investments in predetermined percentages of Delaware Group
funds. With the guidance of a financial adviser, investors may also tailor an
allocation strategy that meets their personal needs and goals. See How to Buy
Shares.

Financial Information about the Fund
Each fiscal year, you will receive an audited annual report and an
unaudited semi-annual report. These reports provide detailed information about
the Fund's investments and performance. Income Funds, Inc.'s fiscal year ends on
July 31.

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<PAGE>

RETIREMENT PLANNING

An investment in the Fund may be suitable for tax-deferred retirement
plans. Among the retirement plans noted below, Class B Shares are available for
investment only by Individual Retirement Accounts, Simplified Employee Pension
Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans.

Retirement plans may be subject to plan establishment fees, annual
maintenance fees and/or other administrative or trustee fees. Fees are based
upon the number of participants in the plan as well as the services selected.
Additional information about fees is included in retirement plan materials. Fees
are quoted upon request. Certain shareholder investment services available to
non-retirement plan shareholders may not be available to retirement plan
shareholders. Certain retirement plans may qualify to purchase the High-Yield
Opportunities Fund Institutional Class. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center or
see Part B.

Individual Retirement Account ("IRA")
Individuals, even if they participate in an employer-sponsored
retirement plan, may establish their own retirement program for investments in
each of the Classes. Contributions to an IRA may be tax-deductible and earnings
are tax-deferred. Under the Tax Reform Act of 1986, the tax deductibility of IRA
contributions is restricted, and in some cases eliminated, for individuals who
participate in certain employer-sponsored retirement plans and whose annual
income exceeds certain limits. Existing IRAs and future contributions up to the
IRA maximums, whether deductible or not, still earn on a tax-deferred basis.

Simplified Employee Pension Plan ("SEP/IRA")
A SEP/IRA may be established by an employer who wishes to sponsor a
tax-sheltered retirement program by making contributions on behalf of all
eligible employees. Each of the Classes is available for investment by a
SEP/IRA.

Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Offers employers with 25 or fewer eligible employees the ability to
establish a SEP/IRA that permits salary deferral contributions. An employer may
also elect to make additional contributions to this plan. Class B Shares are not
available for purchase by such plans.

403(b)(7) Deferred Compensation Plan
Permits employees of public school systems or of certain types of
non-profit organizations to enter into a deferred compensation arrangement for
the purchase of shares of each of the Classes.

457 Deferred Compensation Plan
Permits employees of state and local governments and certain other
entities to enter into a deferred compensation arrangement for the purchase of
shares of each of the Classes.

Prototype Profit Sharing or Money Purchase Pension Plan
Offers self-employed individuals, partnerships and corporations a
tax-qualified plan which provides for the investment of contributions in Class A
Shares or Class C Shares. Class B Shares are not available for purchase by such
plans.

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<PAGE>

Prototype 401(k) Defined Contribution Plan
Permits employers to establish a tax-qualified plan based on salary
deferral contributions for investment in Class A or Class C Shares. Class B
Shares are not available for purchase by such plans.

Allied Plans
Class A Shares are available for purchase by participants in certain
401(k) Defined Contribution Plans ("Allied Plans") which are made available
under a joint venture agreement between the Distributor and another institution
through which mutual funds are marketed and which allow investments in Class A
Shares of designated Delaware Group funds ("eligible Delaware Group fund
shares"), as well as shares of designated classes of non-Delaware Group funds
("eligible non-Delaware Group fund shares"). Class B Shares and Class C Shares
are not eligible for purchase by Allied Plans.

With respect to purchases made in connection with an Allied Plan, the
value of eligible Delaware Group and eligible non-Delaware Group fund shares
held by the Allied Plan may be combined with the dollar amount of new purchases
by that Allied Plan to obtain a reduced front-end sales charge on additional
purchases of eligible Delaware Group fund shares. See Front-End Sales Charge
Alternative Class A Shares under Classes of Shares.

Participants in Allied Plans may exchange all or part of their eligible
Delaware Group fund shares for other eligible Delaware Group fund shares or for
eligible non-Delaware Group fund shares at net asset value without payment of a
front-end sales charge. However, exchanges of eligible fund shares, both
Delaware Group and non-Delaware Group, which were not subject to a front-end
sales charge, will be subject to the applicable sales charge if exchanged for
eligible Delaware Group fund shares to which a sales charge applies. No sales
charge will apply if the eligible fund shares were previously acquired through
the exchange of eligible shares on which a sales charge was already paid or
through the reinvestment of dividends. See Investing by Exchange.

A dealer's commission may be payable on purchases of eligible Delaware
Group fund shares under an Allied Plan. In determining a financial adviser's
eligibility for a dealer's commission on net asset value purchases of eligible
Delaware Group fund shares in connection with Allied Plans, all participant
holdings in the Allied Plan will be aggregated. See Front-End Sales Charge
Alternative Class A Shares under Classes of Shares.

The Limited CDSC is applicable to redemptions of net asset value
purchases from an Allied Plan on which a dealer's commission has been paid.
Waivers of the Limited CDSC, as described under Waiver of Limited Contingent
Deferred Sales Charge - Class A Shares under Redemption and Exchange, apply to
redemptions by participants in Allied Plans except in the case of exchanges
between eligible Delaware Group and non-Delaware Group fund shares. When
eligible Delaware Group fund shares are exchanged into eligible non-Delaware
Group fund shares, the Limited CDSC will be imposed at the time of the exchange,
unless the joint venture agreement specifies that the amount of the Limited CDSC
will be paid by the financial adviser or selling dealer. See Contingent Deferred
Sales Charge for Certain Redemptions of Class A Shares Purchased at Net Asset
Value under Redemption and Exchange.

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<PAGE>

CLASSES OF SHARES

Alternative Purchase Arrangements
Shares may be purchased at a price equal to the next determined net
asset value per share, subject to a sales charge which may be imposed, at the
election of the purchaser, at the time of the purchase for Class A Shares
("front-end sales charge alternative"), or on a contingent deferred basis for
Class B Shares ("deferred sales charge alternative") or Class C Shares ("level
sales charge alternative").

Class A Shares. An investor who elects the front-end sales charge
alternative acquires Class A Shares, which incur a sales charge when they are
purchased, but generally are not subject to any sales charge when they are
redeemed. Absent any applicable fee waiver, Class A Shares are subject to annual
12b-1 Plan expenses of up to a maximum of .30% (currently, no more than .25%
pursuant to Board action) of average daily net assets of such shares. Certain
purchases of Class A Shares qualify for reduced front-end sales charges. See
Front-End Sales Charge Alternative - Class A Shares. See also Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange and Distribution (12b-1) and Service
under Management of the Fund.

Class B Shares. An investor who elects the deferred sales charge
alternative acquires Class B Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within six years of purchase. Absent any applicable fee
waiver, Class B Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (.25% of which are service fees to be paid to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for approximately eight
years after purchase. Class B Shares permit all of the investor's dollars to
work from the time the investment is made. If no waiver of 12b-1 fees is in
effect, the higher 12b-1 Plan expenses paid by Class B Shares will cause such
shares to have a higher expense ratio and to pay lower dividends than Class A
Shares. At the end of approximately eight years after purchase, the Class B
Shares will automatically be converted into Class A Shares. See Automatic
Conversion of Class B Shares, below.

Class C Shares. An investor who elects the level sales charge
alternative acquires Class C Shares, which do not incur a front-end sales charge
when they are purchased, but are subject to a contingent deferred sales charge
if they are redeemed within 12 months of purchase. Absent any applicable fee
waiver, Class C Shares are subject to annual 12b-1 Plan expenses of up to a
maximum of 1% (.25% of which are service fees to be paid to the Distributor,
dealers or others for providing personal service and/or maintaining shareholder
accounts) of average daily net assets of such shares for the life of the
investment. If no waiver of 12b-1 fees is in effect, the higher 12b-1 Plan
expenses paid by Class C Shares will cause such shares to have a higher expense
ratio and to pay lower dividends than Class A Shares. Unlike Class B Shares,
Class C Shares do not convert to another class.

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<PAGE>

The alternative purchase arrangements described above permit investors
to choose the method of purchasing shares that is most suitable given the amount
of their purchase, the length of time they expect to hold their shares and other
relevant circumstances. Investors should determine whether, given their
particular circumstances, it is more advantageous to purchase Class A Shares and
incur a front-end sales charge, purchase Class B Shares and have the entire
initial purchase amount invested in the Fund with their investment being subject
to a CDSC if they redeem shares within six years of purchase, or purchase Class
C Shares and have the entire initial purchase amount invested in the Fund with
their investment being subject to a CDSC if they redeem shares within 12 months
of purchase. In addition, investors should consider the level of annual 12b-1
Plan expenses applicable to each Class. If no waiver of 12b-1 fees is in effect,
the higher 12b-1 Plan expenses on Class B Shares and Class C Shares will be
offset to the extent a return is realized on the additional money initially
invested upon the purchase of such shares. However, there can be no assurance as
to the return, if any, that will be realized on such additional money. In
comparing Class B Shares to Class C Shares, investors should also consider the
desirability of an automatic conversion feature, which is available only for
Class B Shares.

Prospective investors should refer to Appendix A--Investment
Illustrations in this Prospectus for an illustration of the potential effect
that each of the purchase options may have on a long-term shareholder's
investment.

For the distribution and related services provided to, and the expenses
borne on behalf of, the Fund, absent any applicable fee waiver, the Distributor
and others will be paid, in the case of the Class A Shares, from the proceeds of
the front-end sales charge and 12b-1 Plan fees and, in the case of the Class B
Shares and the Class C Shares, from the proceeds of the 12b-1 Plan fees and, if
applicable, the CDSC incurred upon redemption. Financial advisers may receive
different compensation for selling Class A, Class B and Class C Shares.
Investors should understand that the purpose and function of the respective
12b-1 Plans and the CDSCs applicable to Class B Shares and Class C Shares are
the same as those of the 12b-1 Plan and the front-end sales charge applicable to
Class A Shares in that such fees and charges are used to finance the
distribution of the respective Classes. See 12b-1 Distribution Plans - Class A,
Class B and Class C Shares.

Dividends paid on Class A, Class B and Class C Shares, to the extent
any dividends are paid, will be calculated in the same manner, at the same time,
on the same day and will be in the same amount, except that, when assessed, the
additional amount of 12b-1 Plan expenses relating to Class B Shares and Class C
Shares will be borne exclusively by such shares. See Calculation of Offering
Price and Net Asset Value Per Share.

The NASD has adopted certain rules relating to investment company sales
charges. Income Funds, Inc. and the Distributor intend to operate in compliance
with these rules.

Front-End Sales Charge Alternative - Class A Shares
Class A Shares may be purchased at the offering price, which reflects a
maximum front-end sales charge of 4.75%. See Calculation of Offering Price and
Net Asset Value Per Share.

Purchases of $100,000 or more carry a reduced front-end sales charge as
shown in the following table.

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<PAGE>

High-Yield Opportunities Fund A Class
- -------------------------------------------------------------------------------
Front-End Sales Charge Dealer's
as % of Commission***
Offering Amount as % of
Amount of Purchase Price Invested** Offering Price
- -------------------------------------------------------------------------------

Less than $100,000 4.75% 4.91% 4.00%

$100,000 but
under $250,000 3.75 3.82 3.00

$250,000 but
under $500,000 2.50 2.55 2.00

$500,000 but
under $1,000,000* 2.00 2.00 1.60

* There is no front-end sales charge on purchases of Class A Shares of $1
million or more but, under certain limited circumstances, a 1% Limited CDSC
may apply upon redemption of such shares.

** Based upon the initial net asset value of $5.50 per share of the Class A
Shares.

*** Financial institutions or their affiliated brokers may receive an agency
transaction fee in the percentages set forth above.
- --------------------------------------------------------------------------------

The Fund must be notified when a sale takes place which would qualify
for the reduced front-end sales charge on the basis of previous or
current purchases. The reduced front-end sales charge will be granted
upon confirmation of the shareholder's holdings by the Fund. Such
reduced front-end sales charges are not retroactive.

From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
the front-end sales charge shown above. In addition, certain dealers
who enter into an agreement to provide extra training and information
on Delaware Group products and services and who increase sales of
Delaware Group funds may receive an additional commission of up to .15%
of the offering price. Dealers who receive 90% or more of the sales
charge may be deemed to be underwriters under the Securities Act of
1933.
- --------------------------------------------------------------------------------

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<PAGE>

For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are made in accordance with the following schedule:

Dealer's Commission
-------------------
(as a percentage of
Amount of Purchase amount purchased)
------------------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25

In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies may be aggregated with those of the Class A Shares
of the Fund. Financial advisers also may be eligible for a dealer's commission
in connection with certain purchases made under a Letter of Intention or
pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.

An exchange from other Delaware Group funds will not qualify for
payment of the dealer's commission, unless a dealer's commission or similar
payment has not been previously paid on the assets being exchanged. The schedule
and program for payment of the dealer's commission are subject to change or
termination at any time by the Distributor at its discretion.

Redemptions of Class A Shares purchased at net asset value may result
in the imposition of a Limited CDSC if the dealer's commission described above
was paid in connection with the purchase of those shares. See Contingent
Deferred Sales Charge for Certain Redemptions of Class A Shares Purchased at Net
Asset Value under Redemption and Exchange.

Combined Purchases Privilege
By combining your holdings of Class A Shares with your holdings of
Class B Shares and/or Class C Shares of the Fund and shares of the other funds
in the Delaware Group, except those noted below, you can reduce the front-end
sales charges on any additional purchases of Class A Shares. Shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with ownership of
variable insurance products may be combined with other Delaware Group fund
holdings. Shares of other funds that do not carry a front-end sales charge or
CDSC may not be included unless they were acquired through an exchange from a
Delaware Group fund that does carry a front-end sales charge or CDSC.

This privilege permits you to combine your purchases and holdings with
those of your spouse, your children under 21 and any trust, fiduciary or
retirement account for the benefit of such family members.

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<PAGE>

It also permits you to use these combinations under a Letter of
Intention. A Letter of Intention allows you to make purchases over a 13-month
period and qualify the entire purchase for a reduction in front-end sales
charges on Class A Shares.

Combined purchases of $1,000,000 or more, including certain purchases
made at net asset value pursuant to a Right of Accumulation or under a Letter of
Intention, may result in the payment of a dealer's commission and the
applicability of a Limited CDSC. Investors should consult their financial
advisers or the Shareholder Service Center about the operation of these
features. See Front-End Sales Charge Alternative - Class A Shares, above.

Buying Class A Shares at Net Asset Value
Class A Shares of the Fund may be purchased at net asset value under
the Delaware Group Dividend Reinvestment Plan and, under certain circumstances,
the Exchange Privilege and the 12-Month Reinvestment Privilege. See The Delaware
Difference and Redemption and Exchange for additional information.

Purchases of Class A Shares may be made at net asset value by current
and former officers, directors and employees (and members of their families) of
the Manager, any affiliate, any of the funds in the Delaware Group, certain of
their agents and registered representatives and employees of authorized
investment dealers and by employee benefit plans for such entities. Individual
purchases, including those in retirement accounts, must be for accounts in the
name of the individual or a qualifying family member.

Purchases of Class A Shares may also be made by clients of registered
representatives of an authorized investment dealer at net asset value within 12
months after the registered representative changes employment, if the purchase
is funded by proceeds from an investment where a front-end sales charge,
contingent deferred sales charge or other sales charge has been assessed.
Purchases of Class A Shares may also be made at net asset value by bank
employees who provide services in connection with agreements between the bank
and unaffiliated brokers or dealers concerning sales of shares of Delaware Group
funds. Officers, directors and key employees of institutional clients of the
Manager or any of its affiliates may purchase Class A Shares at net asset value.
Moreover, purchases may be effected at net asset value for the benefit of the
clients of brokers, dealers and registered investment advisers affiliated with a
broker or dealer, if such broker, dealer or investment adviser has entered into
an agreement with the Distributor providing specifically for the purchase of
Class A Shares in connection with special investment products, such as wrap
accounts or similar fee based programs.

Investments in Class A Shares made by plan level and/or participant
retirement accounts that are for the purpose of repaying a loan taken from such
accounts will be made at net asset value. Loan repayments made to a Delaware
Group account in connection with loans originated from accounts previously
maintained by another investment firm will also be invested at net asset value.

Investors who held shares in any class of any Delaware Group fund as of
December 1, 1995, may currently purchase Class A Shares at net asset value
through the Delaware Group Asset Planner service if such shares are being
purchased with proceeds from the redemption of shares of a fund (other than a
money market fund) outside of the Delaware Group of funds. The Delaware Group
Asset Planner Account Registration Form and check for such a transaction should
note that the investment is being made under

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<PAGE>

the "NAV/Asset Planner Accommodation Program." Prior notice will be given should
this program be discontinued. Class A Shares may also be purchased at net asset
value in an IRA through the Delaware Group Asset Planner service if the assets
being invested are being transferred from an existing IRA held outside of the
Delaware Group or are part of a distribution received from an employer-sponsored
or other retirement plan. See Delaware Group Asset Planner under How To Buy
Shares.

The Fund must be notified in advance that an investment qualifies for
purchase at net asset value.

Group Investment Plans
Group Investment Plans (e.g., SEP/IRA, SAR/SEP, Prototype Profit
Sharing, Pension and 401(k) Defined Contribution Plans) may benefit from the
reduced front-end sales charges available on the Class A Shares set forth in the
table on page , based on total plan assets. In addition, 403(b)(7) and 457
Retirement Plan Accounts may benefit from a reduced front-end sales charge on
Class A Shares based on the total amount invested by all participants in the
plan by satisfying the following criteria: (i) the employer for which the plan
was established has 250 or more eligible employees and the plan lists only one
broker of record, or (ii) the plan includes employer contributions and the plan
lists only one broker of record. If a company has more than one plan investing
in the Delaware Group of funds, then the total amount invested in all plans will
be aggregated to determine the applicable front-end sales charge reduction on
each purchase, both initial and subsequent, if, at the time of each such
purchase, the company notifies the Fund that it qualifies for the reduction.
Employees participating in such Group Investment Plans may also combine the
investments held in their plan account to determine the front-end sales charge
applicable to purchases in non-retirement Delaware Group investment accounts if,
at the time of each such purchase, they notify the Fund that they are eligible
to combine purchase amounts held in their plan account.

For additional information on retirement plans, including plan forms,
applications, minimum investments and any applicable account maintenance fees,
contact your investment dealer or the Distributor.

For other retirement plans and special services, see Retirement
Planning.

Deferred Sales Charge Alternative - Class B Shares
Class B Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the full amount of the investor's purchase
payment will be invested in Fund shares. The Distributor currently anticipates
compensating dealers or brokers for selling Class B Shares at the time of
purchase from its own assets in an amount equal to no more than 4% of the dollar
amount purchased. In addition, from time to time, upon written notice to all of
its dealers, the Distributor may hold special promotions for specified periods
during which the Distributor may pay additional compensation to dealers or
brokers for selling Class B Shares at the time of purchase. As discussed below,
however, absent any applicable fee waiver, Class B Shares are subject to annual
12b-1 Plan expenses and, if redeemed within six years of purchase, a CDSC.

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<PAGE>

Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are paid
to the Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class B Shares.
These payments support the compensation paid to dealers or brokers for selling
Class B Shares. Payments to the Distributor and others under the Class B 12b-1
Plan may be in an amount equal to no more than 1% annually. The combination of
the CDSC and the proceeds of the 12b-1 Plan fees makes it possible for the Fund
to sell Class B Shares without deducting a front-end sales charge at the time of
purchase.

Holders of Class B Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class B Shares
described in this Prospectus, even after the exchange. Such CDSC schedule may be
higher than the CDSC schedule for the Class B Shares acquired as a result of the
exchange. See Redemption and Exchange.

Automatic Conversion of Class B Shares
Class B Shares, other than shares acquired through reinvestment of
dividends, held for eight years after purchase are eligible for automatic
conversion into Class A Shares. Conversions of Class B Shares into Class A
Shares will occur only four times in any calendar year, on the last business day
of the second full week of March, June, September and December (each, a
"Conversion Date"). If the eighth anniversary after a purchase of Class B Shares
falls on a Conversion Date, an investor's Class B Shares will be converted on
that date. If the eighth anniversary occurs between Conversion Dates, an
investor's Class B Shares will be converted on the next Conversion Date after
such anniversary. Consequently, if a shareholder's eighth anniversary falls on
the day after a Conversion Date, that shareholder will have to hold Class B
Shares for as long as three additional months after the eighth anniversary of
purchase before the shares will automatically convert into Class A Shares.

Class B Shares of a fund acquired through a reinvestment of dividends
will convert to the corresponding Class A Shares of that fund (or, in the case
of Delaware Group Cash Reserve, Inc., the Delaware Cash Reserve Consultant
Class) pro-rata with Class B Shares of that fund not acquired through dividend
reinvestment.

All such automatic conversions of Class B Shares will constitute
tax-free exchanges for federal income tax purposes. See Taxes.

Level Sales Charge Alternative - Class C Shares
Class C Shares may be purchased at net asset value without a front-end
sales charge and, as a result, the Fund will invest the full amount of the
investor's purchase payment. The Distributor currently anticipates compensating
dealers or brokers for selling Class C Shares at the time of purchase from its
own assets in an amount equal to no more than 1% of the dollar amount purchased.
As discussed below, however, absent any applicable fee waiver, Class C Shares
are subject to annual 12b-1 Plan expenses and, if redeemed within 12 months of
purchase, a CDSC.

Proceeds from the CDSC and the annual 12b-1 Plan fees, if any, are paid
to the Distributor and others for providing distribution and related services,
and bearing related expenses, in connection with the sale of Class C Shares.
These payments support the compensation paid to dealers or brokers for selling
Class C Shares. Payments to the Distributor and others under the Class C 12b-1
Plan may be in an amount equal to no more than 1% annually.

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<PAGE>

Holders of Class C Shares who exercise the exchange privilege described
below will continue to be subject to the CDSC schedule for the Class C Shares as
described in this Prospectus. See Redemption and Exchange.

Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B Shares redeemed within six years of purchase may be subject to
a CDSC at the rates set forth below and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestments of dividends or capital gains distributions. For purposes
of this formula, the "net asset value at the time of purchase" will be the net
asset value at purchase of the Class B Shares or the Class C Shares of the Fund,
even if those shares are later exchanged for shares of another Delaware Group
fund. In the event of an exchange of the shares, the "net asset value of such
shares at the time of redemption" will be the net asset value of the shares that
were acquired in the exchange.

The following table sets forth the rates of the CDSC for the Class B
Shares of the Fund:

Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ ------------------

0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None

During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares, absent any applicable fee waiver. See Automatic Conversion of Class B
Shares, above. Investors are reminded that the Class A Shares into which the
Class B Shares will convert are subject to ongoing annual 12b-1 Plan expenses of
up to a maximum of .30% (currently, no more than .25% pursuant to Board action)
of average daily net assets of such shares.

In determining whether a CDSC applies to a redemption of Class B
Shares, it will be assumed that shares held for more than six years are redeemed
first, followed by shares acquired through the reinvestment of dividends or
distributions, and finally by shares held longest during the six-year period.
With respect to Class C Shares, it will be assumed that shares held for more
than 12 months are redeemed first followed by shares acquired through the
reinvestment of dividends or distributions, and finally by shares held for 12
months or less.

All investments made during a calendar month, regardless of what day of
the month the investment occurred, will age one month on the last day of that
month and each subsequent month.

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<PAGE>

The CDSC is waived on certain redemptions of Class B Shares and Class C
Shares. See Waiver of Contingent Deferred Sales Charge - Class B Shares and
Class C Shares under Redemption and Exchange.

Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of the Classes exceed certain limits, as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.

Subject to pending amendments to the NASD's Rules of Fair Practice, in
connection with the promotion of Delaware Group fund shares, the Distributor
may, from time to time, pay to participate in dealer-sponsored seminars and
conferences, reimburse dealers for expenses incurred in connection with
preapproved seminars, conferences and advertising and may, from time to time,
pay or allow additional promotional incentives to dealers, which shall include
non-cash concessions, such as certain luxury merchandise or a trip to or
attendance at a business or investment seminar at a luxury resort, as part of
preapproved sales contests. Payment of non-cash compensation to dealers is
currently under review by the NASD and the Securities and Exchange Commission.
It is likely that the NASD's Rules of Fair Practice will be amended such that
the ability of the Distributor to pay non-cash compensation as described above
will be restricted in some fashion. The Distributor intends to comply with the
NASD's Rules of Fair Practice as they may be amended.

High-Yield Opportunities Fund Institutional Class
In addition to offering the Class A, Class B and Class C Shares, the
Fund also offers the High-Yield Opportunities Fund Institutional Class, which
is described in a separate prospectus and is available for purchase only by
certain investors. High-Yield Opportunities Fund Institutional Class shares
generally are distributed directly by the Distributor and do not have a
front-end sales charge, a CDSC or a Limited CDSC, and are not subject to 12b-1
Plan distribution expenses. To obtain the prospectus that describes the
High-Yield Opportunities Fund Institutional Class, contact the Distributor by
writing to the address or by calling the telephone number listed on the back of
this Prospectus.

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<PAGE>

HOW TO BUY SHARES

Purchase Amounts
Generally, the minimum initial purchase is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases of shares of any Class
generally must be $100 or more. For purchases under a Uniform Gifts to Minors
Act or Uniform Transfers to Minors Act or through an Automatic Investing Plan,
there is a minimum initial purchase of $250 and a minimum subsequent purchase of
$25. Minimum purchase requirements do not apply to retirement plans other than
IRAs, for which there is a minimum initial purchase of $250, and a minimum
subsequent purchase of $25, regardless of which Class is selected.

There is a maximum purchase limitation of $250,000 on each purchase of
Class B Shares. For Class C Shares, each purchase must be in an amount that is
less than $1,000,000. An investor may exceed these maximum purchase limitations
by making cumulative purchases over a period of time. In doing so, an investor
should keep in mind that reduced front-end sales charges are available on
investments of $100,000 or more in Class A Shares, and that Class A Shares (i)
are subject to lower annual 12b-1 Plan expenses than Class B Shares and Class C
Shares and (ii) generally are not subject to a CDSC. For retirement plans, the
maximum purchase limitations apply only to the initial purchase of Class B
Shares or Class C Shares by the plan.

Investing through Your Investment Dealer
You can make a purchase of shares of the Fund through most investment
dealers who, as part of the service they provide, must transmit orders promptly.
They may charge for this service. If you want a dealer but do not have one, we
can refer you to one.

Investing by Mail
1. Initial Purchases--An Investment Application or, in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to High-Yield Opportunities Fund A Class,
High-Yield Opportunities Fund B Class or High-Yield Opportunities Fund C Class,
to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.

2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to the specific Fund and Class selected. Your check should be
identified with your name(s) and account number. An investment slip (similar to
a deposit slip) is provided at the bottom of transaction confirmations and
dividend statements that you will receive from Income Funds, Inc. Use of this
investment slip can help expedite processing of your check when making
additional purchases. Your investment may be delayed if you send additional
purchases by certified mail.

Investing by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number for the Class in which you are
investing).

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<PAGE>

1. Initial Purchases--Before you invest, telephone the Shareholder Service
Center to get an account number. If you do not call first, processing of your
investment may be delayed. In addition, you must promptly send your Investment
Application or, in the case of a retirement account, an appropriate retirement
plan application, to the specific Fund and Class selected, to Delaware Group at
1818 Market Street, Philadelphia, PA 19103.

2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You should advise the
Shareholder Service Center by telephone of each wire you send.

If you want to wire investments to a retirement plan account, call the
Shareholder Service Center for special wiring instructions.

Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group,
you may write and authorize an exchange of part or all of your investment into
shares of the Fund. If you wish to open an account by exchange, call the
Shareholder Service Center for more information. All exchanges are subject to
the eligibility and minimum purchase requirements set forth in each fund's
prospectus.

Holders of Class A Shares may exchange all or part of their shares for
certain of the shares of other funds in the Delaware Group, including other
Class A Shares, but may not exchange their Class A Shares for Class B Shares or
Class C Shares of the Fund or of any other fund in the Delaware Group. Holders
of Class B Shares of the Fund are permitted to exchange all or part of their
Class B Shares only into Class B Shares of other Delaware Group funds.
Similarly, holders of Class C Shares of the Fund are permitted to exchange all
or part of their Class C Shares only into Class C Shares of other Delaware Group
funds. See Appendix C--Classes Offered for a list of funds that offer Class A,
Class B, Class C and Consultant Class Shares. Class B Shares of the Fund and
Class C Shares of the Fund acquired by exchange will continue to carry the CDSC
and, in the case of Class B Shares, the automatic conversion schedule of the
fund from which the exchange is made. The holding period of Class B Shares of
the Fund acquired by exchange will be added to that of the shares that were
exchanged for purposes of determining the time of the automatic conversion into
Class A Shares of the Fund.

Permissible exchanges into Class A Shares of the Fund will be made
without a front-end sales charge, except for exchanges of shares that were not
previously subject to a front-end sales charge (unless such shares were acquired
through the reinvestment of dividends). Permissible exchanges into Class B
Shares or Class C Shares of the Fund will be made without the imposition of a
CDSC by the fund from which the exchange is being made at the time of the
exchange.

See Allied Plans under Retirement Planning for information on exchanges
by participants in an Allied Plan.

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<PAGE>

Additional Methods of Adding to Your Investment
Call the Shareholder Service Center for more information if you wish to
use the following services:

1. Automatic Investing Plan
The Automatic Investing Plan enables you to make regular monthly
investments without writing or mailing checks. You may authorize Income Funds,
Inc. to transfer a designated amount monthly from your checking account to your
account. Many shareholders use this as an automatic savings plan. Shareholders
should allow a reasonable amount of time for initial purchases and changes to
these plans to become effective.

This option is not available to participants in the following plans:
SAR/SEP, SEP/IRA, Profit Sharing and Money Purchase Pension Plans, 401(k)
Defined Contribution Plans, 403(b)(7) Deferred Compensation Plans or 457
Deferred Compensation Plans.

2. Direct Deposit
You may have your employer or bank make regular investments directly to
your Fund account for you (for example: payroll deduction, pay by phone, annuity
payments). The Fund also accepts preauthorized recurring government and private
payments by Electronic Fund Transfer, which avoids mail time and check clearing
holds on payments such as social security, federal salaries, Railroad Retirement
benefits, etc.

* * *

Should investments through an automatic investing plan or by direct
deposit be reclaimed or returned for some reason, Income Funds, Inc. has the
right to liquidate your shares to reimburse the government or transmitting bank.
If there are insufficient funds in your account, you are obligated to reimburse
the Fund.

3. Wealth Builder Option
You can use our Wealth Builder Option to invest in the Fund through
regular liquidations of shares in your accounts in other funds in the Delaware
Group. You may also elect to invest in other mutual funds in the Delaware Group
through the Wealth Builder Option through regular liquidations of shares in your
Fund account.

Under this automatic exchange program, you can authorize regular
monthly amounts (minimum of $100 per fund) to be liquidated from your account in
one or more funds in the Delaware Group and invested automatically into any
other Delaware Group account that you may specify. If in connection with the
election of the Wealth Builder Option, you wish to open a new account to receive
the automatic investment, such new account must meet the minimum initial
purchase requirements described in the prospectus of the fund that you select.
All investments under this option are exchanges and are therefore subject to the
same conditions and limitations as other exchanges noted above. You can
terminate your participation at any time by written notice to the fund from
which the exchanges are made. See Redemption and Exchange.

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<PAGE>

4. Dividend Reinvestment Plan
You can elect to have your distributions (capital gains and/or dividend
income) paid to you by check or reinvested in your Fund account. Or, you may
invest your distributions in certain other funds in the Delaware Group, subject
to the exceptions noted below as well as the eligibility and minimum purchase
requirements set forth in each fund's prospectus.

Reinvestments of distributions into Class A Shares of the Fund or of
other Delaware Group funds are made without a front-end sales charge.
Reinvestments of distributions into Class B Shares of the Fund or of other
Delaware Group funds or into Class C Shares of the Fund or of other Delaware
Group funds are also made without any sales charge and will not be subject to a
CDSC if later redeemed. See Automatic Conversion of Class B Shares under Classes
of Shares for information concerning the automatic conversion of Class B Shares
acquired by reinvesting dividends.

Holders of Class A Shares of the Fund may not reinvest their
distributions into Class B Shares or Class C Shares of any fund in the Delaware
Group, including the Fund. Holders of Class B Shares of the Fund may reinvest
their distributions only into Class B Shares of the funds in the Delaware Group
which offer that class of shares (the "Class B Funds"). Similarly, holders of
Class C Shares of the Fund may reinvest their distributions only into Class C
Shares of the funds in the Delaware Group which offer that class of shares (the
"Class C Funds"). See Appendix C--Classes Offered for a list of the funds
offering those classes of shares. For more information about reinvestments, call
the Shareholder Service Center.

Delaware Group Asset Planner
To invest in Delaware Group funds using the Delaware Group Asset
Planner asset allocation service, you should complete a Delaware Group Asset
Planner Account Registration Form, which is available only from a financial
adviser or investment dealer. As previously described, the Delaware Group Asset
Planner service offers a choice of four predesigned asset allocation strategies
(each with a different risk/reward profile) in predetermined percentages in
Delaware Group funds. Or, with the help of a financial adviser, you may design a
customized asset allocation strategy.

The sales charge on an investment through the Asset Planner service is
determined by the individual sales charges of the underlying funds and their
percentage allocation in the selected Strategy. Exchanges from existing Delaware
Group accounts into the Asset Planner service may be made at net asset value
under the circumstances described under Investing by Exchange, above. Also see
Buying Class A Shares at Net Asset Value under Classes of Shares. The minimum
initial investment per Strategy is $2,000; subsequent investments must be at
least $100. Individual fund minimums do not apply to investments made using the
Asset Planner service. Class A, Class B and Class C Shares are available through
the Asset Planner service. Generally, only shares within the same class may be
used within the same Strategy. However, Class A Shares of the Fund and of other
funds in the Delaware Group may be used in the same Strategy with consultant
class shares that are offered by certain other Delaware Group funds. See
Appendix C--Classes Offered for the funds in the Delaware Group that offer
consultant class shares.

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<PAGE>

An annual maintenance fee, currently $35 per Strategy, is due at the
time of initial investment and by September 30th of each subsequent year.
However, for all IRA accounts established with the same Social Security number
under the Asset Planner service, the annual maintenance fee will be limited to
$35 irrespective of the number of Strategies selected. For example, if you
transfer regular IRA assets and rollover assets from a qualified plan into an
IRA through the Delaware Group Asset Planner service and, to avoid commingling,
maintain more than one Strategy registered under the same Social Security
number, only one $35 annual fee needs to be paid. The fee, payable to Delaware
Service Company, Inc. to defray extra costs associated with administering the
Asset Planner service, will be deducted automatically from one of the funds
within your Asset Planner account if not paid by September 30th. See Part B.

Investors will receive a customized quarterly Strategy Report
summarizing all Delaware Group Asset Planner investment performance and account
activity during the prior period. Confirmation statements will be sent following
all transactions other than those involving a reinvestment of distributions.

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

Purchase Price and Effective Date
The offering price and net asset value of the Class A, Class B and
Class C Shares are determined as of the close of regular trading on the New York
Stock Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is
open.

The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received unless
it is received after the time the offering price or net asset value of shares is
determined, as noted above. Purchase orders received after such time will be
effective the next business day.

The Conditions of Your Purchase
The Fund reserves the right to reject any purchase order. If a purchase
is canceled because your check is returned unpaid, you are responsible for any
loss incurred. The Fund can redeem shares from your account(s) to reimburse
itself for any loss, and you may be restricted from making future purchases in
any of the funds in the Delaware Group. The Fund reserves the right to reject
purchase orders paid by third-party checks or checks that are not drawn on a
domestic branch of a United States financial institution. If a check drawn on a
foreign financial institution is accepted, you may be subject to additional bank
charges for clearance and currency conversion.

The Fund also reserves the right, following shareholder notification,
to charge a service fee on non-retirement accounts that have remained below the
minimum stated account balance for a period of three or more consecutive months.
Holders of such accounts may be notified of their insufficient account balance
and advised that they have until the end of the current calendar quarter to
raise their balance to the stated minimum. If the account has not reached the
minimum balance requirement by that time, the Fund will charge a $9 fee for that
quarter and each subsequent calendar quarter until the account is brought up to
the minimum balance. The service fee will be deducted from the account during
the first

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<PAGE>

week of each calendar quarter for the previous quarter, and will be used to help
defray the cost of maintaining low-balance accounts. No fees will be charged
without proper notice, and no CDSC will apply to such assessments.

The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under the minimum initial purchase
amount as a result of redemptions. An investor making the minimum initial
investment may be subject to involuntary redemption without the imposition of a
CDSC or Limited CDSC if he or she redeems any portion of his or her account.

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REDEMPTION AND EXCHANGE

You can redeem or exchange your shares in a number of different ways.
The exchange service is useful if your investment requirements change and you
want an easy way to invest in other equity funds, bond funds, tax-advantaged
funds or money market funds. This service is also useful if you are anticipating
a major expenditure and want to move a portion of your investment into a fund
that has the checkwriting feature. Exchanges are subject to the requirements of
each fund and all exchanges of shares constitute taxable events. See Taxes.
Further, in order for an exchange to be processed, shares of the fund being
acquired must be registered in the state where the acquiring shareholder
resides. You may want to consult your financial adviser or investment dealer to
discuss which funds in the Delaware Group will best meet your changing
objectives, and the consequences of any exchange transaction. You may also call
the Delaware Group directly for fund information.

Your shares will be redeemed or exchanged at a price based on the net
asset value next determined after the Fund receives your request in good order,
subject, in the case of a redemption, to any applicable CDSC or Limited CDSC.
Redemption or exchange requests received in good order after the time the
offering price and net asset value of shares are determined, as noted above,
will be processed on the next business day. See Purchase Price and Effective
Date under How to Buy Shares. A shareholder submitting a redemption request may
indicate that he or she wishes to receive redemption proceeds of a specific
dollar amount. In the case of such a request, and in the case of certain
redemptions from retirement plan accounts, the Fund will redeem the number of
shares necessary to deduct the applicable CDSC in the case of Class B and Class
C Shares, and, if applicable, the Limited CDSC in the case of Class A Shares and
tender to the shareholder the requested amount, assuming the shareholder holds
enough shares in his or her account for the redemption to be processed in this
manner. Otherwise, the amount tendered to the shareholder upon redemption will
be reduced by the amount of the applicable CDSC or Limited CDSC. Redemption
proceeds will be distributed promptly, as described below, but not later than
seven days after receipt of a redemption request.

Except as noted below, for a redemption request to be in "good order,"
you must provide your account number, account registration, and the total number
of shares or dollar amount of the transaction. For exchange requests, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Shareholder Service Center at 800-523-1918. The Fund may
suspend, terminate, or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.

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<PAGE>

You can avoid this potential delay if you purchase shares by wiring Federal
Funds. The Fund reserves the right to reject a written or telephone redemption
request or delay payment of redemption proceeds if there has been a recent
change to the shareholder's address of record.

There is no front-end sales charge or fee for exchanges made between
shares of funds which both carry a front-end sales charge. Any applicable
front-end sales charge will apply to exchanges from shares of funds not subject
to a front-end sales charge, except for exchanges involving assets that were
previously invested in a fund with a front-end sales charge and/or exchanges
involving the reinvestment of dividends.

Holders of Class B Shares or Class C Shares that exchange their shares
("Original Shares") for shares of other funds in the Delaware Group (in each
case, "New Shares") in a permitted exchange, will not be subject to a CDSC that
might otherwise be due upon redemption of the Original Shares. However, such
shareholders will continue to be subject to the CDSC and, in the case of Class B
Shares, the automatic conversion schedule of the Original Shares as described in
this Prospectus and any CDSC assessed upon redemption will be charged by the
Fund from which the Original Shares were exchanged. In an exchange of Class B
Shares from the Fund, the Fund's CDSC schedule may be higher than the CDSC
schedule relating to the New Shares acquired as a result of the exchange. For
purposes of computing the CDSC that may be payable upon a disposition of the New
Shares, the period of time that an investor held the Original Shares is added to
the period of time that an investor held the New Shares. With respect to Class B
Shares, the automatic conversion schedule of the Original Shares may be longer
than that of the New Shares. Consequently, an investment in New Shares by
exchange may subject an investor to the higher 12b-1 fees applicable to Class B
Shares of the Fund for a longer period of time than if the investment in New
Shares were made directly.

Various redemption and exchange methods are outlined below. Except for
the CDSC applicable to certain redemptions of Class B and Class C Shares and the
Limited CDSC applicable to certain redemptions of Class A Shares purchased at
net asset value, there is no fee charged by the Fund or the Distributor for
redeeming or exchanging your shares, but such fees could be charged in the
future. You may have your investment dealer arrange to have your shares redeemed
or exchanged. Your investment dealer may charge for this service.

All authorizations given by shareholders, including selection of any of
the features described below, shall continue in effect until such time as a
written revocation or modification has been received by the Fund or its agent.

Written Redemption
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares. The request must be signed by all owners
of the account or your investment dealer of record. For redemptions of more than
$50,000, or when the proceeds are not sent to the shareholder(s) at the address
of record, the Fund requires a signature by all owners of the account and a
signature guarantee for each owner. Each signature guarantee must be supplied by
an eligible guarantor institution. The Fund reserves the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. The Fund may require further documentation from corporations,
executors, retirement plans, administrators, trustees or guardians.

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<PAGE>

Payment is normally mailed the next business day after receipt of your
redemption request. If your Class A Shares are in certificate form, the
certificate must accompany your request and also be in good order. Certificates
are issued for Class A Shares only if a shareholder submits a specific request.
Certificates are not issued for Class B Shares or Class C Shares.

Written Exchange
You may also write to the Fund (at 1818 Market Street, Philadelphia, PA
19103) to request an exchange of any or all of your shares into another mutual
fund in the Delaware Group, subject to the same conditions and limitations as
other exchanges noted above.

Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your Class A Shares in certificate form, you may
redeem or exchange only by written request and you must return your
certificates.

The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such services available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.

Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Instructions received by telephone are
generally tape recorded, and a written confirmation will be provided for all
purchase, exchange and redemption transactions initiated by telephone. By
exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.

Telephone Redemption--Check to Your Address of Record
The Telephone Redemption feature is a quick and easy method to redeem
shares. You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your address of record. Checks will be payable
to the shareholder(s) of record. Payment is normally mailed the next business
day after receipt of the redemption request. This service is only available to
individual, joint and individual fiduciary-type accounts.

Telephone Redemption--Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must complete an Authorization Form and have your signature
guaranteed. For your protection, your authorization must be on file. If you
request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be

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<PAGE>

deducted from your redemption. If you ask for a check, it will normally be
mailed the next business day after receipt of your redemption request to your
predesignated bank account. There are no separate fees for this redemption
method, but the mail time may delay getting funds into your bank account. Simply
call the Shareholder Service Center prior to the time the offering price and net
asset value are determined, as noted above.

Telephone Exchange
The Telephone Exchange feature is a convenient and efficient way to
adjust your investment holdings as your liquidity requirements and investment
objectives change. You or your investment dealer of record can exchange your
shares into other funds in the Delaware Group under the same registration,
subject to the same conditions and limitations as other exchanges noted above.
As with the written exchange service, telephone exchanges are subject to the
requirements of each fund, as described above. Telephone exchanges may be
subject to limitations as to amounts or frequency.

Systematic Withdrawal Plans

1. Regular Plans
This plan provides shareholders with a consistent monthly (or
quarterly) payment. This is particularly useful to shareholders living on fixed
incomes, since it can provide them with a stable supplemental amount. With
accounts of at least $5,000, you may elect monthly withdrawals of $25 (quarterly
$75) or more. The Fund does not recommend any particular monthly amount, as each
shareholder's situation and needs vary. Payments are normally made by check. In
the alternative, you may elect to have your payments transferred from your Fund
account to your predesignated bank account through the MoneyLine Direct Deposit
Service. Your funds will normally be credited to your bank account two business
days after the payment date. There are no separate fees for this redemption
method. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.

2. Retirement Plans
For shareholders eligible under the applicable retirement plan to
receive benefits in periodic payments, the Systematic Withdrawal Plan provides
you with maximum flexibility. A number of formulas are available for calculating
your withdrawals depending upon whether the distributions are required or
optional. Withdrawals must be for $25 or more; however, no minimum account
balance is required. The MoneyLine Direct Deposit Service described above is not
available for retirement plans.

* * *

Shareholders should not purchase additional shares while participating
in a Systematic Withdrawal Plan.

Redemptions of Class A Shares via a Systematic Withdrawal Plan may be
subject to a Limited CDSC if the original purchase was made at net asset value
within the 12 months prior to the withdrawal and a dealer's commission was paid
on that purchase. See Contingent Deferred Sales Charge for Certain Redemptions
of Class A Shares Purchased at Net Asset Value, below.

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<PAGE>

The applicable CDSC for Class B Shares and Class C Shares redeemed via
a Systematic Withdrawal Plan will be waived if, on the date that the Plan is
established, the annual amount selected to be withdrawn is less than 12% of the
account balance. If the annual amount selected to be withdrawn exceeds 12% of
the account balance on the date that the Systematic Withdrawal Plan is
established, all redemptions under the Plan will be subject to the applicable
CDSC. Whether a waiver of the CDSC is available or not, the first shares to be
redeemed for each Systematic Withdrawal Plan payment will be those not subject
to a CDSC because they have either satisfied the required holding period or were
acquired through the reinvestment of distributions. The 12% annual limit will be
reset on the date that any Systematic Withdrawal Plan is modified (for example,
a change in the amount selected to be withdrawn or the frequency or date of
withdrawals), based on the balance in the account on that date. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares, below.

For more information on Systematic Withdrawal Plans, call the
Shareholder Service Center.

Contingent Deferred Sales Charge for Certain Redemptions of Class A Shares
Purchased at Net Asset Value
A Limited CDSC will be imposed on certain redemptions of Class A Shares
(or shares into which such Class A Shares are exchanged) made within 12 months
of purchase, if such purchases were made at net asset value and triggered the
payment by the Distributor of the dealer's commission previously described. See
Classes of Shares.

The Limited CDSC will be paid to the Distributor and will be equal to
the lesser of 1% of: (1) the net asset value at the time of purchase of the
Class A Shares being redeemed; or (2) the net asset value of such Class A Shares
at the time of redemption. For purposes of this formula, the "net asset value at
the time of purchase" will be the net asset value at purchase of the Class A
Shares even if those shares are later exchanged for shares of another Delaware
Group fund and, in the event of an exchange of Class A Shares, the "net asset
value of such shares at the time of redemption" will be the net asset value of
the shares acquired in the exchange.

Redemptions of such Class A Shares held for more than 12 months will
not be subjected to the Limited CDSC and an exchange of such Class A Shares into
another Delaware Group fund will not trigger the imposition of the Limited CDSC
at the time of such exchange. The period a shareholder owns shares into which
Class A Shares are exchanged will count towards satisfying the 12-month holding
period. The Limited CDSC is assessed if such 12-month period is not satisfied
irrespective of whether the redemption triggering its payment is of Class A
Shares of the Fund or Class A Shares acquired in the exchange.

In determining whether a Limited CDSC is payable, it will be assumed
that shares not subject to the Limited CDSC are the first redeemed followed by
other shares held for the longest period of time. The Limited CDSC will not be
imposed upon shares representing reinvested dividends or capital gains
distributions, or upon amounts representing share appreciation. All investments
made during a calendar month, regardless of what day of the month the investment
occurred, will age one month on the last day of that month and each subsequent
month.

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<PAGE>

Waiver of Limited Contingent Deferred Sales Charge - Class A Shares
The Limited CDSC for Class A Shares on which a dealer's commission has
been paid will be waived in the following instances: (i) redemptions that result
from the Fund's right to liquidate a shareholder's account if the aggregate net
asset value of the shares held in the account is less than the then-effective
minimum account size; (ii) distributions to participants from a retirement plan
qualified under section 401(a) or 401(k) of the Internal Revenue Code of 1986,
as amended (the "Code"), or due to death of a participant in such a plan; (iii)
redemptions pursuant to the direction of a participant or beneficiary of a
retirement plan qualified under section 401(a) or 401(k) of the Code with
respect to that retirement plan; (iv) distributions from a section 403(b)(7)
Plan or an IRA due to death, disability, or attainment of age 59 1/2; (v)
returns of excess contributions to an IRA; (vi) distributions by other employee
benefit plans to pay benefits; (vii) distributions described in (ii), (iv), and
(vi) above pursuant to a systematic withdrawal plan; and (viii) redemptions by
the classes of shareholders who are permitted to purchase shares at net asset
value, regardless of the size of the purchase (see Buying Class A Shares at Net
Asset Value under Classes of Shares).

Waiver of Contingent Deferred Sales Charge - Class B and Class C Shares
The CDSC is waived on certain redemptions of Class B Shares in
connection with the following redemptions: (i) redemptions that result from the
Fund's right to liquidate a shareholder's account if the aggregate net asset
value of the shares held in the account is less than the then-effective minimum
account size; (ii) returns of excess contributions to an IRA or 403(b)(7)
Deferred Compensation Plan; (iii) required minimum distributions from an IRA,
403(b)(7) Deferred Compensation Plan or 457 Deferred Compensation Plan; and (iv)
distributions from an account if the redemption results from the death of all
registered owners of the account (in the case of accounts established under the
Uniform Gifts to Minors or Uniform Transfers to Minors Acts or trust accounts,
the waiver applies upon the death of all beneficial owners) or a total and
permanent disability (as defined in Section 72 of the Code) of all registered
owners occurring after the purchase of the shares being redeemed.

The CDSC on Class C Shares is waived in connection with the following
redemptions: (i) redemptions that result from the Fund's right to liquidate a
shareholder's account if the aggregate net asset value of the shares held in the
account is less than the then-effective minimum account size; (ii) returns of
excess contributions to an IRA, 403(b)(7) Deferred Compensation Plan, Profit
Sharing Plan, Money Purchase Pension Plan or 401(k) Defined Contribution Plan;
(iii) required minimum distributions from an IRA, 403(b)(7) Deferred
Compensation Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money
Purchase Pension Plan or 401(k) Defined Contribution Plan; (iv) distributions
from a 403(b)(7) Deferred Compensation Plan, 457 Deferred Compensation Plan,
Profit Sharing Plan, or 401(k) Defined Contribution Plan, under hardship
provisions of the plan; (v) distributions from a 403(b)(7) Deferred Compensation
Plan, 457 Deferred Compensation Plan, Profit Sharing Plan, Money Purchase
Pension Plan or a 401(k) Defined Contribution Plan upon attainment of normal
retirement age under the plan or upon separation from service; (vi)
distributions from an IRA on or after attainment of age 59 1/2; and (vii)
distributions from an account if the redemption results from the death of all
registered owners of the

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<PAGE>

account (in the case of accounts established under the Uniform Gifts to Minors
or Uniform Transfers to Minors Acts or trust accounts, the waiver applies upon
the death of all beneficial owners) or a total and permanent disability (as
defined in Section 72 of the Code) of all registered owners occurring after the
purchase of the shares being redeemed.

In addition, the CDSC will be waived on Class B and Class C Shares
redeemed in accordance with a Systematic Withdrawal Plan if the annual amount
selected to be withdrawn under the Plan does not exceed 12% of the value of the
account on the date that the Systematic Withdrawal Plan was established or
modified.

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<PAGE>

DIVIDENDS AND DISTRIBUTIONS

The Fund declares a dividend to all shareholders of record at the time
the offering price of shares is determined. See Purchase Price and Effective
Date under How to Buy Shares. Thus, when redeeming shares, dividends continue to
be credited up to and including the date of redemption.

The Fund's dividends are expected to be declared daily and paid
monthly. However, the Fund does not anticipate declaring or paying dividends
during the first few months following the commencement of its operations.
Payment by check of cash dividends will ordinarily be mailed within three
business days after the payable date. Distributions from net realized securities
profits, if any, will be distributed twice a year. The first payment normally
would be made during the first quarter of the next fiscal year. The second
payment would be made near the end of the calendar year to comply with certain
requirements of the Code.

Purchases of Fund shares by wire begin earning dividends when converted
into Federal Funds and available for investment, normally the next business day
after receipt. However, if the Fund is given prior notice of Federal Funds wire
and an acceptable written guarantee of timely receipt from an investor
satisfying the Fund's credit policies, the purchase will start earning dividends
on the date the wire is received. Purchases by check earn dividends upon
conversion to Federal Funds, normally one business day after receipt.

Each class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that, absent any applicable fee waiver,
the per share dividends from net investment income on the Class A Shares, the
Class B Shares and the Class C Shares will vary due to the expenses under the
12b-1 Plan applicable to each Class. Generally, the dividends per share on Class
B Shares and Class C Shares can be expected to be lower than the dividends per
share on Class A Shares because the expenses under the 12b-1 Plans relating to
Class B and Class C Shares will be higher than the expenses under the 12b-1 Plan
relating to Class A Shares. See Distribution (12b-1) and Service under
Management of the Fund.

Both dividends and distributions, if any, are automatically reinvested
in your account at net asset value unless you elect otherwise. Any check in
payment of dividends or other distributions which cannot be delivered by the
United States Post Office or which remains uncashed for a period of more than
one year may be reinvested in your account at the then-current net asset value
and the dividend option may be changed from cash to reinvest. If you elect to
take your dividends and distributions in cash and such dividends and
distributions are in an amount of $25 or more, you may choose the MoneyLine
Direct Deposit Service and have such payments transferred from your Fund account
to your predesignated bank account. This service is not available for retirement
plans. See MoneyLine Direct Deposit Service under The Delaware Difference for
more information about this service.

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<PAGE>

TAXES

The tax discussion set forth below is included for general information
only. Investors should consult their own advisers concerning the federal, state,
local or foreign tax consequences of an investment in the Fund.

The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code (the "Code"). As such, the Fund will
not be subject to federal income tax, or to any excise tax, to the extent its
earnings are distributed as provided in the Code.

The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to those investors who are subject
to income taxes as ordinary income, whether received in cash or in additional
shares. It is expected that either none or only a nominal portion of the Fund's
dividends will be eligible for the dividends-received deduction for
corporations.

Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to those investors who are
subject to income taxes as long-term capital gains, regardless of the length of
time an investor has owned shares in the Fund. The Fund does not seek to realize
any particular amount of capital gains during a year; rather, realized gains are
a byproduct of Fund management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year. Also, for
those investors subject to tax, if purchases of shares in the Fund are made
shortly before the record date for a dividend or capital gains distribution, a
portion of the investment will be returned as a taxable distribution.

Although dividends generally will be treated as distributed when paid,
dividends which are declared in October, November or December to shareholders of
record on a specified date in one of those months, but which, for operational
reasons, may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the shareholder
on December 31 of the calendar year in which they are declared.

The sale of shares of the Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. Capital gain or loss may be
realized from an ordinary redemption of shares or an exchange of shares between
the Fund and any other fund in the Delaware Group. Any loss incurred on a sale
or exchange of Fund shares that had been held for six months or less will be
treated as a long-term capital loss to the extent of capital gain dividends
received with respect to such shares. All or a portion of the sales charge
incurred in acquiring Fund shares will be excluded from the federal tax basis of
any of such shares sold or exchanged within 90 days of their purchase (for
purposes of determining gain or loss upon the sale of such shares) if the sale
proceeds are reinvested in the Fund or in another fund in the Delaware Group of
funds and a sales charge that would otherwise apply to the reinvestment is
reduced or eliminated. Any portion of such sales charge excluded from the tax
basis of the shares sold will be added to the tax basis of the shares acquired
in the reinvestment.

The automatic conversion of Class B Shares into Class A Shares at the
end of approximately eight years after purchase will be tax-free for federal tax
purposes. See Automatic Conversion of Class B Shares under Classes of Shares.

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<PAGE>

The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.

In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. Distributions of interest income and capital gains
realized from certain types of U.S. government securities may be exempt from
state personal income taxes. Shares of the Fund are exempt from Pennsylvania
county personal property taxes.

Each year, Income Funds, Inc. will mail to you information on the tax
status of the Fund's dividends and distributions. Shareholders will also receive
each year information as to the portion of dividend income that is derived from
U.S. government securities that are exempt from state income tax. Of course,
shareholders who are not subject to tax on their income would not be required to
pay tax on amounts distributed to them by the Fund.

The Fund is required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your Investment Application your proper Taxpayer
Identification Number and by certifying that you are not subject to backup
withholding.

See Taxes in Part B for additional information on tax matters relating
to the Fund and its shareholders.

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CALCULATION OF OFFERING PRICE AND NET ASSET VALUE PER SHARE

The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Debt securities are priced on the basis of valuations provided by
an independent pricing service using methods approved by Income Fund, Inc.'s
Board of Directors. Equity securities for which marked quotations are available
are priced at market value. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good faith and
in a method approved by Income Funds, Inc.'s Board of Directors.

Class A Shares are purchased at the offering price per share, while
Class B Shares and Class C Shares are purchased at the NAV per share. The
offering price per share of Class A Shares consists of the NAV per share next
computed after the order is received, plus any applicable front-end sales
charges.

The offering price and NAV are computed as of the close of regular
trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern time) on
days when the Exchange is open.

The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the High-Yield Opportunities Fund Institutional Class will not incur
any of the expenses under the Fund's 12b-1 Plans and the Class A, Class B and
Class C Shares alone will bear the 12b-1 Plan expenses, if any, payable under
their respective Plans.

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<PAGE>

MANAGEMENT OF THE FUND

Directors
The business and affairs of Income Funds, Inc. are managed under the
direction of its Board of Directors. Part B contains additional information
regarding Income Funds, Inc.'s directors and officers.

Investment Manager
The Manager furnishes investment management services to the Fund.

The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1996, the Manager and its affiliates in
the Delaware Group, including Delaware International Advisers Ltd., were
supervising in the aggregate more than $28 billion in assets in the various
institutional or separately managed (approximately $17,646,238,000) and
investment company (approximately $10,764,119,000) accounts.

The Manager is an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc. ("DMH"). On April 3, 1995, a merger between DMH and a
wholly owned subsidiary of Lincoln National Corporation ("Lincoln National") was
completed. DMH and the Manager are now indirect, wholly owned subsidiaries, and
subject to the ultimate control, of Lincoln National. Lincoln National, with
headquarters in Fort Wayne, Indiana, is a diversified organization with
operations in many aspects of the financial services industry, including
insurance and investment management.

The Manager manages the Fund's portfolio and makes investment decisions
for the Fund which are implemented by the Fund's Trading Department. The Manager
also administers Income Funds, Inc.'s affairs and pays the salaries of all the
directors, officers and employees of Income Funds, Inc. who are affiliated with
the Manager. For these services, the Manager is paid an annual fee equal to .60%
on the first $500 million of average daily net assets, .575% on the next $250
million and .55% on the average daily net assets in excess of $750 million.

Paul A. Matlack and Gerald T. Nichols have primary responsibility for
making day-to-day investment decisions for the Fund. Mr. Matlack, a Vice
President/Senior Portfolio Manager of Income Funds, Inc., has been a member of
the Fund's management team since its inception. A Chartered Financial Analyst,
Mr. Matlack is a graduate of the University of Pennsylvania with an MBA in
Finance from George Washington University. He began his career at Mellon Bank as
a credit specialist, and later served as a corporate loan officer for Mellon
Bank and then Provident National Bank. Mr. Nichols, a Vice President/Senior
Portfolio Manager of Income Funds, Inc., has been a member of the Fund's
management team since its inception. Mr. Nichols is a graduate of the University
of Kansas, where he received a BS in Business Administration and an MS in
Finance. Prior to joining the Manager, he was a high yield credit analyst at
Waddell & Reed, Inc. and subsequently the investment officer for a private
merchant banking firm. He is a Chartered Financial Analyst.

Mr. Matlack and Mr. Nichols will from time to time consult with Paul E.
Suckow, Executive Vice President/Chief Investment Officer, Fixed Income of
Income Funds, Inc. A Chartered Financial Analyst, he is a graduate of Bradley
University with an MBA from Western Illinois University. Mr. Suckow was a
fixed-income portfolio manager at the Delaware Group from 1981 to 1985. He
returned to the Delaware Group in 1993 after eight years with Oppenheimer
Management Corporation where he served as Executive Vice President and Director
of Fixed Income.

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Portfolio Trading Practices
The Fund normally will not invest for short-term trading purposes.
However, the Fund may sell securities without regard to the length of time they
have been held. The degree of portfolio activity will affect brokerage costs of
the Fund and may affect taxes payable by the Fund's shareholders. Given the
Fund's investment objective, its annual portfolio turnover rate is not expected
to exceed 100%. A turnover rate of 100% would occur, for example, if all the
investments in the Fund's portfolio at the beginning of the year were replaced
by the end of the year.

The Fund uses its best efforts to obtain the best available price and
most favorable execution for portfolio transactions. Orders may be placed with
brokers or dealers who provide brokerage and research services to the Manager or
to their advisory clients. These services may be used by the Manager in
servicing any of its accounts. Subject to best price and execution, the Fund may
consider a broker/dealer's sales of Fund shares in placing portfolio orders and
may place orders with broker/dealers that have agreed to defray certain Fund
expenses such as custodian fees.

Performance Information
From time to time, the Fund may quote yield or total return performance
of the Classes in advertising and other types of literature.

The current yield for each Class will be calculated by dividing the
annualized net investment income earned by that Class during a recent 30-day
period by the maximum offering price per share on the last day of the period.
The yield formula provides for semi-annual compounding, which assumes that net
investment income is earned and reinvested at a constant rate and annualized at
the end of a six-month period.

Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions at net asset value and: (i) in
the case of Class A Shares, the impact of the maximum front-end sales charge at
the beginning of each specified period; and (ii) in the case of Class B Shares
and Class C Shares, the deduction of any applicable CDSC at the end of the
relevant period. Each presentation will include the average annual total return
for one-, five- and ten-year or life-of-fund periods, as relevant. The Fund may
also advertise aggregate and average total return information concerning a Class
over additional periods of time. In addition, the Fund may present total return
information that does not reflect the deduction of the maximum front-end sales
charge or any applicable CDSC. In this case, such total return information would
be more favorable than total return information that includes the deductions of
the maximum front-end sales charge or any applicable CDSC.

Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication of future results.

Distribution (12b-1) and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Income
Funds, Inc. dated as of ___________, 1996.

-45-

<PAGE>

Income Funds, Inc. has adopted a separate distribution plan under Rule
12b-1 for each of the Class A Shares, Class B Shares and Class C Shares of the
Fund (the "Plans"). The Plans permit the Fund to pay the Distributor from the
assets of the respective Classes a monthly fee for the Distributor's services
and expenses in distributing and promoting sales of shares. These expenses
include, among other things, preparing and distributing advertisements, sales
literature, and prospectuses and reports used for sales purposes, compensating
sales and marketing personnel, holding special promotions for specified periods
of time, and paying distribution and maintenance fees to brokers, dealers and
others. In connection with the promotion of shares of the Classes, the
Distributor may, from time to time, pay to participate in dealer-sponsored
seminars and conferences, and reimburse dealers for expenses incurred in
connection with preapproved seminars, conferences, and advertising. The
Distributor may pay or allow additional promotional incentives to dealers as
part of preapproved sales contests and/or to dealers who provide extra training
and information concerning a Class and increase sales of the Class. In addition,
the Fund may make payments from the 12b-1 plan fees of the respective Class
directly to others, such as banks, who aid in the distribution of Class shares
or provide services in respect of a Class, pursuant to service agreements with
Income Funds, Inc.

The 12b-1 Plan expenses relating to each of the Class B Shares and
Class C Shares of the Fund are also used to pay the Distributor for advancing
the commission costs to dealers with respect to the initial sale of such shares.

The Distributor has elected voluntarily to waive its right to receive
12b-1 fees (including service fees) from the commencement of the public offering
of the Classes through ____________, 199__. Absent any applicable fee waiver,
the aggregate fees paid by the Fund from the assets of the respective Classes to
the Distributor and others under the Plans may not exceed (i) .30% of the Class
A Shares' average daily net assets in any year, and (ii) 1% (.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and Class C Shares' average daily net assets in any year. The Class A,
Class B and Class C Shares will not incur any distribution expenses beyond these
limits, which may not be increased without shareholder approval.

Although the maximum fee payable, if any, under the Plan relating to
the Class A Shares is .30% of average daily net assets, the Board of Directors
has currently set the annual fee for the Class at .25% of the average daily net
assets. The Board of Directors may increase the fee to the full .30% on all
Class A Shares' assets at any time. See Shares.

While payments, if any, pursuant to the Plans may not exceed .30%
annually with respect to the Class A Shares, and 1% annually with respect to
each of the Class B Shares and the Class C Shares, the Plans do not limit fees
to amounts actually expended by the Distributor. It is therefore possible that
the Distributor may realize a profit in any particular year. However, the
Distributor currently expects that its distribution expenses will likely equal
or exceed payments to it under the Plans. The Distributor may, however incur
such additional expenses and make additional payments to dealers from its own
resources to promote the distribution of shares of the Classes. The monthly fees
paid to the Distributor are subject to the review and approval of Income Funds,
Inc.'s unaffiliated directors, who may reduce the fees or terminate the Plans at
any time.

-46-

<PAGE>

The Fund's Plans do not apply to the High-Yield Opportunities Fund
Institutional Class of shares. Those shares are not included in calculating the
Plans' fees, and the Plans are not used to assist in the distribution and
marketing of the High-Yield Opportunities Fund Institutional Class shares.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for the Fund
pursuant to an amended and restated agreement dated as of ___________, 1996. The
Transfer Agent also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement. The directors of Income Funds,
Inc. annually review service fees paid to the Transfer Agent.

The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.

Expenses
The Fund is responsible for all of its own expenses other than those
borne by the Manager under the Investment Management Agreement and those borne
by the Distributor under the Distribution Agreement. The expense ratio of each
Class will reflect the impact of its 12b-1 Plan.

Shares
Income Funds, Inc. is an open-end management investment company. The
Fund's portfolio of assets is diversified as defined by the 1940 Act. Commonly
known as a mutual fund, Income Funds, Inc. was organized as a Maryland
corporation on March 4, 1983. Income Funds, Inc. was previously organized as a
Delaware corporation in 1970. In addition to the Fund, Income Funds, Inc.
presently offers two other series of shares, the Delchester Fund and Strategic
Income Fund series.

Income Funds, Inc.'s shares have a par value of $1.00, equal voting
rights, except as noted below, and are equal in all other respects. Income
Funds, Inc.'s shares have noncumulative voting rights which means that the
holders of more than 50% of Income Funds, Inc.'s shares voting for the election
of directors can elect 100% of the directors if they choose to do so. Under
Maryland law, Income Funds, Inc. is not required, and does not intend, to hold
annual meetings of shareholders unless, under certain circumstances, it is
required to do so under the 1940 Act. Shareholders of 10% or more of Income
Funds, Inc.'s outstanding shares may request that a special meeting be called to
consider the removal of a director.

In addition to Class A Shares, Class B Shares and Class C Shares, the
Fund also offers the High- Yield Opportunities Fund Institutional Class shares.
Shares of each class represent proportionate interests in the assets of the Fund
and have the same voting and other rights and preferences as the other classes
of the Fund, except that shares of the High-Yield Opportunities Fund
Institutional Class are not subject to, and may not vote on matters affecting,
the Distribution Plans under Rule 12b-1 relating to the Class A, Class B and
Class C Shares. Similarly, as a general matter, the shareholders of Class A
Shares, Class B Shares and Class C Shares may vote only on matters affecting the
12b-1 Plan that relates to the class of shares that they hold. However, the
Class B Shares may vote on any proposal to increase materially the fees to be
paid by the Fund under the Rule 12b-1 Plan relating to the Class A Shares.

-47-

<PAGE>

It is expected that [Lincoln National Corporation Employees' Retirement
Trust (the "Trust")] will make an initial investment in the Fund, which could
result in the Trust holding up to 100% of the outstanding shares of the Fund.
Subject to certain limited exceptions, there would be no limitation on the
Trust's ability to redeem its shares of the Fund and it may elect to do so at
any time.

-48-

<PAGE>

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

High-Yield, High Risk Securities
The Fund invests primarily in securities rated BB or lower by S&P or Ba
or lower by Moody's, or similarly rated by another nationally-recognized
statistical rating organization or, if unrated (which may be more speculative in
nature than rated bonds), judged to be of comparable quality by the Manager. See
Appendix B--Ratings to this Prospectus for more rating information. The
discussion in this section supplements the description of the risks of
high-yield securities found earlier in this Prospectus in Investment Objective
and Policies and Risk Factors and investors should refer to those sections for a
further discussion of the risks of high-yield bonds.

Fixed-income securities of this type are considered to be of poor
standing and predominantly speculative. Such securities are subject to a
substantial degree of credit risk. In the past, the high-yields from these bonds
have more than compensated for their higher default rates. There can be no
assurance, however, that yields will continue to offset default rates on these
bonds in the future. The Manager intends to maintain an adequately diversified
portfolio of these bonds. While diversification can help to reduce the effect of
an individual default on the Fund, there can be no assurance that
diversification will protect the Fund from widespread bond defaults brought
about by a sustained economic downturn.

Medium and low-grade bonds held by the Fund may be issued as a
consequence of corporate restructurings, such as leveraged buy-outs, mergers,
acquisitions, debt recapitalizations or similar events. Also, these bonds are
often issued by smaller, less creditworthy companies or by highly leveraged
(indebted) firms, which are generally less able than more financially stable
firms to make scheduled payments of interest and principal. The risks posed by
bonds issued under such circumstances are substantial.

The economy and interest rates may affect these high-yield, high risk
securities differently from other securities. Prices have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. Changes by recognized rating agencies in their rating of any security
and in the ability of an issuer to make payments of interest and principal will
also ordinarily have a more dramatic effect on the values of these investments
than on the values of higher rated securities. Such changes in value will not
affect cash income derived from these securities, unless the issuers fail to pay
interest or dividends when due. Such changes will, however, affect the Fund's
net asset value per share.

Zero Coupon Bonds and Pay-In-Kind Bonds
The Fund may purchase zero-coupon bonds and pay-in-kind ("PIK") bonds.
A zero-coupon bond has no cash coupon payments. Instead, the issuer sells the
security at a substantial discount from its maturity value. The interest
received by the investor from holding this security to maturity is the
difference between the maturity value and the purchase price. The advantage to
the investor is that the reinvestment risk of the income received during the
life of the bond is eliminated. However, zero-coupon bonds, like other bonds,
retain interest rate and credit risk and usually display more price volatility
than

-49-

<PAGE>

securities that pay a cash coupon. Since there are no periodic interest payments
made to the holder of a zero-coupon bond, when interest rates rise, the value of
such a security will fall more dramatically than a bond paying out interest on a
current basis. When interest rates fall, however, zero-coupon bonds rise more
rapidly in value because the bonds have locked in a specific rate of return
which becomes more attractive the further interest rates fall.

PIK bonds are securities that pay interest in either cash or additional
securities, at the issuer's option, for a specified period. PIKs, like
zero-coupon bonds, are designed to give an issuer flexibility in managing cash
flow. PIK bonds can be either senior or subordinated debt and trade flat (i.e.,
without accrued interest). The price of PIK bonds is expected to reflect to the
market value of the underlying debt plus an amount representing accrued interest
since the last payment. PIKs are usually less volatile than zero-coupon bonds,
but more volatile than cash-pay securities. PIK bonds may provide an attractive
yield on the Fund's investment even when the interest paid is in the form of
additional securities of the issuer instead of cash.

The Fund is required to distribute to shareholders income imputed to
any zero-coupon or PIK investments. Such distributions could reduce the Fund's
cash position.

Foreign Investment Information
The Fund may invest up to 15% of its total assets in securities of
foreign issuers, including Yankee Bonds. Investments in obligations of foreign
issuers involve somewhat different investment risks than those affecting
obligations of United States issuers. There is limited publicly available
information with respect to foreign issuers, and foreign issuers are not subject
to uniform accounting, auditing and financial standards and requirements
comparable to those applicable to domestic companies. There is also less
government supervision and regulation of foreign securities exchanges, brokers
and listed companies than in the United States and it is more difficult to
enforce legal rights outside of the U.S. Many foreign securities markets have
substantially less volume than U.S. national securities exchanges, and
securities of some foreign issuers are less liquid and more volatile than
securities of comparable domestic issuers. Settlement practices of certain
foreign countries may include delays and may otherwise differ from those
customary in U.S. markets. Brokerage commissions and other transaction costs on
foreign securities exchanges are generally higher than in the United States. It
is also expected that the expenses for custodial arrangements of the Fund's
foreign securities will be somewhat greater than the expenses for the custodial
arrangements for U.S. securities of equal value. Dividends and interest paid by
foreign issuers may be subject to withholding and other foreign taxes. Although
in some countries a portion of these taxes is recoverable, the non-recovered
portion of foreign withholding taxes will reduce the income the Fund receives
from the companies comprising the Fund's investments. See Taxes. Additional
risks include future political and economic developments, the possibility that a
foreign jurisdiction might impose or change withholding taxes on income payable
with respect to foreign securities, possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits and the possible
adoption of foreign government restrictions such as exchange controls. Also,
because stocks of foreign companies are normally denominated in foreign
currencies, the Fund may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations, and may incur costs in
connection with conversions between various currencies.

-50-

<PAGE>

The risks noted above often are heightened for investments in emerging
or developing countries. Compared to the United States and other developed
countries, emerging or developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities. Prices on these exchanges tend to be
volatile and, in the past, securities in these countries have offered greater
potential for gain (as well as loss) than securities of companies located in
developed countries. Further, investments by foreign investors are subject to a
variety of restrictions in many emerging or developing countries. These
restrictions may take the form of prior governmental approval, limits on the
amount or type of securities held by foreigners, and limits on the type of
companies in which foreigners may invest. Additional restrictions may be imposed
at any time by these or other countries in which the Fund invests. In addition,
the repatriation of both investment income and capital from several foreign
countries is restricted and controlled under certain regulations, including in
some cases the need for certain government consents. Although these restrictions
may in the future make it undesirable to invest in emerging or developing
countries, the Manager does not believe that any current repatriation
restrictions would affect the Fund's decision to invest in such countries.

U.S. Government Securities
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by federal agencies and U.S.
government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, investors in such securities
look principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are, in effect, backed
by the full faith and credit of the United States through provisions in their
charters that they may make "indefinite and unlimited" drawings on the Treasury,
if needed to service its debt. Debt from certain other agencies and
instrumentalities, including the Federal Home Loan Bank and Federal National
Mortgage Association, are not guaranteed by the United States, but those
institutions are protected by the discretionary authority for the U.S. Treasury
to purchase certain amounts of their securities to assist the institutions in
meeting their debt obligations. Finally, other agencies and instrumentalities,
such as the Farm Credit System, Tennessee Valley Authority and the Federal Home
Loan Mortgage Corporation, are federally chartered institutions under U.S.
government supervision, but their debt securities are backed only by the
creditworthiness of those institutions, not the U.S. government.

An instrumentality of a U.S. government agency is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal Immediate
Credit Banks and the Federal National Mortgage Association.

Short-Term Investments
The short-term investments in which the Fund may invest are:

(1) Time deposits, certificates of deposit (including marketable
variable rate certificates of deposit) and bankers' acceptances issued by a U.S.
commercial bank. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated interest rate.
Time

-51-

<PAGE>

deposits maturing in more than seven days will not be purchased by the Fund, and
time deposits maturing from two business days through seven calendar days will
not exceed 15% of the total assets of the Fund. Certificates of deposit are
negotiable short-term obligations issued by commercial banks against funds
deposited in the issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is periodically adjusted
prior to their stated maturity based upon a specified market rate. A bankers'
acceptance is a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods).

The Fund will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion or, in the case of a
bank which does not have total assets of at least $1 billion, the aggregate
investment made in any one such bank is limited to $100,000 and the principal
amount of such investment is insured in full by the Federal Deposit Insurance
Corporation, (ii) it is a member of the Federal Deposit Insurance Corporation,
and (iii) the bank or its securities have received the highest quality rating by
a nationally-recognized statistical rating organization;

(2) Commercial paper with the highest quality rating by a
nationally-recognized statistical rating organization (e.g., A-1 by S&P or
Prime-1 by Moody's) or, if not so rated, of comparable quality as determined by
the Manager;

(3) Short-term corporate obligations with the highest quality rating by
a nationally-recognized statistical rating organization (e.g., AAA by S&P or Aaa
by Moody's) or, if not so rated, of comparable quality as determined by the
Manager;

(4) U.S. government securities (see U.S. Government Securities); and

(5) Repurchase agreements collateralized by securities listed above.

Repurchase Agreements
In order to invest its short-term cash reserves or when in a temporary
defensive posture, the Fund may enter into repurchase agreements with banks or
broker/dealers deemed to be creditworthy by the Manager, under guidelines
approved by the Board of Directors. A repurchase agreement is a short-term
investment in which the purchaser (i.e., the Fund) acquires ownership of a debt
security and the seller agrees to repurchase the obligation at a future time and
set price, thereby determining the yield during the purchaser's holding period.
Generally, repurchase agreements are of short duration, often less than one week
but on occasion for longer periods. Not more than 15% of the Fund's assets may
be invested in repurchase agreements of over seven days' maturity or other
illiquid assets. Should an issuer of a repurchase agreement fail to repurchase
the underlying security, the loss of the Fund, if any, would be the difference
between the repurchase price and the market value of the security. The Fund will
limit its investments in repurchase agreements to those which the Manager under
guidelines of the Board of Directors determines to present minimal credit risks
and which are of high quality. In addition, the Fund must have collateral of at
least 100% of the repurchase price, including the portion representing the
Fund's yield under such agreements, which is monitored on a daily basis.

-52-

<PAGE>

Restricted/Illiquid Securities
The Fund may invest in restricted securities, including securities
eligible for resale without registration pursuant to Rule 144A ("Rule 144A
Securities") under the 1933 Act. Rule 144A exempts many privately placed and
legally restricted securities from the registration requirements of the 1933 Act
and permits such securities to be freely traded among certain institutional
buyers such as the Fund.

The Fund may invest no more than 15% of the value of its net assets in
illiquid securities. Illiquid securities, for purposes of this policy, include
repurchase agreements maturing in more than seven days.

While maintaining oversight, the Board of Directors has delegated to
the Manager the day-to-day functions of determining whether or not individual
Rule 144A Securities are liquid for purposes of the Fund's 15% limitation on
investments in illiquid assets. The Board has instructed the Manager to consider
the following factors in determining the liquidity of a Rule 144A Security: (i)
the frequency of trades and trading volume for the security; (ii) whether at
least three dealers are willing to purchase or sell the security and the number
of potential purchasers; (iii) whether at least two dealers are making a market
in the security; and (iv) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer).

If the Manager determines that a Rule 144A Security which was
previously determined to be liquid is no longer liquid and, as a result, the
Fund's holdings of illiquid securities exceed the Fund 15% limit on investment
in such securities, the Manager will determine what action shall be taken to
ensure that the Fund continues to adhere to such limitation.

Unseasoned Companies
The Fund may invest in relatively new or unseasoned companies which are
in their early stages of development, or small companies positioned in new and
emerging industries where the opportunity for rapid growth is expected to be
above average. Securities of unseasoned companies present greater risks than
securities of larger, more established companies. The companies in which the
Fund may invest may have relatively small revenues, limited product lines, and
may have a small share of the market for their products or services. Small
companies may lack depth of management, they may be unable to internally
generate funds necessary for growth or potential development or to generate such
funds through external financing or favorable terms, or they may be developing
or marketing new products or services for which markets are not yet established
and may never become established. Due these and other factors, small companies
may suffer significant losses as well as realize substantial growth, and
investments in such companies tend to be volatile and are therefore speculative.

-53-

<PAGE>

APPENDIX A--INVESTMENT ILLUSTRATIONS
Illustrations of the Potential Impact on Investment Based on Purchase Option
$10,000 Purchase
<TABLE>
<CAPTION>

Scenario 1 Scenario 2
No Redemption Redeem 1st Year
--------------------------------------- --------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,625 10,625 10,192 10,225 10,525+
2 10,905 11,289 11,289
3 11,669 11,995 11,995
4 12,485 12,744 12,744
5 13,359 13,541 13,541
6 14,294 14,387 14,387
7 15,295 15,286 15,286
8 16,366+ 16,242 16,242
9 17,511 17,379* 17,257
10 18,737 18,595* 18,335

</TABLE>
RESTUBBED TABLE
<TABLE>
<CAPTION>

Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 9,525 10,000 10,000 9,525 10,000 10,000
1 10,192 10,625 10,625 10,192 10,625 10,625
2 10,905 11,289 11,289 10,905 11,289 11,289
3 11,669 11,695 11,995+ 11,669 11,995 11,995
4 12,485 12,744 12,744
5 13,359 13,341 13,541+
6
7
8
9
10

*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
</TABLE>

$250,000 Purchase

<TABLE>
<CAPTION>
Scenario 1 Scenario 2
No Redemption Redeem 1st Year
----------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,625 265,625 260,813 255,625 263,125+
2 279,069 282,227 282,227
3 298,604 299,866 299,866
4 319,507+ 318,607 318,607
5 341,872 338,520 338,520
6 365,803 359,678 359,678
7 391,409 382,158 382,158
8 418,808 406,043 406,043
9 448,124 434,466* 431,420
10 479,493 464,878* 458,384

</TABLE>
<PAGE>

RESTUBBED TABLE
<TABLE>
<CAPTION>
Scenario 3 Scenario 4
Redeem 3rd Year Redeem 5th Year
--------------------------------------- ---------------------------------------
Year Class A Class B Class C Class A Class B Class C
- ---- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
0 243,750 250,000 250,000 243,750 250,000 250,000
1 260,813 265,625 265,625 260,813 265,625 265,625
2 279,069 282,227 282,227 279,069 282,227 282,227
3 298,604 292,366 300,866+ 298,604 299,866 299,866
4 319,507+ 318,607 318,607
5 341,872 333,520 338,520
6
7
8
9
10

*This assumes that Class B Shares were converted to Class A Shares at the end of the eighth year.
</TABLE>

Illustrations do not reflect any applicable waiver of 12b-1 fees. If any such
fee waivers were reflected, the illustrations represented above would be
different.

Assumes a hypothetical return for Class A of 7% per year, a hypothetical return
for Class B of 6.25% for years 1-8 and 7% for years 9-10, and a hypothetical
return for Class C of 6.25% per year. Hypothetical returns vary due to the
different expense structure for each Class and do not represent actual
performance.
Class A purchase subject to appropriate sales charge breakpoint (4.75% @
$10,000; 3.75% @ $100,000; 2.50% @ $250,000).
Class B purchase assessed appropriate CDSC upon redemption (4%-4%-3%-3%-2%-1%
in years 1-2-3-4-5-6).
Class C purchase assessed 1% CDSC upon redemption in year 1.
Figures marked "+" identify which Class offers the greater return potential
based on investment amount, the holding period and the expense structure of each
Class.

<PAGE>

APPENDIX B--RATINGS

The Fund's assets may be invested in corporate bonds that may be rated
BB or lower by S&P or Ba or lower by Moody's, or similarly rated by another
nationally-recognized statistical rating organization or that may be unrated.
These credit ratings evaluate only the safety of principal and interest and do
not consider the market value risk associated with high-yield securities.

General Rating Information

Bonds
Excerpts from Moody's description of its bond ratings: Aaa--judged to
be the best quality. They carry the smallest degree of investment risk;
Aa--judged to be of high quality by all standards; A--possess favorable
attributes and are considered "upper medium" grade obligations; Baa--considered
as medium grade obligations. Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time; Ba--judged to
have speculative elements; their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class; B--generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small; Caa--are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest; Ca--represent obligations which are speculative in a high degree. Such
issues are often in default or have other marked shortcomings; C--the lowest
rated class of bonds and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.

Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB--regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.

Commercial Paper
Excerpts from Moody's description of its two highest commercial paper
ratings: P-1--the highest grade possessing greatest relative strength;
P-2--second highest grade possessing less relative strength than the highest
grade.

Excerpts from S&P's description of its two highest commercial paper
ratings: A-1--judged to be the highest investment grade category possessing the
highest relative strength; A-2--investment grade category possessing less
relative strength than the highest rating.

-54-

<PAGE>

APPENDIX C--CLASSES OFFERED
<TABLE>
<CAPTION>

Growth of Capital A Class B Class C Class Consultant Class
<S> <C> <C> <C> <C>
Trend Fund x x x -
Enterprise Fund x x x -
DelCap Fund x x x -
Value Fund x x x -
U.S. Growth Fund x x x -

Total Return
Devon Fund x x x -
Decatur Total Return Fund x x x -
Decatur Income Fund x x x -
Delaware Fund x x x -

Global Diversification
Emerging Markets Fund x x x -
New Pacific Fund x x x -
International Equity Fund x x x -
World Growth Fund x x x -
Global Assets Fund x x x -
Global Bond Fund x x x -

Current Income
Delchester Fund x x x -
Strategic Income Fund x x x -
Corporate Income Fund x x x -
Federal Bond Fund x x x -
U.S. Government Fund x x x -
Limited-Term Government Fund x x x -

Tax-Free Current Income
Tax-Free Pennsylvania Fund x x x -
Tax-Free USA Fund x x x -
Tax-Free Insured Fund x x x -
Tax-Free USA Intermediate Fund x x x -

Money Market Funds
Delaware Cash Reserve x x x x
U.S. Government Money Fund x - - x
Tax-Free Money Fund x - - x
</TABLE>

-55-
<PAGE>

SUBJECT TO COMPLETION

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

HIGH-YIELD OPPORTUNITIES FUND

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

INSTITUTIONAL

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

P R O S P E C T U S

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

DECEMBER ____ , 1996

DELAWARE
GROUP
--------

<PAGE>

For more information contact the Delaware Group at 800-828-5052.

INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIAN
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245

<PAGE>

HIGH-YIELD OPPORTUNITIES FUND PROSPECTUS
INSTITUTIONAL CLASS SHARES DECEMBER _________ , 1996

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

1818 Market Street, Philadelphia, PA 19103

For more information about
the High-Yield Opportunities Fund Institutional Class
call the Delaware Group at 800-828-5052.

This Prospectus describes the High-Yield Opportunities Fund
Institutional Class of shares (the "Class") of the High-Yield Opportunities Fund
series (the "Fund") of Delaware Group Income Funds, Inc. ("Income Funds, Inc."),
a professionally-managed mutual fund of the series type. The investment
objective of the Fund is to seek to provide investors with total return and, as
a secondary objective, high current income.

This Prospectus sets forth information that you should read and
consider before you invest. Please retain it for future reference. Part B of
Income Funds, Inc.'s registration statement, dated December _____ , 1996, as it
may be amended from time to time, contains additional information about the Fund
and has been filed with the Securities and Exchange Commission. Part B is
incorporated by reference into this Prospectus and is available, without charge,
by writing to Delaware Distributors, L.P. at the above address or by calling the
above telephone numbers.

The Fund also offers the High-Yield Opportunities Fund A Class of
shares, the High-Yield Opportunities Fund B Class of shares and the High-Yield
Opportunities Fund C Class of shares. Shares of these classes are subject to
sales charges and other expenses, which may affect their performance. A
prospectus for these classes can be obtained by writing to Delaware
Distributors, L.P. at the above address or by calling 800-523-4640.

-1-

<PAGE>

TABLE OF CONTENTS

-2-

<PAGE>

SYNOPSIS

The investment objective of the Fund is to seek to provide investors
with total return and, as a secondary objective, high current income. The Fund
seeks to achieve its objective by investing principally in corporate bonds rated
BB or lower by Standard & Poor's Ratings Group ("S&P") or Ba or lower by Moody's
Investors Service, Inc. ("Moody's"), or similarly rated by another
nationally-recognized statistical rating organization, or, if unrated (which may
be more speculative in nature than rated bonds), judged to be of comparable
quality by the Manager (as defined below). The Fund may also invest in U.S. and
foreign government securities and commercial paper. For further details, see
Investment Objective and Policies.

Purchase Price
Shares of the Class offered by this Prospectus are available at net
asset value, without a front-end or contingent deferred sales charge, and are
not subject to distribution fees under a Rule 12b-1 distribution plan. See
Classes of Shares.

Redemption and Exchange
Shares of the Class are redeemed or exchanged at the net asset value
calculated after receipt of the redemption or exchange request. See Redemption
and Exchange.

-3-

<PAGE>

SUMMARY OF EXPENSES

Shareholder Transaction Expenses
- -------------------------------------------------------------------------------

Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price). . . . . None

Maximum Sales Charge Imposed on
Reinvested Dividends (as a
percentage of offering price). . . . . . . . None

Redemption Fees . . . . . . . . . . . . . . . . . . . None*

Exchange Fees . . . . . . . . . . . . . . . . . . . . None**

Annual Operating Expenses
(as a percentage of average daily net assets)
- -------------------------------------------------------------------------------

Management Fees (after voluntary waivers) . . . . . . 0.00%

12b-1 Fees. . . . . . . . . . . . . . . . . . . . . . None

Other Operating Expenses+ . . . . . . . . . . . . . . 1.25%
-----
Total Operating Expenses+
(after voluntary waivers) . . . . . 1.25%
=====

The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Class will bear directly
or indirectly. Because the Fund has no operating history, "Other Operating
Expenses" are estimated based on expenses expected to be incurred during the
Fund's first fiscal year.

*CoreStates Bank, N.A. currently charges $7.50 per redemption for redemptions
payable by wire.

**Exchanges are subject to the requirements of each fund and a front-end sales
charge may apply.

+"Total Operating Expenses" and "Other Operating Expenses" for the Class are
based on estimated amounts for the first full fiscal year of the Class, after
giving effect to the voluntary expense waiver. The Manager has elected
voluntarily to waive that portion, if any, of the annual management fees payable
by the Fund and to pay certain expenses of the Fund to the extent necessary to
ensure that the "Total Operating Expenses" of the Class do not exceed 1.25%
during the commencement of the public offering of the Class through
____________, 1998. If the voluntary expense waivers were not in effect, it is
estimated that the "Total Operating Expenses," as a percentage of average daily
net assets, would be 2.07% for the Class' first full fiscal year, reflecting
management fees of 0.60%.

-4-

<PAGE>

For expense information about High-Yield Opportunities Fund A Class,
High-Yield Opportunities Fund B Class and High-Yield Opportunities Fund C Class,
see the separate prospectus relating to those classes.

The following example illustrates the expenses that an investor would
pay on a $1,000 investment over various time periods, assuming (1) a 5% annual
rate of return, and (2) redemption at the end of each time period. As noted in
the table above, the Fund charges no redemption fees.

1 year 3 years
------ -------

$13 $39

This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.

-5-

<PAGE>

INVESTMENT OBJECTIVE AND POLICIES

The objective of the Fund is to seek total return and, as a secondary
objective, high current income. The Fund seeks to achieve its objective by
investing primarily in corporate bonds rated BB or lower by S&P or Ba or lower
by Moody's, or similarly rated by another nationally-recognized statistical
rating organization or, if unrated (which may be more speculative in nature than
rated bonds), judged to be of comparable quality by the Manager. See Appendix A
for more rating information and Risk Factors and Other Investment Policies and
Risk Considerations for a description of the risks associated with investing in
lower-rated fixed-income securities.

Ownership of Fund shares can reduce the bookkeeping and administrative
inconveniences that would be connected with direct purchases of the types of
securities in which the Fund invests.

-6-

<PAGE>

The Fund may invest up to 15% of its total assets in securities of
issuers domiciled in foreign countries. See Foreign Investment Information under
Other Investment Policies and Risk Considerations.

* * *

For a description of the Fund's other investment policies and for a
further description of some of the policies described above, see Other
Investment Policies and Risk Considerations.

Although the Fund will constantly strive to attain its objective, there
can be no assurance that is will be attained.

-7-

<PAGE>

-8-

<PAGE>

RISK FACTORS

High-Yield Securities
The Fund may invest primarily in bonds rated BB or lower by S&P or Ba
or lower by Moody's, and in bonds of comparable quality. See Appendix A to this
Prospectus for more rating information. Investing in these so-called "junk"
bonds or "high-yield" bonds entails certain risks, including the risk of loss of
principal, which may be greater than the risks involved in investment grade
securities, and which should be considered by investors contemplating an
investment in the Fund. High-yield bonds are sometimes issued by companies whose
earnings at the time of issuance are less than the projected debt service on the
junk bonds. In addition to the considerations discussed elsewhere in this
Prospectus, the risks of lower-rated bonds include the following:

-9-

<PAGE>

See High-Yield, High Risk Securities under Other Investment Policies
and Risk Considerations for further information about high-yield securities.

-10-

<PAGE>

CLASSES OF SHARES

The Distributor serves as the national distributor for Income Funds,
Inc. Shares of the Class may be purchased directly by contacting the Fund or its
agent or through authorized investment dealers. All purchases of shares of the
Class are at net asset value. There is no front-end or contingent deferred sales
charge.

Investment instructions given on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees considering purchasing shares of the Class
as part of their retirement program should contact their employer for details.

Shares of the Class are available for purchase only by: (a) retirement
plans introduced by persons not associated with brokers or dealers that are
primarily engaged in the retail securities business and rollover individual
retirement plans from such plans; (b) tax-exempt employee benefit plans of the
Manager or its affiliates and securities dealer firms with a selling agreement
with the Distributor; (c) institutional advisory accounts of the Manager or its
affiliates and those having client relationships with Delaware Investment
Advisers, a division of the Manager, or its affiliates and their corporate
sponsors, as well as subsidiaries and related employee benefit plans and
rollover individual retirement accounts from such institutional advisory
accounts; (d) banks, trust companies and similar financial institutions
investing for their own account or for the account of their trust customers for
whom such financial institution is exercising investment discretion in
purchasing shares of the Class; and (e) registered investment advisers investing
on behalf of clients that consist solely of institutions and high net-worth
individuals having at least $1,000,000 entrusted to the adviser for investment
purposes, but only if the adviser is not affiliated or associated with a broker
or dealer and derives compensation for its services exclusively from its clients
for such advisory services.

High-Yield Opportunities Fund A Class, High-Yield Opportunities Fund B Class
and High-Yield Opportunities Fund C Class
In addition to offering the High-Yield Opportunities Fund Institutional
Class, the Fund also offers the High-Yield Opportunities Fund A Class, the
High-Yield Opportunities Fund B Class and the High-Yield Opportunities Fund C
Class, which are described in a separate prospectus. Shares of the High-Yield
Opportunities Fund A Class, the High-Yield Opportunities Fund B Class and the
High-Yield Opportunities Fund C Class may be purchased through authorized
investment dealers or directly by contacting the Fund or the Distributor. The
High-Yield Opportunities Fund A Class carries a front-end sales charge and,
absent any applicable fee waiver, has annual 12b-1 expenses equal to a maximum
of .30% (currently, no more than .25% pursuant to Board action). The maximum
front-end sales charge as a percentage of the offering price is 4.75% and is
reduced on certain transactions of $100,000 or more. The High-Yield
Opportunities Fund B Class and the High-Yield Opportunities Fund C Class have no
front-end sales charge but, absent any applicable fee waiver, are subject to
annual 12b-1 expenses equal to a maximum of 1%. Shares of the High-Yield
Opportunities Fund B Class and the High-Yield Opportunities Fund C Class and
certain shares of the High-Yield Opportunities Fund A Class may be subject to a
contingent deferred sales charge upon redemption. To obtain a prospectus
relating to such classes, contact the Distributor by writing to the address or
by calling the phone numbers listed on the cover of this Prospectus.

-11-

<PAGE>

HOW TO BUY SHARES
The Fund makes it easy to invest by mail, by wire, by exchange and by
arrangement with your investment dealer. In all instances, investors must
qualify to purchase shares of the Class.

Investing Directly by Mail
1. Initial Purchases--An Investment Application, or in the case of a retirement
account, an appropriate retirement plan application, must be completed, signed
and sent with a check payable to High-Yield Opportunities Fund Institutional
Class, to Delaware Group at 1818 Market Street, Philadelphia, PA 19103.

2. Subsequent Purchases--Additional purchases may be made at any time by mailing
a check payable to High-Yield Opportunities Fund Institutional Class. Your check
should be identified with your name(s) and account number.

Investing Directly by Wire
You may purchase shares by requesting your bank to transmit funds by
wire to CoreStates Bank, N.A., ABA #031000011, account number 1412893401
(include your name(s) and your account number).

1. Initial Purchases--Before you invest, telephone the Fund's Client Services
Department at 800-828-5052 to get an account number. If you do not call first,
it may delay processing your investment. In addition, you must promptly send
your Investment Application, or in the case of a retirement account, an
appropriate retirement plan application, to High-Yield Opportunities Fund
Institutional Class, to Delaware Group at 1818 Market Street, Philadelphia, PA
19103.

2. Subsequent Purchases--You may make additional investments anytime by wiring
funds to CoreStates Bank, N.A., as described above. You must advise your Client
Services Representative by telephone at 800-828-5052 prior to sending your wire.

Investing by Exchange
If you have an investment in another mutual fund in the Delaware Group
and you qualify to purchase shares of the Class, you may write and authorize an
exchange of part or all of your investment into the Fund. However, shares of the
High-Yield Opportunities Fund B Class and High-Yield Opportunities Fund C Class
and the Class B Shares and Class C Shares of the other funds in the Delaware
Group offering such a class of shares may not be exchanged into the Class. If
you wish to open an account by exchange, call your Client Services
Representative at 800-828-5052 for more information.

Investing through Your Investment Dealer
You can make a purchase of Fund shares through most investment dealers
who, as part of the service they provide, must transmit orders promptly. They
may charge for this service.

Purchase Price and Effective Date
The purchase price (net asset value) is determined as of the close of
regular trading on the New York Stock Exchange (ordinarily, 4 p.m., Eastern
time) on days when the Exchange is open.

-12-

<PAGE>

The effective date of a purchase made through an investment dealer is
the date the order is received by the Fund. The effective date of a direct
purchase is the day your wire, electronic transfer or check is received, unless
it is received after the time the share price is determined, as noted above.
Purchase orders received after such time will be effective the next business
day.

The Fund also reserves the right, upon 60 days' written notice, to
involuntarily redeem accounts that remain under $250 as a result of redemptions.

-13-

<PAGE>

REDEMPTION AND EXCHANGE

Redemption and exchange requests made on behalf of participants in an
employer-sponsored retirement plan are made in accordance with directions
provided by the employer. Employees should therefore contact their employer for
details.

Your shares will be redeemed or exchanged based on the net asset value
next determined after we receive your request in good order. Redemption and
exchange requests received in good order after the time the net asset value of
shares is determined, as noted above, will be processed on the next business
day. See Purchase Price and Effective Date under How to Buy Shares. Except as
otherwise noted below, for a redemption request to be in "good order," you must
provide your Class account number, account registration, and the total number of
shares or dollar amount of the transaction. With regard to exchanges, you must
also provide the name of the fund you want to receive the proceeds. Exchange
instructions and redemption requests must be signed by the record owner(s)
exactly as the shares are registered. You may request a redemption or an
exchange by calling the Fund at 800-828-5052. Redemption proceeds will be
distributed promptly, as described below, but not later than seven days after
receipt of a redemption request.

The Fund will process written and telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. The Fund will honor redemption requests as to shares for which a check
was tendered as payment, but the Fund will not mail or wire the proceeds until
it is reasonably satisfied that the check has cleared, which may take up to 15
days from the purchase date. You can avoid this potential delay if you purchase
shares by wiring Federal Funds. The Fund reserves the right to reject a written
or telephone redemption request or delay payment of redemption proceeds if there
has been a recent change to the shareholder's address of record.

Shares of the Class may be exchanged into any other Delaware Group
mutual fund, provided: (1) the investment satisfies the eligibility and other
requirements set forth in the prospectus of the fund being acquired, including
the payment of any applicable front-end sales charge; and (2) the shares of the
fund being acquired are in a state where that fund is registered. If exchanges
are made into other shares that are eligible for purchase only by those
permitted to purchase shares of the Class, such exchange will be exchanged at
net asset value. Shares of the Class may not be exchanged into the Class B
Shares or Class C Shares of the funds in the Delaware Group. The Fund may
suspend, terminate or amend the terms of the exchange privilege upon 60 days'
written notice to shareholders.

Various redemption and exchange methods are outlined below. No fee is
charged by the Fund or the Distributor for redeeming or exchanging your shares.
You may also have your investment dealer arrange to have your shares redeemed or
exchanged. Your investment dealer may charge for this service.

All authorizations, including selection of any of the features
described below, shall continue in effect until such time as a written
revocation or modification has been received by the Fund or its agent.

-14-

<PAGE>

Written Redemption and Exchange
You can write to the Fund at 1818 Market Street, Philadelphia, PA 19103
to redeem some or all of your shares or to request an exchange of any or all of
your shares into another mutual fund in the Delaware Group, subject to the same
conditions and limitations as other exchanges noted above. The request must be
signed by all owners of the account or your investment dealer of record.

For redemptions of more than $50,000, or when the proceeds are not sent
to the shareholder(s) at the address of record, the Fund requires a signature by
all owners of the account and may require a signature guarantee. Each signature
guarantee must be supplied by an eligible guarantor institution. The Fund
reserves the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness. The Fund may require further
documentation from corporations, executors, retirement plans, administrators,
trustees or guardians.

Payment is normally mailed the next business day after receipt of your
redemption request. Certificates are issued for shares only if you submit a
specific request. If your shares are in certificate form, the certificate must
accompany your request and also be in good order.

You also may submit your written request for redemption or exchange by
facsimile transmission at the following number: 215-255-8864.

Telephone Redemption and Exchange
To get the added convenience of the telephone redemption and exchange
methods, you must have the Transfer Agent hold your shares (without charge) for
you. If you choose to have your shares in certificate form, you may redeem or
exchange only by written request and you must return your certificates.

The Telephone Redemption--Check to Your Address of Record service and
the Telephone Exchange service, both of which are described below, are
automatically provided unless you notify the Fund in writing that you do not
wish to have such service available with respect to your account. The Fund
reserves the right to modify, terminate or suspend these procedures upon 60
days' written notice to shareholders. It may be difficult to reach the Fund by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests.

Neither the Fund nor its Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, the Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, the Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. A written confirmation will be provided
for all purchase, exchange and redemption transactions initiated by telephone.
By exchanging shares by telephone, you are acknowledging prior receipt of a
prospectus for the fund into which your shares are being exchanged.

Telephone Redemption-Check to Your Address of Record
You or your investment dealer of record can have redemption proceeds of
$50,000 or less mailed to you at your record address. Checks will be payable to
the shareholder(s) of record. Payment is normally mailed the next business day
after receipt of the redemption request.

-15-

<PAGE>

Telephone Redemption-Proceeds to Your Bank
Redemption proceeds of $1,000 or more can be transferred to your
predesignated bank account by wire or by check. You should authorize this
service when you open your account. If you change your predesignated bank
account, you must submit a written authorization and you may need to have your
signature guaranteed. For your protection, your authorization must be on file.
If you request a wire, your funds will normally be sent the next business day.
CoreStates Bank, N.A.'s fee (currently $7.50) will be deducted from your
redemption. If you ask for a check, it will normally be mailed the next business
day after receipt of your redemption request to your predesignated bank account.
There are no fees for this redemption method, but the mail time may delay
getting funds into your bank account. Simply call your Client Services
Representative prior to the time the net asset value is determined, as noted
above.

Telephone Exchange
You or your investment dealer of record can exchange shares into any
fund in the Delaware Group under the same registration. As with the written
exchange service, telephone exchanges are subject to the same conditions and
limitations as other exchanges noted above. Telephone exchanges may be subject
to limitations as to amounts or frequency.

-16-

<PAGE>

DIVIDENDS AND DISTRIBUTIONS

Each Class of the Fund will share proportionately in the investment
income and expenses of the Fund, except that the Class will not incur
distribution fees under the Rule 12b-1 Plans which, absent any applicable fee
waiver, apply to the High-Yield Opportunities Fund A Class, the High-Yield
Opportunities Fund B Class and the High-Yield Opportunities Fund C Class.

-17-

<PAGE>

TAXES

The tax discussion set forth below is included for general information
only. Investors should consult their own tax advisers concerning the federal,
state, local or foreign tax consequences of an investment in the Fund.

The Fund intends to qualify as a regulated investment company under
Subchapter M of the Code. As such, the Fund will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are distributed as
provided in the Code.

The Fund intends to distribute substantially all of its net investment
income and net capital gains, if any. Dividends from net investment income or
net short-term capital gains will be taxable to investors who are subject to
income tax as ordinary income, even though received in additional shares. It is
expected that only a nominal portion of the Fund's dividends will be eligible
for the dividends-received deduction for corporations.

Distributions paid by the Fund from long-term capital gains, received
in additional shares, are taxable to those investors who are subject to income
taxes as long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a byproduct of
Fund management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, for those investors
subject to tax, if purchases of shares in the Fund are made shortly before the
record date for a dividend or capital gains distribution, a portion of the
investment will be returned as a taxable distribution.

The Fund may be subject to foreign withholding taxes on income from
certain of its foreign securities.

-18-

<PAGE>

See Accounting and Tax Issues and Taxes in Part B for additional
information on tax matters relating to the Fund and its shareholders.

-19-

<PAGE>

CALCULATION OF NET ASSET VALUE PER SHARE

The purchase and redemption price of the Class is the net asset value
("NAV") per share of the Class next computed after the order is received. The
NAV is computed as of the close of regular trading on the New York Stock
Exchange (ordinarily, 4 p.m., Eastern time) on days when the Exchange is open.

The net asset value ("NAV") per share is computed by adding the value
of all securities and other assets in the portfolio, deducting any liabilities
(expenses and fees are accrued daily) and dividing by the number of shares
outstanding. Debt securities are priced on the basis of valuations provided by
an independent pricing service using methods approved by Income Fund, Inc.'s
Board of Directors. Equity securities for which market quotations are available
are priced at market value. Short-term investments having a maturity of less
than 60 days are valued at amortized cost, which approximates market value. All
other securities are valued at their fair value as determined in good faith and
in a method approved by Income Funds, Inc.'s Board of Directors.

The net asset values of all outstanding shares of each class of the
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in the Fund represented by the value of shares
of that class. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of shares of such classes,
except that the Class will not incur any of the expenses under the Fund's 12b-1
Plans and the High-Yield Opportunities Fund A, B and C Classes alone will bear
the 12b-1 Plan fees payable under their respective Plans.

-20-

<PAGE>

MANAGEMENT OF THE FUND

Investment Manager
The Manager furnishes investment management services to the Fund.

The Manager manages the Fund's portfolio and makes investment decisions
for the Fund which are implemented by the Fund's Trading Department. The Manager
also administers Income Funds, Inc.'s affairs and pays the salaries of all the
directors, officers and employees of Income Funds, Inc. who are affiliated with
the Manager. For these services, the Manager is paid an annual fee equal to
0.60% on the first $500 million of average daily net assets, 0.575% on the next
$250 million and 0.55% on the average daily net assets in excess of $750
million.

-21-

<PAGE>

Performance Information
From time to time, the Fund may quote yield or total return performance
of the Class in advertising and other types of literature.

The current yield for the Class will be calculated by dividing the
annualized net investment income earned by the Class during a recent 30-day
period by the net asset value per share on the last day of the period. The yield
formula provides for semi-annual compounding, which assumes that net investment
income is earned and reinvested at a constant rate and annualized at the end of
a six-month period.

Total return will be based on a hypothetical $1,000 investment,
reflecting the reinvestment of all distributions. Each presentation will include
the average annual total return for one-, five- and ten-year or life-of-fund
periods, as relevant. The Fund may also advertise aggregate and average total
return information concerning the Class over additional periods of time.

Yield and net asset value fluctuate and are not guaranteed. Past
performance is not an indication of future results.

-22-

<PAGE>

Distribution and Service
The Distributor, Delaware Distributors, L.P., serves as the national
distributor of the Fund's shares under a Distribution Agreement with Income
Funds, Inc. dated as of ______________ , 1996. The Distributor bears all of the
costs of promotion and distribution.

The Transfer Agent, Delaware Service Company, Inc., serves as the
shareholder servicing, dividend disbursing and transfer agent for Income Funds,
Inc. under an amended and restated agreement dated as of ______, 1996. The
Transfer Agent also provides accounting services to the Fund pursuant to the
terms of a separate Fund Accounting Agreement dated as of , 1996. The directors
annually review service fees paid to the Transfer Agent. Certain recordkeeping
and other shareholder services that otherwise would be performed by the Transfer
Agent may be performed by certain other entities and the Transfer Agent may
elect to enter into an agreement to pay such other entities for their services.
In addition, participant account maintenance fees may be assessed for certain
recordkeeping provided as part of retirement plan and administration service
packages. These fees are based on the number of participants in the plan and the
various services selected. Fees will be quoted upon request and are subject to
change.

The Distributor and the Transfer Agent are also indirect, wholly owned
subsidiaries of DMH.

In addition to the Class, the Fund also offers the High-Yield
Opportunities Fund A Class, the High-Yield Opportunities Fund B Class and the
High-Yield Opportunities Fund C Class. Shares of each class represent
proportionate interests in the assets of the Fund and have the same voting and
other rights and preferences as the other classes of the Fund, except that
shares of the Class are not subject to, and may not vote on matters affecting,
the Distribution Plans under Rule 12b-1 relating to the High-Yield Opportunities
Fund A Class, the High-Yield Opportunities Fund B Class and the High-Yield
Opportunities Fund C Class.

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<PAGE>

-24-

<PAGE>

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

High-Yield, High Risk Securities
The Fund invests primarily in securities rated BB or lower by S&P or Ba
or lower by Moody's, or similarly rated by another nationally-recognized
statistical rating organization or, if unrated (which may be more speculative in
nature than rated bonds), judged to be of comparable quality by the Manager. See
Appendix A--Ratings to this Prospectus for more rating information. The
discussion in this section supplements the description of the risks of
high-yield securities found earlier in this Prospectus in Investment Objective
and Policies and Risk Factors and investors should refer to those sections for a
further discussion of the risks of high-yield bonds.

-25-

<PAGE>

The Fund is required to distribute to shareholders income imputed to
any zero-coupon or PIK investments. Such distributions could reduce the Fund's
cash position.

-26-

<PAGE>

Short-Term Investments
The short-term investments in which the Fund may invest are:

-27-

<PAGE>

(4) U.S. government securities (see U.S. Government Securities); and

(5) Repurchase agreements collateralized by securities listed above.

-28-

<PAGE>

-29-

<PAGE>

APPENDIX A--RATINGS

General Rating Information

Excerpts from S&P's description of its bond ratings: AAA--highest grade
obligations. They possess the ultimate degree of protection as to principal and
interest; AA--also qualify as high grade obligations, and in the majority of
instances differ from AAA issues only in a small degree; A--strong ability to
pay interest and repay principal although more susceptible to changes in
circumstances; BBB-- regarded as having an adequate capacity to pay interest and
repay principal; BB, B, CCC, CC--regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and CC the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions; C--reserved
for income bonds on which no interest is being paid; D--in default, and payment
of interest and/or repayment of principal is in arrears.

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<PAGE>

SUBJECT TO COMPLETION

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

DELAWARE GROUP INCOME FUNDS, INC.

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

DELCHESTER FUND

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

STRATEGIC INCOME FUND

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

HIGH-YIELD OPPORTUNITIES FUND

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

PART B

STATEMENT OF
ADDITIONAL INFORMATION

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

DECEMBER 30, 1996

DELAWARE
GROUP
--------
<PAGE>

The Delaware Group includes funds with a wide range of investment
objectives. Stock funds, income funds, tax-free funds, money market funds,
global and international funds and closed-end equity funds give investors the
ability to create a portfolio that fits their personal financial goals. For more
information, shareholders of the Fund Classes should contact their financial
adviser or call Delaware Group at 800-523-4640, and shareholders of the
Institutional Class should contact Delaware Group at 800-828-5052.

INVESTMENT MANAGER
Delaware Management Company, Inc.
One Commerce Square
Philadelphia, PA 19103

SUB-ADVISER
Strategic Income Fund:
Delaware International Advisers Ltd.
Veritas House
125 Finsbury Pavement
London, England EC2A 1NQ

NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103

SHAREHOLDER SERVICING,
DIVIDEND DISBURSING,
ACCOUNTING SERVICES
AND TRANSFER AGENT
Delaware Service Company, Inc.
1818 Market Street
Philadelphia, PA 19103

LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
One Commerce Square
Philadelphia, PA 19103

INDEPENDENT AUDITORS
Ernst & Young LLP
Two Commerce Square
Philadelphia, PA 19103

CUSTODIANS
Delchester Fund
High-Yield Opportunities Fund:
The Chase Manhattan Bank
4 Chase Metrotech Center
Brooklyn, NY 11245

Strategic Income Fund:
Bankers Trust Company
One Bankers Trust Plaza
New York, NY 10006

<PAGE>

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

PART B--STATEMENT OF ADDITIONAL INFORMATION
December __, 1996
- -------------------------------------------------------------------------------

DELAWARE GROUP

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

DELAWARE GROUP INCOME FUNDS, INC.

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

1818 Market Street
Philadelphia, PA 19103
- -------------------------------------------------------------------------------

For more information about the Institutional Class of Delchester Fund,
Strategic Income Fund and High-Yield Opportunities Fund: 800-828-5052

For Prospectus and Performance of the Class A Shares, Class B Shares and
Class C Shares of Delchester Fund, Strategic Income Fund and High-Yield
Opportunities Fund: Nationwide 800-523-4640

Information on Existing Accounts of the Class A Shares, Class B Shares and
Class C Shares of Delchester Fund, Strategic Income Fund and High-Yield
Opportunities Fund: (SHAREHOLDERS ONLY)
Nationwide 800-523-1918

Dealer Services: (BROKER/DEALERS ONLY)
Nationwide 800-362-7500
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Cover Page
- ------------------------------------------------------------------------------
Investment Objectives and Policies
- ------------------------------------------------------------------------------
Performance Information
- ------------------------------------------------------------------------------
Trading Practices and Brokerage
- ------------------------------------------------------------------------------
Purchasing Shares
- ------------------------------------------------------------------------------
Investment Plans
- ------------------------------------------------------------------------------
Determining Offering Price and
Net Asset Value
- ------------------------------------------------------------------------------
Redemption and Repurchase
- ------------------------------------------------------------------------------
Dividends and Realized Securities
Profits Distributions
- ------------------------------------------------------------------------------
Taxes
- ------------------------------------------------------------------------------
Investment Management Agreements
- ------------------------------------------------------------------------------
Officers and Directors
- ------------------------------------------------------------------------------
Exchange Privilege
- ------------------------------------------------------------------------------
General Information
- ------------------------------------------------------------------------------
Appendix A--IRA Information
- ------------------------------------------------------------------------------
Financial Statements
- ------------------------------------------------------------------------------

-1-

<PAGE>

Delaware Group Income Funds, Inc. ("Income Funds, Inc.") is a
professionally-managed mutual fund of the series type presently offering three
series of shares: the Delchester Fund series (the "Delchester Fund"), the
Strategic Income Fund series (the "Strategic Income Fund") and the High-Yield
Opportunities Fund series (the "High-Yield Opportunities Fund") (individually, a
"Fund" and collectively, the "Funds").

Each Fund of Income Funds, Inc. offers three retail classes: the
Delchester Fund A Class, the Strategic Income Fund A Class and the High-Yield
Opportunities Fund A Class (the "Class A Shares"); the Delchester Fund B Class,
the Strategic Income Fund B Class and the High-Yield Opportunities Fund B Class
(the "Class B Shares"); and the Delchester Fund C Class, the Strategic Income
Fund C Class and the High-Yield Opportunities Fund C Class (the "Class C
Shares"). Class A Shares, Class B Shares and Class C Shares are collectively
referred to as the "Fund Classes." Each Fund also offers an institutional class:
the Delchester Fund Institutional Class, the Strategic Income Fund Institutional
Class and the High-Yield Opportunities Fund Institutional Class (collectively,
the "Institutional Classes").

Class B Shares, Class C Shares and Institutional Class shares of each
Fund may be purchased at a price equal to the next determined net asset value
per share. Class A Shares may be purchased at the public offering price, which
is equal to the next determined net asset value per share, plus a front-end
sales charge. Class A Shares are subject to a maximum front-end sales charge of
4.75%, absent any applicable fee waiver, and annual 12b-1 Plan expenses which,
for Delchester Fund A Class will vary because of the formula adopted by Income
Funds, Inc.'s Board of Directors but may not exceed .30%, and for Strategic
Income Fund A Class and High-Yield Opportunities Fund A Class may not exceed
.30% and have currently been fixed by the Board at .25%. Class B Shares are
subject to a contingent deferred sales charge ("CDSC") which may be imposed on
redemptions made within six years of purchase and annual 12b-1 Plan expenses of
up to 1% which are assessed against Class B Shares for approximately eight years
after purchase. See Automatic Conversion of Class B Shares under Classes of
Shares in the Prospectuses for the Fund Classes. Class C Shares are subject to a
CDSC which may be imposed on redemptions made within 12 months of purchase and,
absent any applicable fee waiver, annual 12b-1 Plan expenses of up to 1%, which
are assessed against the Class C Shares for the life of the investment. The
High-Yield Opportunities Fund will not pay a 12b-1 Fee with respect to any Class
until _____, 199__. See Distribution and Service under Investment Management
Agreements.

This Statement of Additional Information ("Part B" of the registration
statement) supplements the information contained in the current Prospectus of
the Fund Classes for the Delchester Fund dated September 30, 1996 and the
Strategic Income Fund, dated September 30, 1996, as revised October 4, 1996, and
the current Prospectuses of the Institutional Class for the Delchester Fund and
the Strategic Income Fund, each dated September 30, 1996, as they may be amended
from time to time. This Part B also supplements the information contained in the
current Prospectus of the Fund Classes for the High-Yield Opportunities Fund
dated December __, 1996, and the current Prospectus of the Institutional Class
for the High-Yield Opportunities Fund dated December __, 1996, as they may be
amended from time to time. Part B should be read in conjunction with the
respective class' Prospectus. Part B is not itself a prospectus but is, in its
entirety, incorporated by reference into each class' Prospectus. A Prospectus
for each class may be obtained by writing or calling your investment dealer or
by contacting Income Funds, Inc.'s national distributor, Delaware Distributors,
L.P. (the "Distributor"), 1818 Market Street, Philadelphia, PA 19103.

All references to "shares" in this Part B refer to all classes of
shares of Income Funds, Inc., except where noted.

-2-

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

Delchester Fund seeks to earn and pay shareholders as high a current
income as is consistent with providing reasonable safety. Strategic Income Fund
seeks to provide investors with high current income and total return. The
investment objective of each Fund is a fundamental policy and cannot be changed
without shareholder approval.

Delchester Fund

In investing for income and safety of principal, Delchester Fund's
emphasis in selection will be on securities having a liberal and consistent
yield and those tending to reduce the risk of market fluctuations. The types of
securities in which Delchester Fund invests are subject to price fluctuations
particularly due to changes in interest rates and economic conditions.
Management will seek to achieve Delchester Fund's objective by investing at
least 80% of the Fund's assets at time of purchase in:

(1) Corporate Bonds. The Fund will invest in both rated and unrated
bonds. Unrated bonds may be more speculative in nature than rated bonds; or

(2) Government Securities. Securities of, or guaranteed by, the U.S.
government, its agencies or instrumentalities; or

(3) Commercial Paper. Commercial paper of companies having, at the time
of purchase, an issue of outstanding debt securities rated as described above or
commercial paper rated A-1 or A-2 by Standard & Poor's Ratings Group ("S&P") or
rated P-1 or P-2 by Moody's Investors Service, Inc. ("Moody's") or similarly
rated by other rating agencies.

Appendix B to Delchester Fund's Fund Classes' Prospectus (Appendix A to
the Fund's Institutional Class' Prospectus) describes the ratings of S&P and
Moody's and provides information concerning the ratings of the securities in the
Fund's portfolio.

As a matter of practice, Delchester Fund has consistently invested more
than 80% of its assets in such securities. With respect to the remaining assets,
if any, that Delchester Fund may invest in other securities, the Fund must
invest in income-producing securities, including common stocks and preferred
stocks, some of which may have convertible features or attached warrants.
Additionally, in unusual market conditions, in order to meet redemption
requests, for temporary defensive purposes, and pending investment, the Fund may
hold a substantial portion of its assets in cash or short-term obligations for
an appreciable period of time when market conditions warrant and the Fund is
anticipating higher interest rates. Currently, Delchester Fund's assets are
invested primarily in unrated bonds and bonds rated BB or lower by S&P or Ba or
lower by Moody's.

-3-

<PAGE>

Strategic Income Fund

Foreign and Emerging Markets Securities
Investors should recognize that investing in foreign issuers, including
issuers located in emerging market countries, involves certain considerations,
including those set forth in Strategic Income Fund's Prospectuses, which are not
typically associated with investing in United States issuers. Since the stocks
of foreign companies are frequently denominated in foreign currencies, and since
Strategic Income Fund may temporarily hold uninvested reserves in bank deposits
in foreign currencies, the Fund will be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policies of Strategic Income Fund permit it to enter into forward foreign
currency exchange contracts in order to hedge the Fund's holdings and
commitments against changes in the level of future currency rates. Such
contracts involve an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract.

As disclosed in Strategic Income Fund's Prospectuses, there are a
number of risks involved in investing in foreign securities. For example, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses on profits.

With reference to the Fund's investment in foreign government
securities, there is the risk that a foreign governmental issuer may default on
its obligations. If such a default occurs, the Fund may have limited effective
legal recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the ability
of the holder of foreign government and government-related debt securities to
obtain recourse may be subject to the political climate in the relevant country.
In addition, no assurance can be given that the holders of commercial bank debt
will not contest payments to the holders of other foreign government and
government-related debt obligations in the event of default under their
commercial bank loan agreements.

The issuers of the foreign government and government-related debt
securities in which the Fund expects to invest have in the past experienced
substantial difficulties in servicing their external debt obligations, which
have led to defaults on certain obligations and the restructuring of certain
indebtedness. Restructuring arrangements have included, among other things,
reducing and rescheduling interest and principal payments by negotiating new or
amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Holders of certain foreign government and government-related high-yield
securities may be requested to participate in the restructuring of such
obligations and to extend further loans to their issuers. There can be no
assurance that the Brady Bonds and other foreign government and
government-related securities in which the Fund may invest will not be subject
to similar defaults or restructuring arrangements which may adversely affect the
value of such investments. Furthermore, certain participants in the secondary
market for such debt may be directly involved in negotiating the terms of these
arrangements and may therefore have access to information not available to other
market participants.

-4-

<PAGE>

There has been in the past, and there may be again in the future, an
interest equalization tax levied by the United States in connection with the
purchase of foreign securities such as those purchased by Strategic Income Fund.
Payment of such interest equalization tax, if imposed, would reduce the Fund's
rate of return on its investment. Dividends paid by foreign issuers may be
subject to withholding and other foreign taxes which may decrease the net return
on such investments as compared to dividends paid to the Fund by United States
corporations. Special rules govern the federal income tax treatment of certain
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by the special rules generally
include the following: (i) the acquisition of, or becoming the obligor under, a
bond or other debt instrument (including, to the extent provided in Treasury
Regulations, preferred stock); (ii) the accruing of certain trade receivables
and payables; and (iii) the entering into or acquisition of any forward
contract, futures contract, option and similar financial instruments other than
any "regulated futures contract" or "nonequity option" marked to market. The
disposition of a currency other than the U.S. dollar by a U.S. taxpayer is also
treated as a transaction subject to the special currency rules. However, foreign
currency-related regulated futures contracts and nonequity options are generally
not subject to the special currency rules, if they are or would be treated as
sold for their fair market value at year-end under the marking to market rules
applicable to other futures contracts, unless an election is made to have such
currency rules apply. With respect to transactions covered by the special rules,
foreign currency gain or loss is calculated separately from any gain or loss on
the underlying transaction and is normally taxable as ordinary gain or loss. A
taxpayer may elect to treat as capital gain or loss foreign currency gain or
loss arising from certain identified forward contracts, futures contracts and
options that are capital assets in the hands of the taxpayer and which are not
part of a straddle. Certain transactions subject to the special currency rules
that are part of a "section 988 hedging transaction" (as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), and the Treasury Regulations)
will be integrated and treated as a single transaction or otherwise treated
consistently for purposes of the Code. The income tax effects of integrating and
treating a transaction as a single transaction are generally to create a
synthetic debt instrument that is subject to the original discount provisions.
It is anticipated that some of the non-U.S. dollar denominated investments and
foreign currency contracts Strategic Income Fund may make or enter into will be
subject to the special currency rules described above.

Investments and opportunities for investments by foreign investors in
emerging market countries are subject to a variety of national policies and
restrictions. These restrictions may take the form of prior governmental
approval, limits on the amount or type of securities held by foreigners, limits
on the types of companies in which foreigners may invest and prohibitions on
foreign investments in issuers or industries deemed sensitive to national
interests. Additional restrictions may be imposed at any time by these or other
countries in which Strategic Income Fund invests. Although these restrictions
may in the future make it undesirable to invest in emerging countries, Delaware
International Advisers Ltd., Strategic Income Fund's sub-adviser (the
"Sub-Adviser"), does not believe that any current registration restrictions
would affect its decision to invest in such countries.

Foreign Currency Transactions
The foreign investments made by Strategic Income Fund present currency
considerations which pose special risks. The Sub-Adviser uses a purchasing power
parity approach to evaluate currency risk. A purchasing power parity approach
attempts to identify the amount of goods and services that a dollar will buy in
the United States and compares that to the amount of a foreign currency required
to buy the same amount of goods and services in another country. When the dollar
buys less abroad, the foreign currency may be

-5-

<PAGE>

considered to be overvalued. When the dollar buys more abroad, the foreign
currency may be considered to be undervalued. Eventually, currencies should
trade at levels that should make it possible for the dollar to buy the same
amount of goods and services overseas as in the United States.

Strategic Income Fund may purchase or sell currencies and/or engage in
forward foreign currency transactions in order to expedite settlement of
portfolio transactions and to minimize currency value fluctuations. Forward
foreign currency contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for trades. Strategic Income Fund will account for forward
contracts by marking to market each day at daily exchanges rates. When the Fund
enters into a forward contract to sell an amount of foreign currency
approximating the value of some or all of the Fund's assets denominated in such
foreign currency, the Fund's custodian bank or subcustodian will place cash or
liquid high grade debt securities in a separate account of the Fund in an amount
not less than the value of the Fund's total assets committed to the consummation
of such forward contract. If the additional cash or securities placed in the
separate account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of Strategic Income Fund's commitments with respect to such contract.

Strategic Income Fund's use of forward foreign currency exchange
contracts for hedging and other non-speculative purposes involves certain risks.
For example, a lack of correlation between price changes of a forward contract
and the assets being hedged could render Strategic Income Fund's hedging
strategy unsuccessful and could result in losses. The same results could occur
if movements of foreign currencies do not correlate as expected by the Sub-
Adviser at a time when the Fund is using a hedging instrument denominated in one
foreign currency to protect the value of a security denominated in a second
foreign currency against changes caused by fluctuations in the exchange rate for
the dollar and the second currency. If the direction of securities prices,
interest rates or foreign currency prices is incorrectly predicted, Strategic
Income Fund will be in a worse position than if such transactions had not been
entered into. In addition, since there can be no assurance that a liquid
secondary market will exist for any contract purchased or sold, the Fund may be
required to maintain a position until exercise or expiration, which could result
in losses. Further, forward contracts entail particular risks related to
conditions affecting the underlying currency. Over-the-counter transactions in
forward contracts also involve risks arising from the lack of an organized
exchange trading environment.

Successful use by Strategic Income Fund of forward foreign currency
exchange contracts for hedging and other non-speculative purposes is subject to
the Sub-Adviser's ability to predict correctly the direction of movements in
foreign currencies relative to the U.S. dollar. This requires different skills
and techniques than predicting changes in the prices of individual securities.

Options, Futures and Options on Futures
Strategic Income Fund may purchase call options or purchase put options
and will not engage in option strategies for speculative purposes. Strategic
Income Fund may invest in options that are either listed on U.S. or recognized
foreign exchanges or traded over-the-counter. Certain over-the-counter options
may be illiquid. Thus, it may not be possible to close options positions and
this may have an adverse impact on the Fund's ability to effectively hedge its
securities. Strategic Income Fund will not, however, invest more than 15% of the
value of its net assets in illiquid securities.

-6-

<PAGE>

Purchasing Call Options--Strategic Income Fund may purchase call
options to the extent that premiums paid by the Fund do not aggregate more than
2% of the Fund's total assets. When the Fund purchases a call option, in return
for a premium paid by the Fund to the writer of the option, the Fund obtains the
right to buy the security underlying the option at a specified exercise price at
any time during the term of the option. The writer of the call option, who
receives the premium upon writing the option, has the obligation, upon exercise
of the option, to deliver the underlying security against payment of the
exercise price. The advantage of purchasing call options is that Strategic
Income Fund may alter portfolio characteristics and modify portfolio maturities
without incurring the cost associated with portfolio transactions.

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

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

Purchasing Put Options--Strategic Income Fund may invest up to 2% of
its total assets in the purchase of put options. Strategic Income Fund will, at
all times during which it holds a put option, own the security covered by such
option.

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

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

-7-

<PAGE>

Futures and Options on Futures--Strategic Income Fund may enter into
contract for the purchase or sale for future delivery of securities or foreign
currencies. When the Fund engages in futures transactions, to the extent
required by the SEC, it will maintain with its custodian bank, assets in a
segregated account to cover its obligations with respect to such contracts,
which assets will consist of cash, cash equivalents or high quality debt
securities from its portfolio in an amount equal to the difference between the
fluctuating market value of such futures contracts and the aggregate value of
the margin payments made by the Fund with respect to such futures contracts.

The Fund may enter into such futures contracts to protect against the
adverse affects of fluctuations in interest or foreign exchange rates without
actually buying or selling the securities or foreign currency. For example, if
interest rates are expected to increase, the Fund might enter into futures
contracts for the sale of debt securities. Such a sale would have much the same
effect as selling an equivalent value of the debt securities owned by the Fund.
If interest rates did increase, the value of the debt securities in the
portfolio would decline, but the value of the futures contracts to the Fund
would increase at approximately the same rate, thereby keeping the net asset
value of the Fund from declining as much as it otherwise would have. Similarly,
when it is expected that interest rates may decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at
higher prices. Since the fluctuations in the value of futures contracts should
be similar to those of debt securities, the Fund could take advantage of the
anticipated rise in value of debt securities without actually buying them until
the market had stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the cash market.

With respect to options on futures contracts, when Strategic Income
Fund is not fully invested, it may purchase a call option on a futures contract
to hedge against a market advance due to declining interest rates. The writing
of a call option on a futures contract constitutes a partial hedge against
declining prices of the U.S. government securities which are deliverable upon
exercise of the futures contract. If the futures price at the expiration of the
option is below the exercise price, Strategic Income Fund will retain the full
amount of the option premium which provides a partial hedge against any decline
that may have occurred in the portfolio holdings. The writing of a put option on
a futures contract constitutes a partial hedge against increasing prices of the
securities which are deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price,
Strategic Income Fund will retain the full amount of the option premium which
provides a partial hedge against any increase in the price of U.S. government
securities which Strategic Income Fund intends to purchase.

If a put or call option that Strategic Income Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between the value of
its portfolio securities and changes in the value of its futures positions,
Strategic Income Fund's losses from existing options on futures may, to some
extent, be reduced or increased by changes in the value of portfolio securities.
Strategic Income Fund will purchase a put option on futures contracts to hedge
the Fund's portfolio against the risk of rising interest rates.

To the extent that interest rates move in an unexpected direction,
Strategic Income Fund may not achieve the anticipated benefits of futures
contracts or options on futures contracts or may realize a loss. For example, if
Strategic Income Fund hedged against the possibility of an increase in interest
rates which would adversely affect the price of U.S. government securities held
in its portfolio and interest rates decrease instead, Strategic Income Fund will
lose part or all of the benefit of the increased value of its U.S. government
securities which it has because it will have offsetting losses in its futures
position. In addition, in such

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<PAGE>

situations, if the Fund had insufficient cash, it may be required to sell U.S.
government securities from its portfolio to meet daily variation margin
requirements. Such sales of securities may, but will not necessarily, be at
increased prices which reflect the rising market. Strategic Income Fund may be
required to sell securities at a time when it may be disadvantageous to do so.

Further, with respect to options on futures contracts, Strategic Income
Fund may seek to close out an option position by writing or buying an offsetting
position covering the same securities or contracts and have the same exercise
price and expiration date. The ability to establish and close out positions on
options will be subject to the maintenance of a liquid secondary market, which
cannot be assured.

Although not fundamental policy, the Fund currently intends to limit
its investments in futures contracts and options thereon to the extent that not
more than 5% of the Funds assets are required as futures contract margin
deposits and premiums on options and only to the extent that obligations under
such contracts and transactions represent not more than 20% of the Fund's
assets.

Appendix B to Strategic Income Fund's Fund Classes' Prospectus
(Appendix A to the Fund's Institutional Class' Prospectus) describes the ratings
of S&P, Fitch Investors Service, Inc. and Moody's, and provides information
concerning the ratings of securities in the Fund's portfolio.

Non-Traditional Equity Securities
Strategic Income Fund may invest in convertible preferred stocks that
offer enhanced yield features, such as Preferred Equity Redemption Cumulative
Stock ("PERCS"), which provide an investor, such as the Fund, with the
opportunity to earn higher dividend income than is available on a company's
common stock. A PERCS is a preferred stock which generally features a mandatory
conversion date, as well as a capital appreciation limit which is usually
expressed in terms of a stated price. Upon the conversion date, most PERCS
convert into common stock of the issuer (PERCS are generally not convertible
into cash at maturity). Under a typical arrangement, if after a predetermined
number of years the issuer's common stock is trading at a price below that set
by the capital appreciation limit, each PERCS would convert to one share of
common stock. If, however, the issuer's common stock is trading at a price above
that set by the capital appreciation limit, the holder of the PERCS would
receive less than one full share of common stock. The amount of that fractional
share of common stock received by the PERCS holder is determined by dividing the
price set by the capital appreciation limit of the PERCS by the market price of
the issuer's common stock. PERCS can be called at any time prior to maturity,
and hence do not provide call protection. However, if called early, the issuer
may pay a call premium over the market price to the investor. This call premium
declines at a preset rate daily, up to the maturity date of the PERCS.

Strategic Income Fund may also invest in other enhanced convertible
securities. These include but are not limited to ACES (Automatically Convertible
Equity Securities), PEPS (Participating Equity Preferred Stock), PRIDES
(Preferred Redeemable Increased Dividend Equity Securities), SAILS (Stock
Appreciation Income Linked Securities), TECONS (Term Convertible Notes), QICS
(Quarterly Income Cumulative Securities) and DECS (Dividend Enhanced Convertible
Securities). ACES, PEPS, PRIDES, SAILS, TECONS, QICS, and DECS all have the
following features: they are company-issued convertible preferred stock; unlike
PERCS, they do not have capital appreciation limits; they seek to provide the
investor with high current income, with some prospect of future capital
appreciation; they are typically issued with three to four-year maturities; they
typically have some built-in call protection for the first two to three years;
investors have the right to convert them into shares of common stock at a preset
conversion ratio or hold them until maturity; and upon maturity, they will
automatically convert to either cash or a specified number of shares of common
stock.

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High-Yield Opportunities Fund

The High-Yield Opportunities Fund seeks total return and, as a
secondary objective, high current income. The types of securities in which
High-Yield Opportunities Fund invests are subject to price fluctuations
particularly due to changes in interest rates and economic conditions.
Management will seek to achieve High-Yield Opportunities Fund's objective by
investing at least 80% of the Fund's assets at time of purchase in:

(1) Corporate Bonds. The Fund will invest in bonds rated BB or lower by
S&P or Ba or lower by Moody's or similarly rated by other rating agencies, and
in unrated bonds judged to be of comparable quality by the Manager.
Unrated bonds may be more speculative in nature than rated bonds; or

(2) Government Securities. Securities of, or guaranteed by, the U.S.
and foreign governments, their agencies or instrumentalities; or

(3) Commercial Paper. Commercial paper of companies having, at the time
of purchase, an issue of outstanding debt securities rated as described above or
commercial paper rated A-1 or A-2 by S&P or rated P-1 or P-2 by Moody's or
similarly rated by other rating agencies, and in unrated paper judged to be of
comparable quality by the Manager.

Appendix B to High-Yield Opportunities Fund's Fund Classes' Prospectus
(Appendix A to the Fund's Institutional Class' Prospectus) describes the ratings
of S&P and Moody's and provides information concerning the ratings of the
securities in the Fund's portfolio.

As disclosed in High-Yield Opportunities Fund's Prospectuses, there are
a number of risks involved in investing in foreign securities. For example, the
assets and profits appearing on the financial statements of a developing or
emerging country issuer may not reflect its financial position or results of
operations in the way they would be reflected had the financial statements been
prepared in accordance with United States generally accepted accounting
principles. Also, for an issuer that keeps accounting records in local currency,
inflation accounting rules may require for both tax and accounting purposes,
that certain assets and liabilities be restated on the issuer's balance sheet in
order to express items in terms of currency or constant purchasing power.
Inflation accounting may indirectly generate losses on profits.

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<PAGE>

United States corporations. Special rules govern the federal income tax
treatment of certain transactions denominated in terms of a currency other than
the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by the
special rules generally include the following: (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury Regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option and similar
financial instruments other than any "regulated futures contract" or "nonequity
option" marked to market. The disposition of a currency other than the U.S.
dollar by a U.S. taxpayer is also treated as a transaction subject to the
special currency rules. With respect to transactions covered by the special
rules, foreign currency gain or loss is calculated separately from any gain or
loss on the underlying transaction and is normally taxable as ordinary gain or
loss. A taxpayer may elect to treat as capital gain or loss foreign currency
gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. Certain transactions subject to the special
currency rules that are part of a "section 988 hedging transaction" (as defined
in the Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations) will be integrated and treated as a single transaction or otherwise
treated consistently for purposes of the Code. The income tax effects of
integrating and treating a transaction as a single transaction are generally to
create a synthetic debt instrument that is subject to the original discount
provisions. It is anticipated that some of the non-U.S. dollar denominated
investments and foreign currency contracts High-Yield Opportunities Fund may
make or enter into will be subject to the special currency rules described
above.

Zero Coupon and Pay-In-Kind Bonds
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon, deferred interest and pay-in-kind bonds. These bonds
carry an additional risk in that, unlike bonds that pay interest throughout the
period to maturity, the High-Yield Opportunities Fund will realize no cash until
the cash payment date and, if the issuer defaults, the Fund may obtain no return
at all on its investment. Zero coupon, deferred interest and pay-in-kind bonds
involve additional special considerations.

Zero coupon or deferred interest securities are debt obligations that
do not entitle the holder to any periodic payments of interest prior to maturity
or a specified date when the securities begin paying current interest (the "cash
payment date") and therefore are generally issued and traded at a discount from
their face amounts or par value. The discount varies depending on the time
remaining until maturity or cash payment date, prevailing interest rates,
liquidity of the security and the perceived credit quality of the issuer. The
discount, in the absence of financial difficulties of the issuer, typically
decreases as the final maturity or cash payment date of the security approaches.
The market prices of zero coupon securities are generally more volatile than the
market prices of securities that pay interest periodically and are likely to
respond to changes in interest rates to a greater degree than do non-zero coupon
or deferred interest securities having similar maturities and credit quality.
Current federal income tax law requires that a holder of a zero coupon security
report as income each year the portion of the original issue discount on the
security that accrues that year, even though the holder receives no cash
payments of interest during the year.

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<PAGE>

Pay-in-kind bonds are securities that pay interest through the issuance
of additional bonds. The Fund will be deemed to receive interest over the life
of these bonds and be treated as if interest were paid on a current basis for
federal income tax purposes, although no cash interest payments are received by
the Fund until the cash payment date or until the bonds mature. Accordingly,
during periods when the Fund receive no cash interest payments on its zero
coupon securities or deferred interest or pay-in-kind bonds, it may be required
to dispose of portfolio securities to meet the distribution requirements and
these sales may be subject to the risk factors discussed above. The Fund is not
limited in the amount of its assets that may be invested in these types of
securities.

Convertible, Debt And Non-Traditional Equity Securities
From time to time, a portion of the Fund's assets may be invested in
convertible and debt securities of issuers in any industry. A convertible
security is a security which may be converted at a stated price within a
specified period of time into a certain quantity of the common stock of the same
or a different issuer. Convertible and debt securities are senior to common
stocks in a corporation's capital structure, although convertible securities are
usually subordinated to similar nonconvertible securities. Convertible and debt
securities provide a fixed-income stream and the opportunity, through its
conversion feature, to participate in the capital appreciation resulting from a
market price advance in the convertible security's underlying common stock. Just
as with debt securities, convertible securities tend to increase in market value
when interest rates decline and tend to decrease in value when interest rates
rise. However, the price of a convertible security is also influenced by the
market value of the security's underlying common stock and tends to increase as
the market value of the underlying stock rises, whereas it tends to decrease as
the market value of the underlying stock declines. Convertible and debt
securities acquired by the Fund may be rated below investment grade, or unrated.
These lower rated convertible and debt securities are subject to credit risk
considerations substantially similar to such considerations affecting high risk,
high-yield bonds, commonly referred to as "junk bonds." See Investment Objective
and Policies, Risk Factors and High-Yield, High Risk Securities for a further
discussion of these types of investments.

The Fund may invest in convertible preferred stocks that offer enhanced
yield features, such as Preferred Equity Redemption Cumulative Stock ("PERCS"),
which provide an investor, such as the Fund, with the opportunity to earn higher
dividend income than is available on a company's common stock. A PERCS is a
preferred stock which generally features a mandatory conversion date, as well as
a capital appreciation limit which is usually expressed in terms of a stated
price. Upon the conversion date, most PERCS convert into common stock of the
issuer (PERCS are generally not convertible into cash at maturity). Under a
typical arrangement, if after a predetermined number of years the issuer's
common stock is trading at a price below that set by the capital appreciation
limit, each PERCS would convert to one share of common stock. If, however, the
issuer's common stock is trading at a price above that set by the capital
appreciation limit, the holder of the PERCS would receive less than one full
share of common stock. The amount of that fractional share of common stock
received by the PERCS holder is determined by dividing the price set by the
capital appreciation limit of the PERCS by the market price of the issuer's
common stock. PERCS can be called at any time prior to maturity, and hence do
not provide call protection. However, if called early, the issuer may pay a call
premium over the market price to the investor. This call premium declines at a
preset rate daily, up to the maturity date of the PERCS.

The Fund may also invest in other enhanced convertible securities.
These include but are not limited to ACES (Automatically Convertible Equity
Securities), PEPS (Participating Equity Preferred Stock), PRIDES (Preferred
Redeemable Increased Dividend Equity Securities), SAILS (Stock Appreciation
Income Linked

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Securities), TECONS (Term Convertible Notes), QICS (Quarterly Income Cumulative
Securities) and DECS (Dividend Enhanced Convertible Securities). ACES, PEPS,
PRIDES, SAILS, TECONS, QICS and DECS all have the following features: they are
company-issued convertible preferred stock; unlike PERCS, they do not have
capital appreciation limits; they seek to provide the investor with high current
income, with some prospect of future capital appreciation; they are typically
issued with three to four-year maturities; they typically have some built-in
call protection for the first two to three years; investors have the right to
convert them into shares of common stock at a preset conversion ratio or hold
them until maturity; and upon maturity, they will automatically convert to
either cash or a specified number of shares of common stock.

When-Issued And Delayed Delivery Securities
The Fund may purchase securities on a when-issued or delayed delivery
basis. In such transactions, instruments are purchased with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of and
payment for these securities may take as long as a month or more after the date
of the purchase commitment. The Fund will maintain with its Custodian Bank a
separate account with a segregated portfolio of securities in an amount at least
equal to these commitments. The payment obligation and the interest rates that
will be received are each fixed at the time the Fund enters into the commitment
and no interest accrues to the Fund until settlement. Thus, it is possible that
the market value at the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has changed.

Borrowing From Banks
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not borrow money in excess
of one-third of the value of its net assets. The Fund has no intention of
increasing its net income through borrowing. Any borrowing will be done from a
bank and, to the extent that such borrowing exceeds 5% of the value of the
Fund's net assets, asset coverage of at least 300% is required. In the event
that such asset coverage shall at any time fall below 300%, the Fund shall,
within three days thereafter (not including Sundays or holidays, or such longer
period as the Securities and Exchange Commission may prescribe by rules and
regulations), reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. The Fund will not
pledge more than 10% of its net assets, or issue senior securities as defined in
the 1940 Act, except for notes to banks. Investment securities will not be
purchased while the Fund has an outstanding borrowing.

Investment Policies Applicable to Each Fund

High-Yield Securities
Among the possible risks of investing in high-yield securities are the
possibility of legislative and regulatory action and proposals. There are a
variety of legislative actions which have been taken or which are considered
from time to time by the United States Congress which could adversely affect the
market for high-yield securities. For example, Congressional legislation limited
the deductibility of interest paid on certain high-yield securities used to
finance corporate acquisitions. Also, 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. For example, many insurance companies have restricted or
eliminated their purchases of high-yield securities as a result of, among other
factors, actions taken by the National Association of Insurance Commissioners.
If similar legislative and regulatory actions are taken in the future, they
could result in further tightening of the secondary market for high-yield
issues, could reduce the number of new high-yield securities being issued and
could make it more difficult for a Fund to attain its investment objective.

Restricted Securities
The Funds may purchase privately-placed debt and other securities whose
resale is restricted under applicable securities laws. Such restricted
securities generally offer a higher return than comparable registered securities
but involve

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some additional risk since they can be resold only in privately-negotiated
transactions or after registration under applicable securities laws. The
registration process may involve delays which could result in the Funds
obtaining a less favorable price on a resale. Delchester Fund will not purchase
illiquid assets if more than 10% of its total assets would then consist of such
illiquid securities. Strategic Income Fund and High-Yield Opportunities Fund
will not purchase illiquid assets if more than 15% of its respective net assets
would then consist of such illiquid securities.

Repurchase Agreements
The Funds are permitted to invest in repurchase agreements, but they
normally so only to invest cash balances. A repurchase agreement is a short-term
investment by which the purchaser acquires ownership of a debt security and the
seller agrees to repurchase the obligation at a future time and set price,
thereby determining the yield during the purchaser's holding period. Should an
issuer of a repurchase agreement fail to repurchase the underlying security, the
loss to a Fund, if any, would be the difference between the repurchase price and
the market value of the security. Each Fund will limit its investments in
repurchase agreements to those which Delaware Management Company, Inc. (the
"Manager"), under the guidelines of the Board of Directors, determines present
minimal credit risks and which are of high quality. In addition, each Fund must
have collateral of at least 100% of the repurchase price, including the portion
representing the Fund's yield under such agreements, which is monitored on a
daily basis.

The funds in the Delaware Group have obtained an exemption from the
joint-transaction prohibitions of Section 17(d) of the Investment Company Act of
1940 (the "1940 Act") to allow the Delaware Group funds jointly to invest cash
balances. The Funds may invest cash balances in a joint repurchase agreement in
accordance with the terms of the Order and subject generally to the conditions
described above.

Portfolio Loan Transactions
Each Fund may loan up to 25% of its assets to qualified broker/dealers
or institutional investors for their use relating to short sales or other
security transactions.

It is the understanding of the Manager that the staff of the Securities
and Exchange Commission (the "SEC" or the "Commission") permits portfolio
lending by registered investment companies if certain conditions are met. These
conditions are as follows: 1) each transaction must have 100% collateral in the
form of cash, short-term U.S. government securities, or irrevocable letters of
credit payable by banks acceptable to the Fund involved from the borrower; 2)
this collateral must be valued daily and should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund; 3) the Fund must be able to terminate any loan after notice, at any time;
4) the Fund must receive reasonable interest on any loan, and any dividends,
interest or other distributions on the lent securities, and any increase in the
market value of such securities; 5) the Fund may pay reasonable custodian fees
in connection with the loan; 6) the voting rights on the lent securities may
pass to the borrower; however, if the directors of Income Funds, Inc. know that
a material event will occur affecting an investment loan, they must either
terminate the loan in order to vote the proxy or enter into an alternative
arrangement with the borrower to enable the directors to vote the proxy.

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<PAGE>

The major risk to which a Fund would be exposed on a loan transaction
is the risk that the borrower would go bankrupt at a time when the value of the
security goes up. Therefore, each Fund will only enter into loan arrangements
after a review of all pertinent facts by the Manager, under the supervision of
the Board of Directors, including the creditworthiness of the borrowing broker,
dealer or institution and then only if the consideration to be received from
such loans would justify the risk. Creditworthiness will be monitored on an
ongoing basis by the Manager.

Investment Restrictions

Delchester Fund
Delchester Fund has the following investment restrictions which may not
be amended without approval of a majority of the outstanding voting securities,
which is the lesser of more than 50% of the outstanding voting securities of
Delchester Fund, or 67% of the voting securities of Delchester Fund present at a
shareholder meeting if 50% or more of the voting securities are present in
person or represented by proxy. The percentage limitations contained in the
restrictions and policies set forth herein apply at the time of purchase of
securities.

1. Delchester Fund will not invest more than 5% of the value of its
assets in securities of any one company (except U.S. government bonds) or
purchase more than 10% of the voting or nonvoting securities of any one company.

2. Delchester Fund will not invest for the purpose of acquiring control
of any company.

3. Delchester Fund will not purchase or retain securities of a company
which has an officer or director who is an officer or director of Income Funds,
Inc., or an officer, director or partner of the Manager if, to the knowledge of
the Fund, one or more of such persons owns beneficially more than 1/2 of 1% of
the shares of the company, and in the aggregate more than 5% thereof.

4. Delchester Fund will not invest in securities of other investment
companies.

5. Delchester Fund will not make any investment in real estate. This
restriction does not preclude the Fund's purchase of securities issued by real
estate investment trusts.

6. Delchester Fund will not sell short any security or property.

7. Delchester Fund will not buy or sell commodities or commodity
contracts.

8. Delchester Fund will not borrow money in excess of 10% of the value
of its assets and then only as a temporary measure for extraordinary or
emergency purposes. Any borrowing will be done from a bank and to the extent
that such borrowing exceeds 5% of the value of the Fund's assets, asset coverage
of at least 300% is required. In the event that such asset coverage shall at any
time fall below 300%, the Fund shall, within three days thereafter (not
including Sundays and holidays) or such longer period as the SEC may prescribe
by rules and regulations, reduce the amount of its borrowings to an extent that
the asset coverage of such borrowings shall be at least 300%. The Fund shall not
issue senior securities as defined in the 1940 Act, except for notes to banks.

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9. Delchester Fund will not make loans. However, (i) the purchase of a
portion of an issue of publicly distributed bonds, debentures or other
securities, or of other securities authorized to be purchased by the Fund's
investment policies, whether or not the purchase was made upon the original
issuance of the securities, and the entry into "repurchase agreements" are not
to be considered the making of a loan by the Fund; and (ii) the Fund may loan up
to 25% of its assets to qualified broker/dealers or institutional investors for
their use relating to short sales and other security transactions.

10. Delchester Fund will not invest in the securities of companies
which have a record of less than three years' continuous operation, including
any predecessor company or companies, if such purchase at the time thereof would
cause more than 5% of the total Fund assets to be invested in the securities of
such company or companies.

11. Delchester Fund will not act as an underwriter of securities of
other issuers, except that the Fund may acquire restricted or not readily
marketable securities under circumstances where, if such securities are sold,
the Fund might be deemed to be an underwriter for purposes of the Securities Act
of 1933.

12. No long or short positions on shares of the Fund may be taken by
Income Funds, Inc.'s officers, directors or any of its affiliated persons. Such
persons may buy shares of the Fund for investment purposes, however, as
described under Purchasing Shares.

13. Delchester Fund will not invest more than 25% of its assets in any
one particular industry.

Although not a fundamental investment restriction, Delchester Fund
currently does not invest its assets in real estate limited partnerships or oil,
gas and other mineral leases.

Strategic Income Fund
Strategic Income Fund has the following investment restrictions which
may not be amended without approval of a majority of the outstanding voting
securities, which is the lesser of more than 50% of the outstanding voting
securities of Strategic Income Fund, or 67% of the voting securities of
Strategic Income Fund present at a shareholder meeting if 50% or more of the
voting securities are present in person or represented by proxy. The percentage
limitations contained in the restrictions and policies set forth herein apply at
the time of purchase of securities.

1. With respect to 75% of its total assets, Strategic Income Fund will
not invest more than 5% of the value of its total assets in securities of any
one issuer (except obligations issued, or guaranteed by, the U.S. government,
its agencies or instrumentalities or certificates of deposit for any such
securities, and cash and cash items) or purchase more than 10% of the voting
securities of any one company.

2. Strategic Income Fund will not make any investment in real estate.
This restriction does not preclude the Fund's purchase of securities issued by
real estate investment trusts, the purchase of securities issued by companies
that deal in real estate, or the investment in securities secured by real estate
or interests therein.

3. Strategic Income Fund will not sell short any security or property.

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4. Strategic Income Fund will not buy or sell commodities or commodity
contracts, except that the Fund may enter into futures contracts and options
thereon.

5. Strategic Income Fund will not borrow money in excess of one-third
of the value of its net assets. Any borrowing will be done in accordance with
the rules and regulations prescribed from time to time by the SEC with respect
to open-end investment companies.

6. Strategic Income Fund will not make loans. However, (i) the
purchase of a portion of an issue of publicly distributed bonds, debentures or
other securities, or of other securities authorized to be purchased by the
Fund's investment policies, whether or not the purchase was made upon the
original issuance of the securities, and the entry into "repurchase agreements"
are not to be considered the making of a loan by the Fund; and (ii) the Fund may
loan securities to qualified broker/dealers or institutional investors for their
use relating to short sales and other security transactions.

7. Strategic Income Fund will not act as an underwriter of securities
of other issuers, except that the Fund may acquire restricted or not readily
marketable securities under circumstances where, if such securities are sold,
the Fund might be deemed to be an underwriter for purposes of the Securities Act
of 1933.

8. Strategic Income Fund will not invest more than 25% of the value of
its total assets in securities of issuers all of which conduct their principal
business activities in the same industry. This restriction does not apply to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.

In addition to the above fundamental investment restrictions, Strategic
Income Fund has the following investment restrictions which may be amended or
changed without approval of shareholders.

1. Strategic Income Fund will not invest for the purpose of acquiring
control of any company.

2. Strategic Income Fund will not invest in securities of other
investment companies, except that the Fund may invest in securities of open-end,
closed-end and unregistered investment companies, in accordance with the
limitations contained in the Investment Company Act of 1940 at the time of the
investment.

3. Strategic Income Fund will not purchase or retain securities of a
company which has an officer or director who is an officer or director of Income
Funds, Inc., or an officer, director or partner of the Manager if, to the
knowledge of the Fund, one or more of such persons beneficially owns in the
aggregate more than 5% thereof.

4. Strategic Income Fund will not invest in the securities of
companies which have a record of less than three years' continuous operation,
including any predecessor company or companies, if such investment at the time
of purchase would cause more than 5% of the total Fund assets to be invested in
the securities of such company or companies.

Although not a fundamental investment restriction, Strategic Income
Fund currently does not invest its assets in real estate limited partnerships or
oil, gas and other mineral leases. In addition, Strategic Income Fund currently
does not purchase securities on margin except short-term credits that may be
necessary for the clearance of purchases and sales of securities, and the Fund
may make margin payments as may be necessary in connection with the futures and
options transactions described in the Fund's Prospectuses and this Part B.

High-Yield Opportunities Fund
High-Yield Opportunities Fund has the following investment restrictions
which may not be amended without approval of a majority of the outstanding
voting securities, which is the lesser of more than 50% of the outstanding
voting

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securities of High-Yield Opportunities Fund, or 67% of the voting securities of
High-Yield Opportunities Fund present at a shareholder meeting if 50% or more of
the voting securities are present in person or represented by proxy. The
percentage limitations contained in the restrictions and policies set forth
herein apply at the time the Fund purchases securities.

1. With respect to 75% of its total assets, High-Yield Opportunities
Fund will not invest more than 5% of its total assets in the securities of any
one issuer (other than obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities or certificates of deposit for any such
securities and cash and cash items) or purchase more than 10% of the voting
securities of any one company.

2. High-Yield Opportunities Fund will not make any investment in real
estate. This restriction does preclude the Fund's purchase of securities issued
by real estate investment trusts, the purchase of securities issued by companies
that deal in real estate, or the investment in securities secured by real estate
or interests therein.

3. High-Yield Opportunities Fund will not sell short any security or
property.

4. High-Yield Opportunities Fund will not buy or sell commodities or
commodity contracts except that the Fund may enter into futures contracts and
options thereon.

5. High-Yield Opportunities Fund will not borrow money in excess of
one-third of the value of its net assets. Any borrowing will be done in
accordance with the rules and regulations prescribed from time to time by the
SEC with respect to open-end investment companies.

6. High-Yield Opportunities Fund will not make loans. However, (i) the
purchase of a portion of an issue of publicly distributed bonds, debentures or
other securities, or of other securities authorized to be purchased by the
Fund's investment policies, whether or not the purchase was made upon the
original issuance of the securities, and the entry into "repurchase agreements"
are not to be considered the making of a loan by the Fund; and (ii) the Fund may
loan securities to qualified broker/dealers or institutional investors for their
use relating to short sales and other security transactions.

7. High-Yield Opportunities Fund will not act as an underwriter of
securities of other issuers, except that the Fund may acquire restricted or not
readily marketable securities under circumstances where, if such securities are
sold, the Fund may be deemed to be an underwriter for purposes of the Securities
Act of 1933.

8. High-Yield Opportunities Fund will not invest more than 25% of its
total assets in securities of issuers all of which conduct their principal
business activities in the same industry. This restriction does not apply to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities.

In addition to the above fundamental investment restrictions,
High-Yield Opportunities Fund has the following investment restrictions which
may be amended or changed without approval of shareholders.

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<PAGE>

1. High-Yield Opportunities Fund will not invest for the purpose of
acquiring control of any company.

2. High-Yield Opportunities Fund will not invest in securities of other
investment companies, except the Fund may invest in securities of open-end,
closed-end and unregistered investment companies, in accordance with the
limitations contained in the Investment Company Act at the time of the
investment.

3. High-Yield Opportunities Fund will not write, purchase or sell
options, puts, calls or combinations thereof with respect to securities.

4. High-Yield Opportunities Fund will not enter into futures contracts
or options thereon.

5. High-Yield Opportunities Fund will not purchase or retain the
securities of any issuer which has an officer, director or security holder who
is a director or officer of Income Funds, Inc. or of the Manager if or so long
as the directors and officers of Income Funds, Inc. and of the Manager together
own beneficially more than 5% of any class of securities of such issuer.

6. High-Yield Opportunities Fund will not invest in interests in oil,
gas and other mineral leases or other mineral exploration or development
programs.

7. High-Yield Opportunities Fund will not purchase securities on margin
except short-term credits that may be necessary for the clearance of purchases
and sales of securities.

-19-

<PAGE>

PERFORMANCE INFORMATION

From time to time, each Fund may state its Classes' total return in
advertisements and other types of literature. Any statement of total return
performance data for a Class will be accompanied by information on the average
annual compounded rate of return for that Class over, as relevant, the most
recent one-, five- and ten-year (or life-of-fund, if applicable) periods. Each
Fund may also advertise aggregate and average total return information of its
Classes over additional periods of time.

The average annual total rate of return for each Class is based on a
hypothetical $1,000 investment that includes capital appreciation and
depreciation during the stated periods. The following formula will be used for
the actual computations:

n
P(1 + T) = ERV

Where: P = a hypothetical initial purchase order of $1,000 from
which, in the case of only Class A Shares, the
maximum front-end sales charge is deducted;

T = average annual total return;

n = number of years; and

ERV = redeemable value of the hypothetical $1,000 purchase
at the end of the period after the deduction of the
applicable CDSC, if any, with respect to Class B
Shares and Class C Shares.

In presenting performance information for Class A Shares, the Limited
CDSC applicable to only certain redemptions of those shares will not be deducted
from any computation of total return. See the Prospectuses for the Fund Classes
for a description of the Limited CDSC and the limited instances in which it
applies. All references to a CDSC in this Performance Information section will
apply to Class B Shares or Class C Shares of the Funds.

Aggregate or cumulative total return is calculated in a similar manner,
except that the results are not annualized. Each calculation assumes the maximum
front-end sales charge, if any, is deducted from the initial $1,000 investment
at the time it is made with respect to the Class A Shares and that all
distributions are reinvested at net asset value, and, with respect to Class B
Shares and Class C Shares, reflects the deduction of the CDSC that would be
applicable upon complete redemption of such shares. In addition, each Fund may
present total return information that does not reflect the deduction of the
maximum front-end sales charge or any applicable CDSC.

The performance of the Delchester Fund A Class and the Delchester Fund
Institutional Class, as shown below, is the average annual total return
quotations through July 31, 1996, computed as described above. The average
annual total return for the Delchester Fund A Class at offer reflects the
maximum front-end sales charge of 4.75% paid on the purchase of shares. The
average annual total return for the Delchester Fund A Class at net asset value
(NAV) does not reflect any front-end sales charge. Securities prices fluctuated
during the periods covered and past results should not be considered as
representative of future performance.

-20-

<PAGE>

Performance information is not provided for Strategic Income Fund because such
shares were not offered to the public prior to October 1, 1996 and performance
information is not provided for High-Yield Opportunities Fund because such
shares were not offered to the public prior to the date of this Part B.

Pursuant to applicable regulation, total return shown for the
Delchester Fund Institutional Class for the periods prior to the commencement of
operations of such Class is calculated by taking the performance of the
Delchester Fund A Class and adjusting it to reflect the elimination of all
front-end sales charges. However, for those periods, no adjustment has been made
to eliminate the impact of 12b-1 payments, and performance may have been
affected had such an adjustment been made.

Average Annual Total Return

Delchester Delchester Delchester
Fund Fund Fund
A Class A Class Institutional
(at Offer) (at NAV) Class (1)

1 year
ended
7/31/96 3.02% 8.10% 8.37%

3 years
ended
7/31/96 4.31% 6.00% 6.26%

5 years
ended
7/31/96 9.99% 11.06% 11.32%

10 years
ended
7/31/96 8.97% 9.49% 9.72%

15 years
ended
7/31/96 12.42% 12.79% 12.95%

Period
8/20/70(2)
through
7/31/96 9.39% 9.59% 9.68%

- ------------------
(1) Date of initial public offering of the Delchester Fund Institutional
Class was June 1, 1992.
(2) Date of initial public offering of the Delchester Fund A Class.

-21-

<PAGE>

The performance of the Delchester Fund B Class, as shown below, is the
average annual total return quotation through July 31, 1996. The average annual
total return for the Delchester Fund B Class including deferred sales charge
reflects the deduction of the applicable CDSC that would be paid if the shares
were redeemed at July 31, 1996. The average annual total return for the
Delchester Fund B Class excluding deferred sales charge assumes the shares were
not redeemed at July 31, 1996 and therefore does not reflect the deduction of a
CDSC.

Average Annual Total Return
Delchester Fund Delchester Fund
B Class B Class
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)

1 year
ended
7/31/96 3.39% 7.30%

Period
5/2/94(1)
through
7/31/96 4.70% 5.85%

(1) Date of initial public offering of the Delchester Fund B Class.

The performance of the Delchester Fund C Class, as shown below, is the
aggregate total return quotation through July 31, 1996. The aggregate total
return for the Delchester Fund C Class including deferred sales charge reflects
the deduction of the applicable CDSC that would be paid if the shares were
redeemed at July 31, 1996. The aggregate total return for the Delchester Fund C
Class excluding deferred sales charge assumes the shares were not redeemed at
July 31, 1996 and therefore does not reflect the deduction of a CDSC.

Aggregate Total Return
Delchester Fund Delchester Fund
C Class C Class
(Including Deferred (Excluding Deferred
Sales Charge) Sales Charge)

Period
11/29/95(1)
through
7/31/96 4.21% 5.20%

(1) Date of initial public offering of the Delchester Fund C Class; total
return for this short of a time period may not be representative of
longer-term results.

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<PAGE>

As stated in the Funds' Prospectuses, each Fund may also quote the
current yield of each of its Classes in advertisements and investor
communications.

The yield computation is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and annualizing the resulting figure,
according to the following formula:

a--b 6
YIELD = 2[(-------- + 1) -- 1]
cd

Where: a = dividends and interest earned during the period;

b = expenses accrued for the period (net of reimbursements);

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends; and

d = the maximum offering price per share on the last day of
the period.

The above formula will be used in calculating quotations of yield for
each Class of the Funds, based on specified 30-day periods identified in
advertising by the Funds. The yields of the Delchester Fund A Class, the
Delchester Fund B Class, the Delchester Fund C Class and the Delchester Fund
Institutional Class as of July 31, 1996 using this formula were 9.47%, 9.22%,
9.22% and 10.22%, respectively. Yield calculations assume the maximum front-end
sales charge, if any, and do not reflect the deduction of any contingent
deferred sales charge. Actual yield on Class A Shares may be affected by
variations in sales charges on investments. Yield information is not provided
for Strategic Income Fund because such shares were not offered to the public
prior to October 1, 1996 and yield information is not provided for High-Yield
Opportunities Fund because such shares were not offered to the public prior to
the date of this Part B.

Past performance, such as is reflected in quoted yields, should not be
considered as a representation of the results which may be realized from an
investment in any Class of the Funds in the future.

Investors should note that the income earned and dividends paid by the
Funds will vary with the fluctuation of interest rates and performance of the
portfolio to the extent of the Funds' investments in debt securities. The net
asset values of the Funds may change. Unlike money market funds, the Funds
invest in longer-term securities that fluctuate in value and do so in a manner
inversely correlated with changing interest rates. The Funds' net asset values
will tend to rise when interest rates fall. Conversely, the Funds' net asset
values will tend to fall as interest rates rise. Normally, fluctuations in
interest rates have a greater effect on the prices of longer-term bonds. The
value of the securities held by the Funds will vary from day to day and
investors should consider the volatility of the Funds' net asset values as well
as their yields before making a decision to invest.

Delchester Fund's average weighted portfolio maturity at July 31, 1996
was 7 years.

-23-

<PAGE>

Statistical and performance information and various indices compiled
and maintained by organizations such as the following may also be used in
preparing exhibits comparing certain industry trends and competitive mutual fund
performance to comparable activities and performances of the Funds and in
illustrating general financial planning principles. From time to time, certain
mutual fund performance ranking information, calculated and provided by these
organizations, may also be used in the promotion of sales of the Funds. Any
indices used are not managed for any investment goal.

CDA Technologies, Inc., Lipper Analytical Services, Inc. and
Morningstar, Inc. are performance evaluation services that maintain
statistical performance databases, as reported by a diverse universe of
independently-managed mutual funds.

Ibbotson Associates, Inc. is a consulting firm that provides a variety
of historical data including total return, capital appreciation and
income on the stock market as well as other investment asset classes,
and inflation. With its permission, this information will be used
primarily for comparative purposes and to illustrate general financial
planning principles.

Interactive Data Corporation is a statistical access service that
maintains a database of various international industry indicators, such
as historical and current price/earning information, individual equity
and fixed-income price and return information.

Compustat Industrial Databases, a service of S&P, may also be used in
preparing performance and historical stock and bond market exhibits.
This firm maintains fundamental databases that provide financial,
statistical and market information covering more than 7,000 industrial
and non-industrial companies.

Salomon Brothers and Lehman Brothers are statistical research firms
that maintain databases of international market, bond market, corporate
and government-issued securities of various maturities. This
information, as well as unmanaged indices compiled and maintained by
these firms, will be used in preparing comparative illustrations. In
addition, the performance of multiple indices compiled and maintained
by these firms may be combined to create a blended performance result
for comparative purposes. Generally, the indices selected will be
representative of the types of securities in which the Funds may invest
and the assumptions that were used in calculating the blended
performance will be described.

Current interest rate and yield information on government debt
obligations of various durations, as reported weekly by the Federal Reserve
(Bulletin H.15), may also be used. In addition, current rate information on
municipal debt obligations of various durations, as reported daily by The Bond
Buyer, may also be used. The Bond Buyer is published daily and is an
industry-accepted source for current municipal bond market information.

-24-

<PAGE>

From time to time, the Funds may quote actual total return performance
for each Class in advertising and other types of literature compared to indices
or averages of alternative financial products available to prospective
investors. For example, the performance comparisons may include the average
return of various bank instruments, some of which may carry certain return
guarantees, offered by leading banks and thrifts as monitored by Bank Rate
Monitor, and those of generally-accepted corporate bond and government security
price indices of various durations prepared by Lehman Brothers and Salomon
Brothers, Inc. These indices are not managed for any investment goal.
Comparative information on the Consumer Price Index may also be included. The
Consumer Price Index, as prepared by the U.S. Bureau of Labor Statistics, is the
most commonly used measure of inflation. It indicates the cost fluctuations of a
representative group of consumer goods. It does not represent a return from an
investment.

The total return performance for each Class of the Funds will reflect
the appreciation or depreciation of principal, reinvestment of income and any
capital gains distributions paid during any indicated period, and, in the case
of Class A Shares, the impact of the maximum front-end sales charge, if any,
paid on the illustrated investment amount, annualized. Performance of Class A
Shares may also be shown without reflecting the impact of any front-end sales
charge. The results will not reflect any income taxes, if applicable, payable by
shareholders on the reinvested distributions included in the calculations. The
performance of Class B Shares and Class C Shares will be calculated both with
the applicable CDSC included and excluded. The net asset values of the Funds
fluctuate so shares, when redeemed, may be worth more or less than the original
investment, and the Funds' results should not be considered a guarantee of
future performance.

The following table is an example, for purposes of illustration only,
of cumulative total return performance for the Delchester Fund A Class, the
Delchester Fund B Class, the Delchester Fund C Class and the Delchester Fund
Institutional Class through July 31, 1996. Performance information is not
provided for Strategic Income Fund because such shares were not offered to the
public prior to October 1, 1996 and performance information is not provided for
High-Yield Opportunities Fund because such shares were not offered to the public
prior to the date of this Part B.

-25-

<PAGE>

Cumulative Total Return
Delchester Delchester
Fund Fund Consumer
A Class Institutional Price
(at Offer) Class(2) Index(3)
3 months
ended
7/31/96 (2.78%) 2.17% 0.45%

6 months
ended
7/31/96 (1.91%) 3.07% 1.68%

9 months
ended
7/31/96 1.02% 6.24% 2.15%

1 year
ended
7/31/96 3.02% 8.37% 2.95%

3 years
ended
7/31/96 13.50% 19.97% 8.73%

5 years
ended
7/31/96 61.01% 70.96% 15.27%

10 years
ended
7/31/96 136.01% 152.87% 43.39%

15 years
ended
7/31/96 479.28% 521.02% 71.40%

Period
8/20/70(1)
through
7/31/96 925.60% 999.60% 302.33%

- ----------------
(1) Date of initial public offering of the Delchester Fund A Class.

(2) Date of initial public offering of the Delchester Fund Institutional
Class was June 1, 1992. Pursuant to applicable regulation, total return
shown for the Delchester Fund Institutional Class for the periods prior
to- the commencement of operations of such Class is calculated by
taking the performance of the Delchester Fund A Class and adjusting
it to reflect the elimination of all sales charges. However, for those
periods, no adjustment has been made to eliminate the impact of 12b-1
payments, and performance may have been affected had such an adjustment
been made.

(3) Source--U.S. Department of Labor.

-26-

<PAGE>

Cumulative Total Return
Delchester Delchester
Fund Fund
B Class B Class Consumer
(Including (Excluding Price
Deferred Deferred Index(2)
Sales Charge) Sales Charge)
3 months
ended
7/31/96 (2.07%) 1.91% 0.45%

6 months
ended
7/31/96 (1.36%) 2.56% 1.68%

9 months
ended
7/31/96 0.49% 4.45% 2.15%

1 year
ended
7/31/96 3.39% 7.30% 2.95%

Period
5/2/94(1)
through
7/31/96 10.90% 13.63% 6.51%

- -------------
(1) Date of initial public offering of the Delchester Fund B Class.
(2) Source--U.S. Department of Labor.

-27-

<PAGE>

Cumulative Total Return
Delchester Delchester
Fund Fund
C Class C Class Consumer
(Including (Excluding Price
Deferred Deferred Index(2)
Sales Charge) Sales Charge)

3 months
ended
7/31/96 0.92% 1.91% 0.45%

6 months
ended
7/31/96 1.58% 2.56% 1.68%

Period
11/29/95(1)
through
7/31/96 4.21% 5.20% 2.21%

- --------------
(1) Date of initial public offering of the Delchester Fund C Class; total
return for this short of a time period may not be representative of
longer-term results.

(2) Source--U.S. Department of Labor.

Because every investor's goals and risk threshold are different, the
Distributor, as distributor for Income Funds, Inc. and other mutual funds in the
Delaware Group, will provide general information about investment alternatives
and scenarios that will allow investors to assess their personal goals. This
information will include general material about investing as well as materials
reinforcing various industry-accepted principles of prudent and responsible
personal financial planning. One typical way of addressing these issues is to
compare an individual's goals and the length of time the individual has to
attain these goals to his or her risk threshold. In addition, the Distributor
will provide information that discusses the Manager's overriding investment
philosophy and how that philosophy impacts the Funds', and other Delaware Group
funds', investment disciplines employed in seeking their objectives. The
Distributor may also from time to time cite general or specific information
about the institutional clients of the Manager, including the number of such
clients serviced by the Manager.

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

-28-

<PAGE>

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

The example below illustrates how dollar-cost averaging can work. In a
fluctuating market, the average cost per share over a period of time will be
lower than the average price per share for the same time period.

Number
Investment Price Per of Shares
Amount Share Purchased

Month 1 $100 $10.00 10
Month 2 $100 $12.50 8
Month 3 $100 $ 5.00 20
Month 4 $100 $10.00 10
---------------------------------------------------------
$400 $37.50 48

Total Amount Invested: $400
Total Number of Shares Purchased: 48
Average Price Per Share: $9.38 ($37.50/4)
Average Cost Per Share: $8.33 ($400/48 shares)

This example is for illustration purposes only. It is not intended to
represent the actual performance of the Funds.

-29-

<PAGE>

THE POWER OF COMPOUNDING
When you opt to reinvest your current income for additional shares of
the Funds, your investment is given yet another opportunity to grow. It's called
the Power of Compounding and the following chart illustrates just how powerful
it can be.

COMPOUNDED RETURNS
Results of various assumed fixed rates of return on a $10,000
investment compounded monthly for 10 years:

7% Rate 9% Rate 11% Rate
of Return of Return of Return
--------- --------- ---------
1 year $10,723 $10,938 $11,157
2 years $11,498 $11,964 $12,448
3 years $12,330 $13,086 $13,889
4 years $13,221 $14,314 $15,496
5 years $14,177 $15,657 $17,289
6 years $15,201 $17,126 $19,289
7 years $16,300 $18,732 $21,522
8 years $17,479 $20,489 $24,012
9 years $18,743 $22,411 $26,791
10 years $20,098 $24,514 $29,891

These figures are calculated assuming a fixed constant investment
return and assume no fluctuation in the value of principal. These figures, which
do not reflect payment of applicable taxes or any sales charges, are not
intended to be a projection of investment results and do not reflect the actual
performance results of any of the classes.

-30-

<PAGE>

TRADING PRACTICES AND BROKERAGE

Delchester Fund, High-Yield Opportunities Fund and, in the case of its
domestic securities, Strategic Income Fund, each select banks, brokers or
dealers to execute transactions for the purchase or sale of portfolio securities
on the basis of the Fund's judgment of the professional capability of such
banks, brokers or dealers to provide the service. In the case of Strategic
Income Fund, the Sub-Adviser to the Fund selects banks, brokers or dealers to
execute transactions for the purchase or sale of foreign securities in managing
the Fund's international sector. The primary consideration is to have banks,
brokers or dealers execute transactions at best price and execution. Best price
and execution refers to many factors, including the price paid or received for a
security, the commission charged, the promptness and reliability of execution,
the confidentiality and placement accorded the order and other factors affecting
the overall benefit obtained by the account on the transaction. In most
instances, trades of fixed-income securities are made on a net basis where the
Funds either buy the securities directly from the dealer or sell them to the
dealer. In these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission. When a commission is paid, the Fund involved pays reasonably
competitive brokerage commission rates based upon the professional knowledge of
the Manager or the Sub-Adviser as to rates paid and charged for similar
transactions throughout the securities industry. In some instances, a Fund pays
a minimal share transaction cost when the transaction presents no difficulty.

During the fiscal years ended July 31, 1994, 1995 and 1996, no
brokerage commissions were paid by Delchester Fund.

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

During the fiscal year ended July 31, 1996, there were no portfolio
transactions of Delchester Fund resulting in brokerage commissions directed to
brokers for brokerage and research services.

As provided in the Securities Exchange Act of 1934, the Funds'
Investment Management Agreements and the Sub-Advisory Agreement (in the case of
Strategic Income Fund), higher commissions are permitted to be paid to
broker/dealers who provide brokerage and research services than to
broker/dealers who do not provide such services if such higher commissions are
deemed reasonable in relation to the value of the brokerage and research
services provided. Although transactions are directed to broker/dealers who
provide such brokerage and research services, the Funds believe that the
commissions paid to such broker/dealers are not, in general, higher than
commissions that would be paid to broker/dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In some instances, services may be provided to
the Manager or Sub-Adviser which constitute in some part brokerage and research
services used by the Manager or Sub-Adviser in connection with its investment

-31-

<PAGE>

decision-making process and constitute in some part services used by the Manager
or Sub-Adviser in connection with administrative or other functions not related
to its investment decision-making process. In such cases, the Manager or
Sub-Adviser will make a good faith allocation of brokerage and research services
and will pay out of its own resources for services used by the Manager or
Sub-Adviser in connection with administrative or other functions not related to
its investment decision-making process. In addition, so long as no fund is
disadvantaged, portfolio transactions which generate commissions or their
equivalent are allocated to broker/dealers who provide daily portfolio pricing
services to the Funds and to other funds in the Delaware Group. Subject to best
price and execution, commissions allocated to brokers providing such pricing
services may or may not be generated by the funds receiving the pricing service.

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

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

Portfolio Turnover
The rate of portfolio turnover will not be a limiting factor when
portfolio changes are deemed appropriate. Delchester Fund anticipates that its
annual rate of portfolio turnover will not generally exceed 150%, and Strategic
Income Fund and High-Yield Opportunities Fund anticipate that their respective
annual rates of portfolio turnover will not generally exceed 100%. It is
possible that in any particular year market conditions or other factors might
result in portfolio activity at a greater rate than anticipated.

The degree of portfolio activity may affect taxes payable by the Funds'
shareholders. A turnover rate of 100% would occur, for example, if all the
investments in a Fund's portfolio at the beginning of the year were replaced by
the end of the year. In investing for liberal current income, in the case of
Delchester Fund, and for high current income with total return, in the case of
Strategic Income Fund, the Funds may hold securities for any period of time. To
the extent a Fund realizes gains on securities held for less than six months,
such gains are taxable to the shareholder or to the Fund at ordinary income tax
rates. The turnover rates also may be affected by cash requirements from
redemptions and repurchases of Fund shares.

Delchester Fund's portfolio turnover rates were approximately 92% for
the fiscal year ended July 31, 1995 and 108% for the fiscal year ended July 31,
1996.

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<PAGE>

PURCHASING SHARES

The Distributor serves as the national distributor for each Fund's
classes of shares - Class A Shares, Class B Shares, Class C Shares and the
Institutional Class - and has agreed to use its best efforts to sell shares of
each Fund. See the Prospectuses for additional information on how to invest.
Shares of the Funds are offered on a continuous basis, and may be purchased
through authorized investment dealers or directly by contacting Income Funds,
Inc. or the Distributor.

The minimum initial investment generally is $1,000 for Class A Shares,
Class B Shares and Class C Shares. Subsequent purchases generally must be at
least $100. The initial and subsequent minimum investments for Class A Shares
will be waived for purchases by officers, directors and employees of any
Delaware Group fund, the Manager or the Sub-Adviser or any of the their
affiliates if the purchases are made pursuant to a payroll deduction program.
Shares purchased pursuant to the Uniform Gifts to Minors Act or Uniform
Transfers to Minors Act and shares purchased in connection with an Automatic
Investing Plan are subject to a minimum initial purchase of $250 and a minimum
subsequent purchase of $25. Accounts opened under the Delaware Group Asset
Planner service are subject to a minimum initial investment of $2,000 per Asset
Planner Strategy selected. There are no minimum purchase requirements for the
Funds' Institutional Classes, but certain eligibility requirements must be
satisfied.

Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000. For Class C Shares, each purchase must be in an amount
that is less than $1,000,000. See Investment Plans for purchase limitations
applicable to retirement plans. Income Funds, Inc. will reject any purchase
order for more than $250,000 of Class B Shares and $1,000,000 or more of Class C
Shares. An investor may exceed these limitations by making cumulative purchases
over a period of time. An investor should keep in mind, however, that reduced
front-end sales charges apply to investments of $100,000 or more in Class A
Shares, and that, absent any applicable fee waiver, Class A Shares are subject
to lower annual 12b-1 Plan expenses than Class B Shares and Class C Shares and
generally are not subject to a CDSC.

Selling dealers have the responsibility of transmitting orders
promptly. Income Funds, Inc. reserves the right to reject any order for the
purchase of shares of either Fund if in the opinion of management such rejection
is in such Fund's best interests.

The NASD has adopted Rules of Fair Practice relating to investment
company sales charges. Income Funds, Inc. and the Distributor intend to operate
in compliance with these rules.

Class A Shares are purchased at the offering price which reflects a
maximum front-end sales charge of 4.75%; however, lower front-end sales charges
apply for larger purchases. See the table below. Class A Shares are also subject
to annual 12b-1 Plan expenses.

Class B Shares are purchased at net asset value and are subject to a
CDSC of: (i) 4% if shares are redeemed within two years of purchase; (ii) 3% if
shares are redeemed during the third or fourth year following purchase; (iii) 2%
if shares are redeemed during the fifth year following purchase; and (iv) 1% if
shares are redeemed during the sixth year following purchase. Class B Shares are
also subject to annual 12b-1 Plan expenses which, absent any applicable fee
waiver, are higher than those to which Class A Shares are subject and are
assessed against Class B Shares for approximately eight years after purchase.
See Automatic Conversion of Class B Shares under Classes of Shares in the Fund
Classes' Prospectuses.

Class C Shares are purchased at net asset value and are subject to a
CDSC of 1% if shares are redeemed within 12 months following purchase. Class C
Shares are also subject to annual 12b-1 Plan expenses for the life of the
investment which are equal to those to which Class B Shares are subject.

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<PAGE>

The Distributor has voluntarily elected to waive the payment of 12b-1
Plan expenses by the High-Yield Opportunities Fund from the commencement of
public offering through , 199 .

Institutional Class shares are purchased at the net asset value per
share without the imposition of a front-end or contingent deferred sales charge
or 12b-1 Plan expenses. See Determining Offering Price and Net Asset Value and
Plans Under Rule 12b-1 for the Fund Classes in this Part B.

Class A Shares, Class B Shares, Class C Shares and Institutional Class
shares represent a proportionate interest in a Fund's assets and will receive a
proportionate interest in that Fund's income, before application, as to the
Class A, Class B and Class C Shares, of any expenses, if any, under a Fund's
12b-1 Plans.

Certificates representing shares purchased are not ordinarily issued
unless, in the case of Class A Shares or Institutional Class shares, a
shareholder submits a specific request. Certificates are not issued in the case
of Class B Shares or Class C Shares. However, purchases not involving the
issuance of certificates are confirmed to the investor and credited to the
shareholder's account on the books maintained by Delaware Service Company, Inc.
(the "Transfer Agent"). The investor will have the same rights of ownership with
respect to such shares as if certificates had been issued. An investor that is
permitted to obtain a certificate may receive a certificate representing shares
purchased by sending a letter to the Transfer Agent requesting the certificate.
No charge is assessed by Income Funds, Inc. for any certificate issued.
Investors who hold certificates representing any of their shares may only redeem
those shares by written request. The investor's certificate(s) must accompany
such request.

Alternative Purchase Arrangements
The alternative purchase arrangements of Class A, Class B and Class C
Shares of each Fund permit investors to choose the method of purchasing shares
that is most suitable for their needs given the amount of their purchase, the
length of time they expect to hold their shares and other relevant
circumstances. Investors should determine whether, given their particular
circumstances, it is more advantageous to purchase Class A Shares of a Fund and
incur a front-end sales charge and, absent any applicable fee waiver, annual
12b-1 Plan expenses of up to a maximum of .30% of the average daily net assets
of Class A Shares (currently, no more than .25% of the average daily net assets
of the Class A Shares of Strategic Income Fund, pursuant to Board action) or to
purchase either Class B or Class C Shares of a Fund and have the entire initial
purchase amount invested in the Fund with the investment thereafter subject to a
CDSC and annual 12b-1 Plan expenses. Class B Shares are subject to a CDSC if the
shares are redeemed within six years of purchase, and Class C Shares are subject
to a CDSC if the shares are redeemed within 12 months of purchase. Class B and
Class C Shares are each subject to annual 12b-1 Plan expenses of up to a maximum
of 1% (.25% of which are service fees to be paid to the Distributor, dealers or
others for providing personal service and/or maintaining shareholder accounts)
of average daily net assets of the respective Class. Class B Shares will
automatically convert to Class A Shares at the end of approximately eight years
after purchase and, thereafter, be subject to annual 12b-1 Plan expenses of up
to a maximum of .30% of average daily net assets of such shares. Unlike Class B
Shares, Class C Shares do not convert to another class.

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<PAGE>

Class A Shares - Delchester Fund, Strategic Income Fund and High-Yield
Opportunities Fund
Purchases of $100,000 or more of Class A Shares at the offering price
carry reduced front-end sales charges as shown in the accompanying table, and
may include a series of purchases over a 13-month period under a Letter of
Intention signed by the purchaser. See Special Purchase Features -- Class A
Shares, below for more information on ways in which investors can avail
themselves of reduced front-end sales charges and other purchase features.
<TABLE>
<CAPTION>

Delchester Fund
Strategic Income Fund
High-Yield Opportunities Fund
Class A Shares
- -------------------------------------------------------------------------------------------------------------------------------

Dealer's
Commission***
Front-End Sales Charge as % of as % of
Offering Amount Offering
Amount of Purchase Price Invested** Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Strategic High-Yield
Delchester Income Opportunities
Fund Fund Fund
Less than $100,000 4.75% 5.05% 4.91% 4.91% 4.00%

$100,000 but under $250,000 3.75 3.91 3.82 3.82 3.00

$250,000 but under $500,000 2.50 2.60 2.55 2.55 2.00

$500,000 but under $1,000,000* 2.00 2.12 2.00 2.00 1.60
</TABLE>

* There is no front-end sales charge on purchases of $1 million or more
of Class A Shares but, under certain limited circumstances, a 1%
contingent deferred sales charge may apply upon redemption of such
shares. The contingent deferred sales charge ("Limited CDSC") that may
be applicable arises only in the case of certain shares that were
purchased at net asset value and triggered the payment of a dealer's
commission.

** In the case of Delchester Fund, based on the net asset value per share
of the Class A Shares as of the end of Income Funds, Inc.'s most recent
fiscal year. In the case of Strategic Income Fund and High-Yield
Opportunities Fund, based on an initial net asset value of $5.50 per
share.

*** Financial institutions or their affiliated brokers may receive an
agency transaction fee in the percentages set forth above.
- -------------------------------------------------------------------------------

A Fund must be notified when a sale takes place which would qualify for
the reduced front-end sales charge on the basis of previous or current
purchases. The reduced front-end sales charge will be granted upon
confirmation of the shareholder's holdings by such Fund. Such reduced
front-end sales charges are not retroactive.

From time to time, upon written notice to all of its dealers, the
Distributor may hold special promotions for specified periods during
which the Distributor may reallow to dealers up to the full amount of
front-end sales charge shown above. Dealers who receive 90% or more of
the sales charge may be deemed to be underwriters under the Securities
Act of 1933.
- -------------------------------------------------------------------------------

-35-

<PAGE>

Certain dealers who enter into an agreement to provide extra training
and information on Delaware Group products and services and who increase sales
of Delaware Group funds may receive an additional commission of up to .15% of
the offering price in connection with sales of Class A Shares. Such dealers must
meet certain requirements in terms of organization and distribution capabilities
and their ability to increase sales. The Distributor should be contacted for
further information on these requirements as well as the basis and circumstances
upon which the additional commission will be paid. Participating dealers may be
deemed to have additional responsibilities under the securities laws.

Dealer's Commission
For initial purchases of Class A Shares of $1,000,000 or more, a
dealer's commission may be paid by the Distributor to financial advisers through
whom such purchases are effected in accordance with the following schedule:

Dealer's Commission
-------------------
Amount (as a percentage of
of Purchase amount purchased)
-----------
Up to $2 million 1.00%
Next $1 million up to $3 million .75
Next $2 million up to $5 million .50
Amount over $5 million .25

In determining a financial adviser's eligibility for the dealer's
commission, purchases of Class A Shares of other Delaware Group funds as to
which a Limited CDSC applies (see Contingent Deferred Sales Charge for Certain
Redemptions of Class A Shares Purchased at Net Asset Value under Redemption and
Exchange in the Fund Classes' Prospectuses) may be aggregated with those of the
Class A Shares of a Fund. Financial advisers also may be eligible for a dealer's
commission in connection with certain purchases made under a Letter of Intention
or pursuant to an investor's Right of Accumulation. Financial advisers should
contact the Distributor concerning the applicability and calculation of the
dealer's commission in the case of combined purchases.

Contingent Deferred Sales Charge - Class B Shares and Class C Shares
Class B and Class C Shares are purchased without a front-end sales
charge. Class B Shares redeemed within six years of purchase may be subject to a
CDSC at the rates set forth below, and Class C Shares redeemed within 12 months
of purchase may be subject to a CDSC of 1%. CDSCs are charged as a percentage of
the dollar amount subject to the CDSC. The charge will be assessed on an amount
equal to the lesser of the net asset value at the time of purchase of the shares
being redeemed or the net asset value of those shares at the time of redemption.
No CDSC will be imposed on increases in net asset value above the initial
purchase price, nor will a CDSC be assessed on redemptions of shares acquired
through reinvestment of dividends or capital gains distributions. See Waiver of
Contingent Deferred Sales Charge - Class B and Class C Shares under Redemption
and Exchange in the Prospectuses for the Fund Classes for a list of the
instances in which the CDSC is waived.

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<PAGE>

The following table sets forth the rates of the CDSC for Class B Shares
of each Fund:

Contingent Deferred
Sales Charge (as a
Percentage of
Dollar Amount
Year After Purchase Made Subject to Charge)
------------------------ -------------------
0-2 4%
3-4 3%
5 2%
6 1%
7 and thereafter None

During the seventh year after purchase and, thereafter, until converted
automatically into Class A Shares, Class B Shares will still be subject to the
annual 12b-1 Plan expenses of up to 1% of average daily net assets of those
shares. At the end of approximately eight years after purchase, the investor's
Class B Shares will be automatically converted into Class A Shares of the same
Fund. See Automatic Conversion of Class B Shares under Classes of Shares in the
Fund Classes' Prospectuses. Such conversion will constitute a tax-free exchange
for federal income tax purposes. See Taxes in the Prospectuses for the Fund
Classes.

Plans Under Rule 12b-1 for the Fund Classes
Pursuant to Rule 12b-1 under the 1940 Act, Income Funds, Inc. has
adopted a separate plan for each of the Class A Shares, Class B Shares and Class
C Shares of each Fund (the "Plans"). Each Plan permits the relevant Fund to pay
for certain distribution, promotional and related expenses involved in the
marketing of only the class to which the Plan applies. The Plans do not apply to
the Institutional Classes of shares. Such shares are not included in calculating
the Plans' fees, and the Plans are not used to assist in the distribution and
marketing of shares of the Institutional Classes. Shareholders of the
Institutional Classes may not vote on matters affecting the Plans.

The Plans permit a Fund, pursuant to its Distribution Agreement, to pay
out of the assets of the Class A Shares, Class B Shares and Class C Shares
monthly fees to the Distributor for its services and expenses in distributing
and promoting sales of shares of such classes. These expenses include, among
other things, preparing and distributing advertisements, sales literature and
prospectuses and reports used for sales purposes, compensating sales and
marketing personnel, and paying distribution and maintenance fees to securities
brokers and dealers who enter into agreements with the Distributor. The Plan
expenses relating to Class B and Class C Shares are also used to pay the
Distributor for advancing the commission costs to dealers with respect to the
initial sale of such shares.

In addition, absent any applicable fee waiver, each Fund may make
payments out of the assets of the Class A, Class B and Class C Shares directly
to other unaffiliated parties, such as banks, who either aid in the distribution
of shares of, or provide services to, such classes.

The maximum aggregate fee payable by a Fund under its Plans, and the
Funds' Distribution Agreements, is on an annual basis, up to .30% of the Class A
Shares' average daily net assets for the year, and up to 1% (.25% of which are
service fees to be paid to the Distributor, dealers and others for providing
personal service and/or maintaining shareholder accounts) of each of the Class B
Shares' and the Class C

-37-

<PAGE>

Shares' average daily net assets for the year. Income Funds, Inc.'s Board of
Directors may reduce these amounts at any time. The Distributor has agreed to
waive the distribution fees with respect to Delchester Fund and High-Yield
Opportunities Fund the extent such fee for any day exceeds the net investment
income realized by such Funds' respective Class A, Class B and Class C Shares
for such day. In addition, the Distributor has elected voluntarily to waive all
payments under the 12b-1 Plan for the Class A Shares, Class B Shares and Class C
Shares of the High-Yield Opportunities Fund during the commencement of the
public offering of the Fund through _______, 199__.

Although the maximum fee payable under the 12b-1 Plan relating to the
Delchester Fund A Class is .30% of average daily net assets of such class, the
Board of Directors has determined that the annual fee, payable on a monthly
basis, under the Plan relating to the Delchester Fund A Class, will be equal to
the sum of: (i) the amount obtained by multiplying .10% by the average daily net
assets represented by the Delchester Fund A Class that were originally purchased
prior to June 1, 1992 in Delchester I class (which was converted into what is
now referred to as the Class A Shares on June 1, 1992 pursuant to a Plan of
Recapitalization approved by shareholders of the Delchester I class), and (ii)
the amount obtained by multiplying .30% by the average daily net assets
represented by all other Delchester Fund A Class shares. While this is the
method to be used to calculate the 12b-1 fees to be paid by the Delchester Fund
A Class under its Plan, the fee is a Class A Shares' expense so that all
shareholders of the Delchester Fund A Class, regardless of whether they
originally purchased or received shares in the Delchester I class, or in one of
the other classes that is now known as Class A Shares, will bear 12b-1 expenses
at the same rate. In addition, pursuant to Board action, the maximum aggregate
fee payable by the Class A Shares of Strategic Income Fund and High-Yield
Opportunities Fund is .25%. While this describes the current basis for
calculating the fees which will be payable under the Delchester Fund A Class',
Strategic Income Fund A Class' and High-Yield Opportunities Fund A Class' Plans,
such Plans permit a full .30% on all Class A Shares' assets to be paid at any
time following appropriate Board approval.

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

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

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

Each year, the directors must determine whether continuation of the
Plans is in the best interest of shareholders of, respectively, Class A Shares,
Class B Shares and Class C Shares of each Fund and that there is a reasonable
likelihood of the Plan relating to a Fund Class providing a benefit to that
Class. The Plans and the Distribution Agreements, as amended, may be terminated
with respect to a Class at any time without penalty by a majority of those
directors who are not "interested persons" or by a majority vote of the
outstanding voting securities of the relevant Fund Class. Any amendment
materially increasing the percentage

-38-

<PAGE>

payable under the Plans must likewise be approved by a majority vote of the
outstanding voting securities of the relevant Fund Class, as well as by a
majority vote of those directors who are not "interested persons." With respect
to each Class A Shares' Plan, any material increase in the maximum percentage
payable thereunder must also be approved by a majority of the outstanding voting
Class B Shares of the same Fund. Also, any other material amendment to the Plans
must be approved by a majority vote of the directors including a majority of the
noninterested directors of Income Funds, Inc. having no interest in the Plans.
In addition, in order for the Plans to remain effective, the selection and
nomination of directors who are not "interested persons" of Income Funds, Inc.
must be effected by the directors who themselves are not "interested persons"
and who have no direct or indirect financial interest in the Plans. Persons
authorized to make payments under the Plans must provide written reports at
least quarterly to the Board of Directors for their review.

For the fiscal year ended July 31, 1996, payments from the Delchester
Fund A Class pursuant to its Plan amounted to $2,515,759 and such payments were
used for the following purposes: Advertising - $1,879; Annual/Semi-Annual
Reports - $74,570; Broker Trails - $2,056,535; Commissions to Wholesalers -
$184,026; Promotional-Broker Meetings - $50,569; Promotional-Other - $31,866;
Prospectus Printing - $28,155; Telephone - $17,346; and Wholesaler
Expenses - $70,813.

For the fiscal year ended July 31, 1996, payments from the Delchester
Fund B Class pursuant to its Plan amounted to $1,429,755 and such payments were
used for the following purposes: Broker Trails - $359,118; Broker Sales Charges
- - $479,266; Interest on Broker Sales Charges - $521,562; Commissions to
Wholesalers - $61,850; Promotional-Broker Meetings - $7,375; and Prospectus
Printing - $584.

For the period November 29, 1995 (date of initial public offering)
through July 31, 1996, payments from the Delchester Fund C Class pursuant to its
Plan amounted to $15,354 and such payments were used for the following purposes:
Broker Sales Charges - $13,874; Interest on Broker Sales Charges - $1,423; and
Other - $57.

Other Payments to Dealers -- Class A, Class B and Class C Shares
From time to time, at the discretion of the Distributor, all registered
broker/dealers whose aggregate sales of Fund Classes exceed certain limits as
set by the Distributor, may receive from the Distributor an additional payment
of up to .25% of the dollar amount of such sales. The Distributor may also
provide additional promotional incentives or payments to dealers that sell
shares of the Delaware Group of funds. In some instances, these incentives or
payments may be offered only to certain dealers who maintain, have sold or may
sell certain amounts of shares.

Payments to dealers made in connection with seminars, conferences or
contests relating to the promotion of fund shares may be in an amount up to 100%
of the expenses incurred or awards made. The Distributor may also pay a portion
of the expense of preapproved dealer advertisements promoting the sale of
Delaware Group fund shares.

Special Purchase Features -- Class A Shares

Buying Class A Shares at Net Asset Value
Class A Shares may be purchased without a front-end sales charge under
the Dividend Reinvestment Plan and, under certain circumstances, the Exchange
Privilege and the 12-Month Reinvestment Privilege.

-39-

<PAGE>

Current and former officers, directors and employees of Income Funds,
Inc., any other fund in the Delaware Group, the Manager, the Sub-Adviser or any
of the Manager's affiliates that may in the future be created, legal counsel to
the funds and registered representatives and employees of broker/dealers who
have entered into Dealer's Agreements with the Distributor may purchase Class A
Shares of the Funds and any such class of shares of any of the funds in the
Delaware Group, including any fund that may be created, at the net asset value
per share. Family members of such persons at their direction, and any employee
benefit plan established by any of the foregoing funds, corporations, counsel or
broker/dealers may also purchase Class A Shares at net asset value. Purchases of
Class A Shares may also be made by clients of registered representatives of an
authorized investment dealer at net asset value within 12 months of a change of
the registered representative's employment, if the purchase is funded by
proceeds from an investment where a front-end sales charge, contingent deferred
sales charge or other sales charge has been assessed. Purchases of Class A
Shares may also be made at net asset value by bank employees who provide
services in connection with agreements between the bank and unaffiliated brokers
or dealers concerning sales of shares of Delaware Group funds. Officers,
directors and key employees of institutional clients of the Manager, the
Sub-Adviser or any of their affiliates, may purchase Class A Shares at net asset
value. Moreover, purchases may be effected at net asset value for the benefit of
the clients of brokers, dealers and registered investment advisers affiliated
with a broker or dealer, if such broker, dealer or investment adviser has
entered into an agreement with the Distributor providing specifically for the
purchase of Class A Shares in connection with special investment products, such
as wrap accounts or similar fee based programs. Such purchasers are required to
sign a letter stating that the purchase is for investment only and that the
securities may not be resold except to the issuer. Such purchasers may also be
required to sign or deliver such other documents as Income Funds, Inc. may
reasonably require to establish eligibility for purchase at net asset value.

Investors who held shares in any class of any Delaware Group fund as of
December 1, 1995, may purchase Class A Shares at net asset value through the
Delaware Group Asset Planner service if such shares are being purchased with
proceeds from the redemption of shares of a fund (other than a money market
fund) outside of the Delaware Group of funds. The Delaware Group Asset Planner
Account Registration Form and check for such a transaction should note that the
investment is being made under the "NAV/Asset Planner Accommodation Program."
Class A Shares may also be purchased at net asset value in an IRA through the
Delaware Group Asset Planner service if the assets being invested are being
transferred from an existing IRA held outside of the Delaware Group or are part
of a distribution received from an employer-sponsored or other retirement plan.
See Delaware Group Asset Planner under How To Buy Shares in the Prospectuses for
the Fund Classes.

The Funds must be notified in advance that the trade qualifies for
purchase at net asset value.

Letter of Intention
The reduced front-end sales charges described above with respect to
Class A Shares are also applicable to the aggregate amount of purchases made
within a 13-month period pursuant to a written Letter of Intention provided by
the Distributor and signed by the purchaser, and not legally binding on the
signer or Income Funds, Inc., which provides for the holding in escrow by the
Transfer Agent of 5% of the total amount of the Class A Shares intended to be
purchased until such purchase is completed within the 13-month period. A

-40-

<PAGE>

Letter of Intention may be dated to include shares purchased up to 90 days prior
to the date the Letter is signed. The 13-month period begins on the date of the
earliest purchase. If the intended investment is not completed, except as noted
below, the purchaser will be asked to pay an amount equal to the difference
between the front-end sales charge on Class A Shares purchased at the reduced
rate and the front-end sales charge otherwise applicable to the total shares
purchased. If such payment is not made within 20 days following the expiration
of the 13-month period, the Transfer Agent will surrender an appropriate number
of the escrowed shares for redemption in order to realize the difference. Such
purchasers may include the value (at offering price at the level designated in
their Letter of Intention) of all their shares of the Funds and of any class of
any of the other mutual funds in the Delaware Group (except shares of any
Delaware Group fund which do not carry a front-end sales charge, CDSC or Limited
CDSC, other than shares of Delaware Group Premium Fund, Inc. beneficially owned
in connection with the ownership of variable insurance products, unless they
were acquired through an exchange from a Delaware Group fund which carried a
front-end sales charge, CDSC or Limited CDSC) previously purchased and still
held as of the date of their Letter of Intention toward the completion of such
Letter.

Employers offering a Delaware Group retirement plan may also complete a
Letter of Intention to obtain a reduced front-end sales charge on investments in
Class A Shares made by the plan. The aggregate investment level of the Letter of
Intention will be determined and accepted by the Transfer Agent at the point of
plan establishment. The level and any reduction in front-end sales charge will
be based on actual plan participation and the projected investments in Delaware
Group funds that are offered with a front-end sales charge, CDSC or Limited CDSC
for a 13-month period. The Transfer Agent reserves the right to adjust the
signed Letter of Intention based on this acceptance criteria. The 13-month
period will begin on the date this Letter of Intention is accepted by the
Transfer Agent. If actual investments exceed the anticipated level and equal an
amount that would qualify the plan for further discounts, any front-end sales
charges will be automatically adjusted. In the event this Letter of Intention is
not fulfilled within the 13-month period, the plan level will be adjusted
(without completing another Letter of Intention) and the employer will be billed
for the difference in front-end sales charges due, based on the plan's assets
under management at that time. Employers may also include the value (at offering
price at the level designated in their Letter of Intention) of all their shares
intended for purchase that are offered with a front-end sales charge, CDSC or
Limited CDSC of any class. Class B Shares and Class C Shares of a Fund and other
Delaware Group funds which offer corresponding classes of shares may also be
aggregated for this purpose.

Combined Purchases Privilege
In determining the availability of the reduced front-end sales charge
previously set forth with respect to Class A Shares, purchasers may combine the
total amount of any combination of the Class A Shares, Class B Shares and/or
Class C Shares of the Funds, as well as shares of any other class of any of the
other Delaware Group funds (except shares of any Delaware Group fund which do
not carry a front-end sales charge, CDSC or Limited CDSC, other than shares of
Delaware Group Premium Fund, Inc. beneficially owned in connection with the
ownership of variable insurance products, unless they were acquired through an
exchange from a Delaware Group fund which carried a front-end sales charge, CDSC
or Limited CDSC).

The privilege also extends to all purchases made at one time by an
individual; or an individual, his or her spouse and their children under 21; or
a trustee or other fiduciary of trust estates or fiduciary accounts for the
benefit of such family members (including certain employee benefit programs).

-41-

<PAGE>

Right of Accumulation
In determining the availability of the reduced front-end sales charge
with respect to Class A Shares, purchasers may also combine any subsequent
purchases of Class A Shares, Class B Shares and Class C Shares of a Fund, as
well as shares of any other class of any of the other Delaware Group funds which
offer such classes (except shares of any Delaware Group fund which do not carry
a front-end sales charge, CDSC or Limited CDSC, other than shares of Delaware
Group Premium Fund, Inc. beneficially owned in connection with the ownership of
variable insurance products, unless they were acquired through an exchange from
a Delaware Group fund which carried a front-end sales charge, CDSC or Limited
CDSC). If, for example, any such purchaser has previously purchased and still
holds Class A Shares and/or shares of any other of the classes described in the
previous sentence with a value of $40,000 and subsequently purchases $60,000 at
offering price of additional shares of Class A Shares, the charge applicable to
the $60,000 purchase would currently be 3.75%. For the purpose of this
calculation, the shares presently held shall be valued at the public offering
price that would have been in effect were the shares purchased simultaneously
with the current purchase. Investors should refer to the table of sales charges
for Class A Shares to determine the applicability of the Right of Accumulation
to their particular circumstances.

12-Month Reinvestment Privilege
Holders of Class A Shares of a Fund (and of the Institutional Classes
holding shares which were acquired through an exchange from one of the other
mutual funds in the Delaware Group offered with a front-end sales charge) who
redeem such shares have one year from the date of redemption to reinvest all or
part of their redemption proceeds in Class A Shares of that Fund or in Class A
Shares of any of the other funds in the Delaware Group, subject to applicable
eligibility and minimum purchase requirements, in states where shares of such
other funds may be sold, at net asset value without the payment of a front-end
sales charge. This privilege does not extend to Class A Shares where the
redemption of the shares triggered the payment of a Limited CDSC. Persons
investing redemption proceeds from direct investments in mutual funds in the
Delaware Group offered without a front-end sales charge will be required to pay
the applicable sales charge when purchasing Class A Shares. The reinvestment
privilege does not extend to a redemption of either Class B Shares or Class C
Shares.

Any such reinvestment cannot exceed the redemption proceeds (plus any
amount necessary to purchase a full share). The reinvestment will be made at the
net asset value next determined after receipt of remittance. A redemption and
reinvestment could have income tax consequences. It is recommended that a tax
adviser be consulted with respect to such transactions. Any reinvestment
directed to a fund in which the investor does not then have an account will be
treated like all other initial purchases of a fund's shares. Consequently, an
investor should obtain and read carefully the prospectus for the fund in which
the investment is intended to be made before investing or sending money. The
prospectus contains more complete information about the fund, including charges
and expenses.

Investors should consult their financial advisers or the Transfer
Agent, which also serves as the Funds' shareholder servicing agent, about the
applicability of the Limited CDSC (see Contingent Deferred Sales Charge for
Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Fund Classes' Prospectuses) in connection with
the features described above.

Group Investment Plans
Group Investment Plans that are not eligible to purchase shares of the
Institutional Classes may also benefit from the reduced front-end sales charges
for investments in Class A Shares set forth in the table on page _____, based on
total plan assets. If a company has more than one plan investing in the Delaware
Group

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<PAGE>

of funds, then the total amount invested in all plans would be used in
determining the applicable front-end sales charge reduction upon each purchase,
both initial and subsequent, upon notification to the Fund in which the
investment is being made at the time of each such purchase. Employees
participating in such Group Investment Plans may also combine the investments
made in their plan account when determining the applicable front-end sales
charge on purchases to non-retirement Delaware Group investment accounts if they
so notify the Fund in connection with each purchase. For other retirement plans
and special services, see Retirement Plans for the Fund Classes under Investment
Plans.

The Institutional Classes
The Institutional Class of each Fund is available for purchase only by:
(a) retirement plans introduced by persons not associated with brokers or
dealers that are primarily engaged in the retail securities business and
rollover individual retirement accounts from such plans; (b) tax-exempt employee
benefit plans of the Manager, the Sub-Adviser or their affiliates and securities
dealer firms with a selling agreement with the Distributor; (c) institutional
advisory accounts of the Manager, the Sub-Adviser or their affiliates and those
having client relationships with Delaware Investment Advisers, a division of the
Manager, or its affiliates and their corporate sponsors, as well as subsidiaries
and related employee benefit plans and rollover individual retirement accounts
from such institutional advisory accounts; (d) banks, trust companies and
similar financial institutions investing for their own account or for the
account of their trust customers for whom such financial institution is
exercising investment discretion in purchasing shares of the class; and (e)
registered investment advisers investing on behalf of clients that consist
solely of institutions and high net-worth individuals having at least $1,000,000
entrusted to the adviser for investment purposes, but only if the adviser is not
affiliated or associated with a broker or dealer and derives compensation for
its services exclusively from its clients for such advisory services.

Shares of the Institutional Classes are available for purchase at net
asset value, without the imposition of a front-end or contingent deferred sales
charge and are not subject to Rule 12b-1 expenses.

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<PAGE>

INVESTMENT PLANS

Reinvestment Plan/Open Account
Unless otherwise designated by shareholders in writing, dividends from
net investment income and distributions from realized securities profits, if
any, will be automatically reinvested in additional shares of the respective
Fund Class in which an investor has an account (based on the net asset value in
effect on the reinvestment date) and will be credited to the shareholder's
account on that date. All dividends and distributions of the Institutional
Classes are reinvested in the accounts of the holders of such shares (based on
the net asset value in effect on the reinvestment date). A confirmation of each
distribution from realized securities profits, if any, will be mailed to
shareholders in the first quarter of the fiscal year.

Under the Reinvestment Plan/Open Account, shareholders may purchase and
add full and fractional shares to their plan accounts at any time either through
their investment dealers or by sending a check or money order to the specific
Fund and class in which shares are being purchased. Such purchases, which must
meet the minimum subsequent purchase requirements set forth in the Prospectuses
and this Part B, are made, for Class A Shares at the public offering price, and
for Class B Shares, Class C Shares and the Institutional Classes at the net
asset value, at the end of the day of receipt. A reinvestment plan may be
terminated at any time. This plan does not assure a profit nor protect against
depreciation in a declining market.

Reinvestment of Dividends in Other Delaware Group Funds
Subject to applicable eligibility and minimum initial purchase
requirements and the limitations set forth below, holders of Class A, Class B
and Class C Shares may automatically reinvest dividends and/or distributions in
any of the mutual funds in the Delaware Group, including the Funds, in states
where their shares may be sold. Such investments will be at net asset value at
the close of business on the reinvestment date without any front-end sales
charge or service fee. The shareholder must notify the Transfer Agent in writing
and must have established an account in the fund into which the dividends and/or
distributions are to be invested. Any reinvestment directed to a fund in which
the investor does not then have an account will be treated like all other
initial purchases of a fund's shares. Consequently, an investor should obtain
and read carefully the prospectus for the fund in which the investment is
intended to be made before investing or sending money. The prospectus contains
more complete information about the fund, including charges and expenses. See
also Additional Methods of Adding to Your Investment - Dividend Reinvestment
Plan under How to Buy Shares in the Prospectuses for the Fund Classes.

Subject to the following limitations, dividends and/or distributions
from other funds in the Delaware Group may be invested in shares of the Funds,
provided an account has been established. Dividends from Class A Shares may not
be directed to Class B Shares or Class C Shares. Dividends from Class B Shares
may only be directed to other Class B Shares and dividends from Class C Shares
may only be directed to other Class C Shares. See Classes of Shares in the Fund
Classes' Prospectuses for the funds in the Delaware Group that are eligible for
investment by holders of Fund shares.

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<PAGE>

Investing by Electronic Fund Transfer
Direct Deposit Purchase Plan -- Investors may arrange for a Fund to
accept for investment in Class A, Class B or Class C Shares, through an agent
bank, preauthorized government or private recurring payments. This method of
investment assures the timely credit to the shareholder's account of payments
such as social security, veterans' pension or compensation benefits, federal
salaries, Railroad Retirement benefits, private payroll checks, dividends, and
disability or pension fund benefits. It also eliminates lost, stolen and delayed
checks.

Automatic Investing Plan -- Shareholders of Class A, Class B and Class
C Shares may make automatic investments by authorizing, in advance, monthly
payments directly from their checking account for deposit into their Fund
account. This type of investment will be handled in either of the following
ways. (1) If the shareholder's bank is a member of the National Automated
Clearing House Association ("NACHA"), the amount of the investment will be
electronically deducted from his or her account by Electronic Fund Transfer
("EFT"). The shareholder's checking account will reflect a debit each month at a
specified date although no check is required to initiate the transaction. (2) If
the shareholder's bank is not a member of NACHA, deductions will be made by
preauthorized checks, known as Depository Transfer Checks. Should the
shareholder's bank become a member of NACHA in the future, his or her
investments would be handled electronically through EFT.

* * *

Initial investments under the Direct Deposit Purchase Plan and the
Automatic Investing Plan must be for $250 or more and subsequent investments
under such Plans must be for $25 or more. An investor wishing to take advantage
of either service must complete an authorization form. Either service can be
discontinued by the shareholder at any time without penalty by giving written
notice.

Payments to a Fund from the federal government or its agencies on
behalf of a shareholder may be credited to the shareholder's account after such
payments should have been terminated by reason of death or otherwise. Any such
payments are subject to reclamation by the federal government or its agencies.
Similarly, under certain circumstances, investments from private sources may be
subject to reclamation by the transmitting bank. In the event of a reclamation,
a Fund may liquidate sufficient shares from a shareholder's account to reimburse
the government or the private source. In the event there are insufficient shares
in the shareholder's account, the shareholder is expected to reimburse the Fund.

Direct Deposit Purchases by Mail
Shareholders may authorize a third party, such as a bank or employer,
to make investments directly to their Fund accounts. A Fund will accept these
investments, such as bank-by-phone, annuity payments and payroll allotments, by
mail directly from the third party. Investors should contact their employers or
financial institutions who in turn should contact Income Funds, Inc. for proper
instructions.

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<PAGE>

Wealth Builder Option
Shareholders can use the Wealth Builder Option to invest in the Fund
Classes through regular liquidations of shares in their accounts in other mutual
funds in the Delaware Group. Shareholders of the Fund Classes may elect to
invest in one or more of the other mutual funds in the Delaware Group through
the Wealth Builder Option. See Wealth Builder Option and Redemption and Exchange
in the Prospectuses for the Fund Classes.

Under this automatic exchange program, shareholders can authorize
regular monthly investments (minimum of $100 per fund) to be liquidated from
their account and invested automatically into other mutual funds in the Delaware
Group, subject to the conditions and limitations set forth in the Fund Classes'
Prospectuses. The investment will be made on the 20th day of each month (or, if
the fund selected is not open that day, the next business day) at the public
offering price or net asset value, as applicable, of the fund selected on the
date of investment. No investment will be made for any month if the value of the
shareholder's account is less than the amount specified for investment.

Periodic investment through the Wealth Builder Option does not insure
profits or protect against losses in a declining market. The price of the fund
into which investments are made could fluctuate. Since this program involves
continuous investment regardless of such fluctuating value, investors selecting
this option should consider their financial ability to continue to participate
in the program through periods of low fund share prices. This program involves
automatic exchanges between two or more fund accounts and is treated as a
purchase of shares of the fund into which investments are made through the
program. See Exchange Privilege for a brief summary of the tax consequences of
exchanges. Shareholders can terminate their participation at any time by written
notice to their Fund.

Retirement Plans for the Fund Classes
An investment in either Fund may be suitable for tax-deferred
retirement plans. Among the retirement plans noted below, Class B Shares are
available for investment only by Individual Retirement Accounts, Simplified
Employee Pension Plans, 457 Deferred Compensation Plans and 403(b)(7) Deferred
Compensation Plans. The CDSC may be waived on certain redemptions of Class B
Shares and Class C Shares. See Waiver of Contingent Deferred Sales Charge -
Class B and Class C Shares under Redemption and Exchange in the Prospectuses for
the Fund Classes for a list of the instances in which the CDSC is waived.

Each purchase of Class B Shares is subject to a maximum purchase
limitation of $250,000 for retirement plans. Each purchase of Class C Shares
must be in an amount that is less than $1,000,000 for such plans. The maximum
purchase limitations apply only to the initial purchase of shares by the
retirement plan.

Minimum investment limitations generally applicable to other investors
do not apply to retirement plans, other than Individual Retirement Accounts for
which there is a minimum initial purchase of $250, and a minimum subsequent
purchase of $25, regardless of which class is selected. Retirement plans may be
subject to plan establishment fees, annual maintenance fees and/or other
administrative or trustee fees. Fees are based upon the number of participants
in the plan as well as the services selected. Additional information about fees
is included in retirement plan materials. Fees are quoted upon request. Annual
maintenance fees may be

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<PAGE>

shared by Delaware Management Trust Company, the Transfer Agent, other
affiliates of the Manager and others that provide services to such plans.

Certain shareholder investment services available to non-retirement
plan shareholders may not be available to retirement plan shareholders. Certain
retirement plans may qualify to purchase shares of the Institutional Classes.
See The Institutional Classes, above. For additional information on any of the
plans and Delaware's retirement services, call the Shareholder Service Center
telephone number.

It is advisable for an investor considering any one of the retirement
plans described below to consult with an attorney, accountant or a qualified
retirement plan consultant. For further details, including applications for any
of these plans, contact your investment dealer or the Distributor.

Taxable distributions from the retirement plans described below may be
subject to withholding.

Please contact your investment dealer or the Distributor for the
special application forms required for the plans described below.

Prototype Profit Sharing or Money Purchase Pension Plans
Prototype Plans are available for self-employed individuals,
partnerships and corporations which replace the former Keogh and corporate
retirement plans. These Plans contain profit sharing or money purchase pension
plan provisions. Contributions for plans of this type may be invested only in
Class A and Class C Shares.

Individual Retirement Account ("IRA")
A document is available for an individual who wants to establish an IRA
by making contributions which may be tax-deductible, even if the individual is
already participating in an employer-sponsored retirement plan. Even if
contributions are not deductible for tax purposes, as indicated below, earnings
will be tax-deferred. In addition, an individual may make contributions on
behalf of a spouse who has no compensation for the year or elects to be treated
as having no compensation for the year. Investments in each of the Fund Classes
are permissible.

The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who are not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.

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<PAGE>

A company or association may establish a Group IRA for employees or
members who want to purchase shares of a Fund. Purchases of $1 million or more
of Class A Shares qualify for purchase at net asset value but may, under certain
circumstances, be subject to a Limited CDSC. See Purchasing Shares for
information on reduced front-end sales charges applicable to Class A Shares.

Investments generally must be held in the IRA until age 59 1/2 in order
to avoid premature distribution penalties, but distributions generally must
commence no later than April 1 of the calendar year following the year in which
the participant reaches age 70 1/2. Individuals are entitled to revoke the
account, for any reason and without penalty, by mailing written notice of
revocation to Delaware Management Trust Company within seven days after the
receipt of the IRA Disclosure Statement or within seven days after the
establishment of the IRA, except, if the IRA is established more than seven days
after receipt of the IRA Disclosure Statement, the account may not be revoked.
Distributions from the account (except for the pro-rata portion of any
nondeductible contributions) are fully taxable as ordinary income in the year
received. Excess contributions removed after the tax filing deadline, plus
extensions, for the year in which the excess contributions were made are subject
to a 6% excise tax on the amount of excess. Premature distributions
(distributions made before age 59 1/2, except for death, disability and certain
other limited circumstances) will be subject to a 10% excise tax on the amount
prematurely distributed, in addition to the income tax resulting from the
distribution. See Alternative Purchase Arrangements - Class B Shares and Class C
Shares under Classes of Shares, Contingent Deferred Sales Charge-Class B Shares
and Class C Shares under Classes of Shares, and Waiver of Contingent Deferred
Sales Charge - Class B and Class C Shares under Redemption and Exchange in the
Fund Classes' Prospectuses concerning the applicability of a CDSC upon
redemption.

See Appendix A--IRA Information for additional IRA information.

Salary Reduction Simplified Employee Pension Plan ("SAR/SEP")
Employers with 25 or fewer eligible employees can establish this plan
which permits employer contributions and salary deferral contributions in Class
A Shares and Class C Shares only.

Prototype 401(k) Defined Contribution Plan
Section 401(k) of the Code permits employers to establish qualified
plans based on salary deferral contributions. Plan documents are available to
enable employers to establish a plan. An employer may also elect to make profit
sharing contributions and/or matching contributions with investments in only
Class A Shares and Class C Shares or certain other funds in the Delaware Group.
Purchases under the plan may be combined for purposes of computing the reduced
front-end sales charge applicable to Class A Shares as set forth in the table on
page .

Deferred Compensation Plan for Public Schools and Non-Profit Organizations
("403(b)(7)")
Section 403(b)(7) of the Code permits public school systems and certain
non-profit organizations to use mutual fund shares held in a custodial account
to fund deferred compensation arrangements for their employees. A custodial
account agreement is available for those employers who wish to purchase any of
the Fund Classes in conjunction with such an arrangement. Applicable front-end
sales charges with respect to Class A Shares for such purchases are set forth in
the table on page _____.

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Deferred Compensation Plan for State and Local Government Employees ("457")
Section 457 of the Code permits state and local governments, their
agencies and certain other entities to establish a deferred compensation plan
for their employees who wish to participate. This enables employees to defer a
portion of their salaries and any federal (and possibly state) taxes thereon.
Such plans may invest in shares of any of the Fund Classes. Although investors
may use their own plan, there is available a Delaware Group 457 Deferred
Compensation Plan. Interested investors should contact the Distributor or their
investment dealers to obtain further information. Applicable front-end sales
charges for such purchases of Class A Shares are set forth in the table on
page .

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<PAGE>

DETERMINING OFFERING PRICE AND NET ASSET VALUE

Orders for purchases of Class A Shares are effected at the offering
price next calculated by the Fund in which shares are being purchased after
receipt of the order by the Fund or its agent. Orders for purchases of Class B
Shares, Class C Shares and the Institutional Classes are effected at the net
asset value per share next calculated after receipt of the order by the Fund in
which shares are being purchased or its agent. Selling dealers have the
responsibility of transmitting orders promptly.

The offering price for Class A Shares consists of the net asset value
per share plus any applicable sales charges. Offering price and net asset value
are computed as of the close of regular trading on the New York Stock Exchange
(ordinarily, 4 p.m., Eastern time) on days when the Exchange is open. The New
York Stock Exchange is scheduled to be open Monday through Friday throughout the
year except for New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. When the New York Stock
Exchange is closed, the Funds will generally be closed, pricing calculations
will not be made and purchase and redemption orders will not be processed.

An example showing how to calculate the net asset value per share and,
in the case of Class A Shares, the offering price per share, is included in
Delchester Fund's financial statements which are incorporated by reference into
this Part B.

Each Fund's net asset value per share is computed by adding the value
of all the securities and other assets in the portfolio, deducting any
liabilities and dividing by the number of shares outstanding. Expenses and fees
are accrued daily. In determining a Fund's total net assets, portfolio
securities listed or traded on a national securities exchange, except for bonds,
are valued at the last sale price on the exchange upon which such securities are
primarily traded. Securities not traded on a particular day, over-the-counter
securities and government and agency securities are valued at the mean value
between bid and asked prices. Money market instruments having a maturity of less
than 60 days are valued at amortized cost. Debt securities (other than
short-term obligations) are valued on the basis of valuations provided by a
pricing service when such prices are believed to reflect the fair value of such
securities. Use of a pricing service has been approved by the Board of
Directors. Prices provided by a pricing service take into account appropriate
factors such as institutional trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data. If no quotations are available, all other securities and assets are
valued at fair value as determined in good faith and in a method approved by the
Board of Directors.

Each Class of a Fund will bear, pro-rata, all of the common expenses of
that Fund. The net asset values of all outstanding shares of each Class of a
Fund will be computed on a pro-rata basis for each outstanding share based on
the proportionate participation in that Fund represented by the value of shares
of that Class. All income earned and expenses incurred by a Fund will be borne
on a pro-rata basis by each outstanding share of a Class, based on each Class'
percentage in the Fund represented by the value of shares of such Classes,
except that Institutional Classes will not incur any of the expenses under
Income Funds, Inc.'s 12b-1 Plans and the Class A, Class B and Class C Shares
alone will bear the 12b-1 Plan expenses payable under their respective Plans.
Due to the specific distribution expenses and other costs that may be allocable
to each Class of a Fund, the dividends paid to each Class of the Fund may vary.
The net asset value per share of each Class of Delchester Fund and High-Yield
Opportunities Fund is expected to be equivalent. However, the net asset value of
each Class of Strategic Income Fund is expected to vary.

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REDEMPTION AND REPURCHASE

Any shareholder may require a Fund to redeem shares by sending a
written request, signed by the record owner or owners exactly as the shares are
registered, to the Fund at 1818 Market Street, Philadelphia, PA 19103. In
addition, certain expedited redemption methods described below are available
when stock certificates have not been issued. Certificates are issued for Class
A Shares and Institutional Class shares only if a shareholder specifically
requests them. Certificates are not issued for Class B Shares or Class C Shares.
If stock certificates have been issued for shares being redeemed, they must
accompany the written request. For redemptions of $50,000 or less paid to the
shareholder at the address of record, the request must be signed by all owners
of the shares or the investment dealer of record, but a signature guarantee is
not required. When the redemption is for more than $50,000, or if payment is
made to someone else or to another address, signatures of all record owners are
required and a signature guarantee may be required. Each signature guarantee
must be supplied by an eligible guarantor institution. Each Fund reserves the
right to reject a signature guarantee supplied by an eligible institution based
on its creditworthiness. The Funds may request further documentation from
corporations, retirement plans, executors, administrators, trustees or
guardians.

In addition to redemption of Fund shares, the Distributor, acting as
agent of the Funds, offers to repurchase Fund shares from broker/dealers acting
on behalf of shareholders. The redemption or repurchase price, which may be more
or less than the shareholder's cost, is the net asset value per share next
determined after receipt of the request in good order by the respective Fund or
its agent, less any applicable CDSC or Limited CDSC. This is computed and
effective at the time the offering price and net asset value are determined. See
Determining Offering Price and Net Asset Value. The Funds and the Distributor
end their business days at 5 p.m., Eastern time. This offer is discretionary and
may be completely withdrawn without further notice by the Distributor.

Orders for the repurchase of Fund shares which are submitted to the
Distributor prior to the close of its business day will be executed at the net
asset value per share computed that day (subject to the applicable CDSC or
Limited CDSC), if the repurchase order was received by the broker/dealer from
the shareholder prior to the time the offering price and net asset value are
determined on such day. The selling dealer has the responsibility of
transmitting orders to the Distributor promptly. Such repurchase is then settled
as an ordinary transaction with the broker/dealer (who may make a charge to the
shareholder for this service) delivering the shares repurchased.

Certain redemptions of Class A Shares purchased at net asset value may
result in the imposition of a Limited CDSC. See Contingent Deferred Sales Charge
for Certain Redemptions of Class A Shares Purchased at Net Asset Value under
Redemption and Exchange in the Prospectuses for the Fund Classes. Class B Shares
are subject to a CDSC of: (i) 4% if shares are redeemed within two years of
purchase; (ii) 3% if shares are redeemed during the third or fourth year
following purchase; (iii) 2% if shares are redeemed during the fifth year
following purchase; and (iv) 1% if shares are redeemed during the sixth year
following purchase. Class C Shares are subject to a CDSC of 1% if shares are
redeemed within 12 months following purchase. See Contingent Deferred Sales
Charge - Class B Shares and Class C Shares under Classes of Shares in the
Prospectuses for the Fund Classes. Except for the applicable CDSC or Limited
CDSC and, with respect to the expedited payment by wire described below for
which there is currently a $7.50 bank wiring cost, neither the Funds nor the
Funds' Distributor charges a fee for redemptions or repurchases, but such fees
could be charged at any time in the future.

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<PAGE>

Payment for shares redeemed will ordinarily be mailed the next business
day, but in no case later than seven days, after receipt of a redemption request
in good order; provided, however, that each commitment to mail or wire
redemption proceeds by a certain time, as described below, is modified by the
qualifications described in the next paragraph.

Each Fund will process written or telephone redemption requests to the
extent that the purchase orders for the shares being redeemed have already
settled. A Fund will honor redemption requests as to shares for which a check
was tendered as payment, but a Fund will not mail or wire the proceeds until it
is reasonably satisfied that the check has cleared. This potential delay can be
avoided by making investments by wiring Federal Funds.

If a shareholder has been credited with a purchase by a check which is
subsequently returned unpaid for insufficient funds or for any other reason, the
Fund involved will automatically redeem from the shareholder's account the
shares purchased by the check plus any dividends earned thereon. Shareholders
may be responsible for any losses to the Fund or to the Distributor.

In case of a suspension of the determination of the net asset value
because the New York Stock Exchange is closed for other than weekends or
holidays, or trading thereon is restricted or an emergency exists as a result of
which disposal by a Fund of securities owned by it is not reasonably practical,
or it is not reasonably practical for a Fund fairly to value its assets, or in
the event that the SEC has provided for such suspension for the protection of
shareholders, a Fund may postpone payment or suspend the right of redemption or
repurchase. In such case, the shareholder may withdraw the request for
redemption or leave it standing as a request for redemption at the net asset
value next determined after the suspension has been terminated.

Payment for shares redeemed or repurchased may be made either in cash
or kind, or partly in cash and partly in kind. Any portfolio securities paid or
distributed in kind would be valued as described in Determining Offering Price
and Net Asset Value. Subsequent sale by an investor receiving a distribution in
kind could result in the payment of brokerage commissions. However, Income
Funds, Inc. has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940 pursuant to which each Fund is obligated to redeem shares
solely in cash up to the lesser of $250,000 or 1% of the net asset value of such
Fund during any 90-day period for any one shareholder.

The value of a Fund's investments is subject to changing market prices.
Thus, a shareholder reselling shares to a Fund may sustain either a gain or
loss, depending upon the price paid and the price received for such shares.

Small Accounts
Before a Fund involuntarily redeems shares from an account that, under
the circumstances listed in the relevant Prospectus, has remained below the
minimum amounts required by the Fund's Prospectuses and sends the proceeds to
the shareholder, the shareholder will be notified in writing that the value of
the shares in the account is less than the minimum required and will be allowed
60 days from the date of notice to make an additional investment to meet the
required minimum. See The Conditions of Your Purchase under How to Buy Shares in
the Prospectuses. Any redemption in an inactive account established with a
minimum investment may trigger mandatory redemption. No CDSC or Limited CDSC
will apply to the redemptions described in this paragraph.

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Effective November 29, 1995, the minimum initial investment in
Delchester Fund A Class was increased from $250 to $1,000. Class A accounts of
Delchester Fund that were established prior to November 29, 1995 and maintain a
balance in excess of $250 will not presently be subject to the $9 quarterly
service fee that may be assessed against accounts with balances below the stated
minimum nor subject to involuntary redemption.

* * *

Each Fund has made available certain redemption privileges, as
described below. The Funds reserve the right to suspend or terminate these
expedited payment procedures upon 60 days' written notice to shareholders.

Expedited Telephone Redemptions
Shareholders of the Fund Classes or their investment dealers of record
wishing to redeem any amount of shares of $50,000 or less for which certificates
have not been issued may call the Shareholder Service Center at 800-523-1918 or,
in the case of shareholders of the Institutional Classes, their Client Services
Representative at 800-828-5052 prior to the time the offering price and net
asset value are determined, as noted above, and have the proceeds mailed to them
at the address of record. Checks payable to the shareholder(s) of record will
normally be mailed the next business day, but no later than seven days, after
the receipt of the redemption request. This option is only available to
individual, joint and individual fiduciary-type accounts.

In addition, redemption proceeds of $1,000 or more can be transferred
to your predesignated bank account by wire or by check by calling the phone
numbers listed above. An authorization form must have been completed by the
shareholder and filed with the relevant Fund before the request is received.
Payment will be made by wire or check to the bank account designated on the
authorization form as follows:

1. Payment by Wire: Request that Federal Funds be wired to the bank
account designated on the authorization form. Redemption proceeds will normally
be wired on the next business day following receipt of the redemption request.
There is a $7.50 wiring fee (subject to change) charged by CoreStates Bank, N.A.
which will be deducted from the withdrawal proceeds each time the shareholder
requests a redemption. If the proceeds are wired to the shareholder's account at
a bank which is not a member of the Federal Reserve System, there could be a
delay in the crediting of the funds to the shareholder's bank account.

2. Payment by Check: Request a check be mailed to the bank account
designated on the authorization form. Redemption proceeds will normally be
mailed the next business day, but no later than seven days, from the date of the
telephone request. This procedure will take longer than the Payment by Wire
option (1 above) because of the extra time necessary for the mailing and
clearing of the check after the bank receives it.

Redemption Requirements: In order to change the name of the bank and
the account number it will be necessary to send a written request to the
relevant Fund and a signature guarantee may be required. Each signature
guarantee must be supplied by an eligible guarantor institution. The Funds
reserve the right to reject a signature guarantee supplied by an eligible
institution based on its creditworthiness.

To reduce the shareholder's risk of attempted fraudulent use of the
telephone redemption procedure, payment will be made only to the bank account
designated on the authorization form.

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<PAGE>

If expedited payment under these procedures could adversely affect a
Fund, the Fund may take up to seven days to pay the shareholder.

Neither the Funds nor the Funds' Transfer Agent is responsible for any
shareholder loss incurred in acting upon written or telephone instructions for
redemption or exchange of Fund shares which are reasonably believed to be
genuine. With respect to such telephone transactions, each Fund will follow
reasonable procedures to confirm that instructions communicated by telephone are
genuine (including verification of a form of personal identification) as, if it
does not, such Fund or the Transfer Agent may be liable for any losses due to
unauthorized or fraudulent transactions. Telephone instructions received by
shareholders of the Fund Classes are generally tape recorded. A written
confirmation will be provided for all purchase, exchange and redemption
transactions initiated by telephone.

Systematic Withdrawal Plan
Shareholders of Class A, Class B and Class C Shares who own or purchase
$5,000 or more of shares at the offering price, or net asset value, as
applicable, for which certificates have not been issued may establish a
Systematic Withdrawal Plan for monthly withdrawals of $25 or more, or quarterly
withdrawals of $75 or more, although the Funds do not recommend any specific
amount of withdrawal. This $5,000 minimum does not apply for a Fund's prototype
retirement plans. Shares purchased with the initial investment and through
reinvestment of cash dividends and realized securities profits distributions
will be credited to the shareholder's account and sufficient full and fractional
shares will be redeemed at the net asset value calculated on the third business
day preceding the mailing date.

Checks are dated either the 1st or the 15th of the month, as selected
by the shareholder (unless such date falls on a holiday or a weekend), and are
normally mailed within two business days. Both ordinary income dividends and
realized securities profits distributions will be automatically reinvested in
additional shares of the class at net asset value. This plan is not recommended
for all investors and should be started only after careful consideration of its
operation and effect upon the investor's savings and investment program. To the
extent that withdrawal payments from the plan exceed any dividends and/or
realized securities profits distributions paid on shares held under the plan,
the withdrawal payments will represent a return of capital and the share balance
may, in time, be depleted, particularly in a declining market.

The sale of shares for withdrawal payments constitutes a taxable event
and a shareholder may incur a capital gain or loss for federal income tax
purposes. This gain or loss may be long-term or short-term depending on the
holding period for the specific shares liquidated. Premature withdrawals from
retirement plans may have adverse tax consequences.

Withdrawals under this plan made concurrently with the purchases of
additional shares may be disadvantageous to the shareholder. Purchases of Class
A Shares through a periodic investment program in a fund managed by the Manager
must be terminated before a Systematic Withdrawal Plan with respect to such
shares can take effect, except if the shareholder is a participant in one of our
retirement plans or is investing in Delaware Group funds which do not carry a
sales charge. Redemptions of Class A Shares pursuant to a Systematic Withdrawal
Plan may be subject to a Limited CDSC if the purchase was made at net asset
value and a dealer's commission has been paid on that purchase. Redemptions of
Class B Shares or Class C Shares pursuant to a Systematic Withdrawal Plan may be
subject to a CDSC, unless the annual amount selected to be withdrawn is less
than 12% of the account balance on the date that the Systematic Withdrawal Plan
was established. See Waiver of Contingent Deferred Sales Charge - Class B and
Class C Shares and Waiver of

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<PAGE>

Limited Contingent Deferred Sales Charge - Class A Shares under Redemption and
Exchange in the Prospectuses for the Fund Classes. Shareholders should consult
their financial advisers to determine whether a Systematic Withdrawal Plan would
be suitable for them.

An investor wishing to start a Systematic Withdrawal Plan must complete
an authorization form. If the recipient of Systematic Withdrawal Plan payments
is other than the registered shareholder, the shareholder's signature on this
authorization must be guaranteed. Each signature guarantee must be supplied by
an eligible guarantor institution. The Funds reserve the right to reject a
signature guarantee supplied by an eligible institution based on its
creditworthiness. This plan may be terminated by the shareholder or the Transfer
Agent at any time by giving written notice.

The Systematic Withdrawal Plan is not available for the Institutional
Classes.

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<PAGE>

DIVIDENDS AND REALIZED SECURITIES PROFITS DISTRIBUTIONS

Both Delchester Fund and High-Yield Opportunities Fund declare a
dividend to shareholders of each Class of the respective Fund's shares from net
investment income on a daily basis. Dividends are declared each day the
respective Fund is open and paid monthly. Net investment income earned on days
when the respective Fund is not open will be declared as a dividend on the next
business day. Purchases of shares of the respective Fund by wire begin earning
dividends when converted into Federal Funds and are available for investment,
normally the next business day after receipt. However, if the respective Fund is
given prior notice of Federal Funds wire and an acceptable written guarantee of
timely receipt from an investor satisfying the Fund's credit policies, the
purchase will start earning dividends on the date the wire is received.
Investors desiring to guarantee wire payments must have an acceptable financial
condition and credit history in the sole discretion of the respective Fund.
Income Funds, Inc. reserves the right to terminate this option at any time.
Purchases by check earn dividends upon conversion to Federal Funds, normally one
business day after receipt. High-Yield Opportunities Fund does not anticipate
declaring or paying dividends during the first few months following the
commencement of its operations.

Strategic Income Fund expects to declare and pay dividends to
shareholders of each Class of the Fund's shares from net investment income
monthly. However, Strategic Income Fund does not anticipate declaring or paying
dividends during the first few months following the commencement of its
operations.

Each Class of shares of a Fund will share proportionately in the
investment income and expenses of that Fund, except that, absent any applicable
fee waiver, Class A Shares, Class B Shares and Class C Shares alone will incur
distribution fees under their respective 12b-1 Plans.

Dividends are automatically reinvested in additional shares of the same
Class of the respective Fund at net asset value, unless, in the case of
shareholders of the Fund Classes, an election to receive dividends in cash has
been made. Payment by check of cash dividends will ordinarily be mailed within
three business days after the payable date. Dividend payments of $1.00 or less
will be automatically reinvested, notwithstanding a shareholder's election to
receive dividends in cash. If such a shareholder's dividends increase to greater
than $1.00, the shareholder would have to file a new election in order to begin
receiving dividends in cash again. If a shareholder redeems an entire account,
all dividends accrued to the time of the withdrawal will be paid by separate
check at the end of that particular monthly dividend period, consistent with the
payment and mailing schedule described above. Any check in payment of dividends
or other distributions which cannot be delivered by the United States Post
Office or which remains uncashed for a period of more than one year may be
reinvested in the shareholder's account at the then-current net asset value and
the dividend option may be changed from cash to reinvest. A Fund may deduct from
a shareholder's account the costs of the Fund's effort to locate a shareholder
if a shareholder's mail is returned by the United States Post Office or the Fund
is otherwise unable to locate the shareholder or verify the shareholder's
mailing address. These costs may include a percentage of the account when a
search company charges a percentage fee in exchange for their location services.

Any distributions from net realized securities profits will be made
twice a year. The first payment would be made during the first quarter of the
next fiscal year. The second payment would be made near the end of the calendar
year to comply with certain requirements of the Code. Such distributions will be
reinvested in shares, unless the shareholders of the Fund Classes elect to
receive them in cash. The Funds will mail a quarterly statement showing the
dividends paid and all the transactions made during the period.

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<PAGE>

TAXES

It is each Fund's policy to pay out substantially all net investment
income and net realized gains to relieve each Fund of federal income tax
liability on that portion of its income paid to shareholders under Subchapter M
of the Code. Delchester Fund has met these requirements in previous years, and
Delchester Fund and Strategic Income Fund intend to meet the requirements this
year. High-Yield Opportunities Fund intends to meet these requirements when it
commences operations. The Funds also intend to meet the calendar year
distribution requirements imposed by the Code to avoid the imposition of a 4%
excise tax.

The Funds have no fixed policy with regard to distributions of realized
securities profits when such realized securities profits may be offset by
capital losses carried forward. Presently, however, the Funds intend to offset
realized securities profits to the extent of the capital losses carried forward.
Delchester Fund had an accumulated capital loss carryforward of approximately
$238,687,000 at July 31, 1996 which for federal income tax purposes may be
carried forward and applied against future capital gains. The capital loss
carryforward expires as follows: 1998--$58,204,000, 1999--$89,261,000,
2002--$3,628,000 and 2003--$87,594,000.

Distributions of net investment income and short-term realized
securities profits are taxable as ordinary income to shareholders. Since the
major portion of Delchester Fund's and High-Yield Opportunities Fund's
investment income is derived from interest rather than dividends, no portion of
such distributions will be eligible for the dividends-received deduction
available to corporations. It is expected that either none or a nominal portion
of Strategic Income Fund's dividends will be eligible for the dividends-received
deduction. Distributions of long-term capital gains, if any, are taxable as
long-term capital gains, for federal income tax purposes, regardless of the
length of time an investor has held such shares, and these gains are currently
taxed at long-term capital gain rates. The tax status of dividends and
distributions paid to shareholders will not be affected by whether they are paid
in cash or in additional shares. Long-term capital gains distributions are not
eligible for the dividends-received exclusion. Advice as to the tax status of
each year's dividends and distributions, when paid, will be mailed annually.
Shares of the Funds are exempt from Pennsylvania county personal property taxes.

Net long-term gain from the sale of securities when realized and
distributed (actually or constructively) is taxable as capital gain. If the net
asset value of shares were reduced below a shareholder's cost by distribution of
gain realized on sale of securities, such distribution would be a return of
investment though taxable as stated above. Delchester Fund's portfolio
securities had an unrealized net appreciation for tax purposes of $10,241,699 as
of July 31, 1996.

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<PAGE>

INVESTMENT MANAGEMENT AGREEMENTS

The Manager, located at One Commerce Square, Philadelphia, PA 19103,
furnishes investment management services to the Funds, subject to the
supervision and direction of Income Funds, Inc.'s Board of Directors.

The Manager and its predecessors have been managing the funds in the
Delaware Group since 1938. On July 31, 1996, the Manager and its affiliates in
the Delaware Group, including the Sub-Adviser, were supervising in the aggregate
more than $28 billion in assets in various institutional or separately managed
(approximately $17,646,238,000) and investment company (approximately
$10,764,119,000) accounts.

The Investment Management Agreement for Delchester Fund is dated April
3, 1995 and was approved by shareholders on March 29, 1995. The Investment
Management Agreement for Strategic Income Fund is dated September 30, 1996 and
was approved by the initial shareholder on September 30, 1996. The Investment
Management Agreement for High-Yield Opportunities Fund is dated December __,
1996 and was approved by the initial shareholder on December __, 1996. Each
Agreement has an initial term of two years and may be renewed each year only so
long as such renewal and continuance are specifically approved at least annually
by the Board of Directors or by vote of a majority of the outstanding voting
securities of the Fund to which the Agreement relates, and only if the terms and
the renewal thereof have been approved by the vote of a majority of the
directors of Income Funds, Inc. who are not parties thereto or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Each Agreement is terminable without penalty on 60
days' notice by the directors of Income Funds, Inc. or by the Manager.
Each Agreement will terminate automatically in the event of its assignment.

The annual compensation paid by Delchester Fund for investment
management services is equal to .60% on the first $500 million of the Fund's
average daily net assets, .575% of the next $250 million and .55% of the average
daily net assets in excess of $750 million, less Delchester Fund's proportionate
share of all directors' fees paid to the unaffiliated directors of Income Funds,
Inc. On July 31, 1996, the total net assets of Delchester Fund were
$1,214,671,209. The Manager makes all investment decisions which are implemented
by Delchester Fund. The Manager pays the salaries of all directors, officers and
employees who are affiliated with both the Manager and Income Funds, Inc.
Investment management fees paid by Delchester Fund during the past three fiscal
years were $6,090,393 for 1994, $6,469,140 for 1995 and $6,921,586 for 1996.

The annual compensation paid by High-Yield Opportunities Fund for
investment management services is equal to .60% on the first $500 million of the
Fund's average daily net assets, .575% of the next $250 million and .55% of the
average daily net assets in excess of $750 million. The Manager makes all
investment decisions which are implemented by High-Yield Opportunities Fund. The
Manager pays the salaries of all directors, officers and employees who are
affiliated with both the Manager and Income Funds, Inc.

The annual compensation paid by Strategic Income Fund for investment
management services is equal to .65% on the first $500 million of the Fund's
average daily net assets, .625% of the next $500 million and .60% of the average
daily net assets in excess of $1 billion. The Manager pays the salaries of all
directors, officers and employees who are affiliated with both the Manager and
Income Funds, Inc.

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<PAGE>

Subject to the overall supervision of the Manager, the Sub-Adviser
manages the international sector of Strategic Income Fund's portfolio and
furnishes the Manager with investment recommendations, asset allocation advice,
research and other investment services with respect to foreign securities. For
the services provided to the Manager, the Manager pays the Sub-Adviser a fee
equal to one-third of the investment management fees paid to the Manager under
the terms of the Investment Management Agreement.

The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by Strategic Income Fund and to pay certain
expenses of the Fund to the extent necessary to ensure that the total operating
expenses of each Class do not exceed .75% (exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and 12b-1 expenses) during the
commencement of the public offering of the Fund through July 30, 1997.

The Manager has elected voluntarily to waive that portion, if any, of
the annual management fees payable by High-Yield Opportunities Fund and to pay
certain expenses of the Fund to the extent necessary to ensure that the total
operating expenses of each Class do not exceed 1.25% (exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and 12b-1 expenses)
during the commencement of the public offering of the Fund through __________,
199__ .

Except for those expenses borne by the Manager under the Investment
Management Agreements and the Distributor under the Distribution Agreements, the
Funds are responsible for all of their own expenses. Among others, these include
a Fund's proportionate share of rent and certain other administrative expenses;
the investment management fees; transfer and dividend disbursing agent fees and
costs; custodian expenses; federal and state securities registration fees; proxy
costs; and the costs of preparing prospectuses and reports sent to shareholders.
The ratios of expenses to average daily net assets for the Class A Shares, the
Class B Shares and the Institutional Class of Delchester Fund for the fiscal
year ended July 31, 1996 were 1.02%, 1.77% and .77%, respectively. The ratios
for the Class A Shares and the Class B Shares reflect the impact of their
respective 12b-1 Plans. Delchester Fund anticipates that the ratio of expenses
to average daily net assets of Class C Shares will be approximately equal to
that of the Class B Shares.

By California regulation, the Manager is required to waive certain fees
and reimburse a Fund for certain expenses to the extent that such Fund's annual
operating expenses, exclusive of taxes, interest, brokerage commissions and
extraordinary expenses, exceed 2 1/2% of its first $30 million of average daily
net assets, 2% of the next $70 million of average daily net assets and 1/2% of
any additional average daily net assets. For the fiscal year ended July 31,
1996, no such reimbursement was necessary or paid for Delchester Fund.

Distribution and Service
The Distributor, Delaware Distributors, L.P. (which formerly conducted
business as Delaware Distributors, Inc.), located at 1818 Market Street,
Philadelphia, PA 19103, serves as the national distributor of each Fund's shares
under a Distribution Agreement dated as of April 3, 1995, as amended on November
29, 1995 for Delchester Fund, under a separate Distribution Agreement dated as
of September 30, 1996 for Strategic Income Fund and under a separate
Distribution Agreement dated as of December __, 1996 for High-Yield
Opportunities Fund. The Distributor is an affiliate of the Manager and bears all
of the costs of promotion and distribution, except for payments by each Fund on
behalf of its Class A Shares, Class B Shares and Class C Shares under the 12b-1
Plan for each such class. The Distributor has elected voluntarily to waive
payments under the 12b-1 Plan for the Class A Shares, Class B Shares and Class C
Shares of the High-Yield Opportunities Fund during the commencement of the
public offering of the Fund through ______, 199__.

Prior to January 3, 1995, Delaware Distributors, Inc. ("DDI") served as
the national distributor of Delchester Fund's shares. On that date, Delaware
Distributors, L.P., a newly formed limited partnership, succeeded to the
business of DDI. All officers and employees of DDI became officers and employees
of Delaware Distributors, L.P. DDI is the

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<PAGE>

corporate general partner of Delaware Distributors, L.P. and both DDI and
Delaware Distributors, L.P. are indirect, wholly owned subsidiaries of
Delaware Management Holdings, Inc.

The Transfer Agent, Delaware Service Company, Inc., another affiliate
of the Manager located at 1818 Market Street, Philadelphia, PA 19103, serves as
the Funds' shareholder servicing, dividend disbursing and transfer agent
pursuant to an Amended and Restated Shareholders Services Agreement dated as of
December __, 1996. The Transfer Agent also provides accounting services to the
Funds pursuant to the terms of a separate Fund Accounting Agreement. The
Transfer Agent is also an indirect, wholly owned subsidiary of Delaware
Management Holdings, Inc.

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<PAGE>

OFFICERS AND DIRECTORS

The business and affairs of Income Funds, Inc. are managed under the
direction of its Board of Directors. Certain officers and directors of Income
Funds, Inc. hold identical positions in each of the other funds in the Delaware
Group. On November 30, 1996, Income Funds, Inc.'s officers and directors owned
less than 1% of the outstanding shares of the Class A Shares, Class B Shares and
Class C Shares of Delchester Fund and approximately 0.00% of the outstanding
shares of the Institutional Class shares of Delchester Fund. As of the same
date, Income Funds, Inc.'s officers and directors owned approximately 0.00% of
the outstanding shares of the Class A Shares, approximately 0.00% of the
outstanding shares of the Class B Shares, approximately 0.00% of the outstanding
shares of the Class C Shares and approximately 0.00% of the outstanding shares
of the Institutional Class shares of Strategic Income Fund. Shares of High-Yield
Opportunities Fund were not offered for investment prior to the date of this
Part B.

As of November 30, 1996, management believes the following accounts
held 5% or more of the outstanding shares of a Class of shares of Delchester
Fund:
<TABLE>
<CAPTION>

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

Delchester Fund
B Class Merrill Lynch, Pierce, Fenner
& Smith Mutual Fund Operations
Attention Book Entry
4800 Deer Lake Dr East 3rd Fl.
Jacksonville, FL 32246 00,000 0.00%

Delchester Fund
C Class Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303 00,000 0.00%

Merrill Lynch, Pierce, Fenner
& Smith Mutual Fund Operations
Attention Book Entry
4800 Deer Lake Dr. East 3rd Fl.
Jacksonville, FL 32246 00,000 0.00%

Donaldson Lufkin Jenrette
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303 00,000 0.00%

Joel L. Vittori
Trust AAA South Jersey
Pension Plan
201 Kings Highway South
Cherry Hill, NJ 08034 00,000 0.00%

</TABLE>

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<PAGE>

Class Name and Address of Account Share Amount Percentage
- ----- --------------------------- ------------ ----------
<S> <C> <C> <C>
Delchester Fund
Institutional Class Nationwide Life Insurance Co.
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218 00,000 00.00%

Bear Stearns
FBO Raymond G. Perelman
Charitable Remainder Unitrust
One Metrotech Center North
Brooklyn, NY 11201 00,000 00.00%

Charles Schwab & Co. Inc.
Attention Mutual Fund Dept.
101 Montgomery Street
San Francisco, CA 94104 00,000 00.00%

Delaware Management Company
Employee Profit Sharing Trust
1818 Market Street
Philadelphia, PA 19103 00,000 00.00%

Ogden Financial Services Inc.
Attention George Warren
3411 Silverside Road
103 Springer Building
Wilmington, DE 19810 00,000 00.00%

General Refractories Co.
Pension Salaried Plan
c/o Bankers Trust
P.O. Box 1742
Church Street Station
New York, NY 10008 00,000 00.00%
</TABLE>

As of November 30, 1996, management believes the following accounts
held 5% or more of the outstanding shares of a Class of shares of Strategic
Income Fund:

DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Holdings Ltd., Founders
Holdings, Inc., Delaware International Advisers Ltd., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc. are direct
or indirect, wholly owned subsidiaries of Delaware Management Holdings, Inc.
("DMH"). On April 3, 1995, a merger between DMH and a wholly owned subsidiary of
Lincoln National Corporation ("Lincoln National") was completed. In connection
with the merger, a new Investment Management Agreement between Delchester Fund
and the Manager was executed

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<PAGE>

following shareholder approval. DMH and the Manager are now indirect, wholly
owned subsidiaries, and subject to the ultimate control, of Lincoln National.
Lincoln National, with headquarters in Fort Wayne, Indiana, is a diversified
organization with operations in many aspects of the financial services industry,
including insurance and investment management.

Directors and principal officers of Income Funds, Inc. are noted below
along with their ages and their business experience for the past five years.
Unless otherwise noted, the address of each officer and director is One Commerce
Square, Philadelphia, PA 19103.

*Wayne A. Stork (59)
Chairman,President, Chief Executive Officer, Director and/or Trustee
of Income Funds, Inc., 16 other investment companies in the
Delaware Group (which excludes Delaware Pooled Trust, Inc.),
Delaware Management Holdings, Inc., DMH Corp., Delaware
International Holdings Ltd. and Founders Holdings, Inc.
Chairman and Director of Delaware Pooled Trust, Inc., Delaware
Distributors, Inc., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.
Chairman,President, Chief Executive Officer, Chief Investment Officer
and Director of Delaware Management Company, Inc.
Chairman, Chief Executive Officer and Director of Delaware
International Advisers Ltd.
Director of Delaware Service Company, Inc.
During the past five years, Mr. Stork has served in various executive
capacities at different times within the Delaware
organization.

Winthrop S. Jessup (51)
Executive Vice President of Income Funds, Inc., 16 other investment
companies in the Delaware Group (which excludes Delaware
Pooled Trust, Inc.) and Delaware Management Holdings, Inc.
President and Chief Executive Officer of Delaware Pooled Trust, Inc.
President and Director of Delaware Capital Management, Inc.
Executive Vice President and Director of DMH Corp., Delaware Management
Company, Inc., Delaware International Holdings Ltd. and
Founders Holdings, Inc.
Vice Chairman and Director of Delaware Distributors, Inc.
Vice Chairman of Delaware Distributors, L.P.
Director of Delaware Service Company, Inc., Delaware International
Advisers Ltd., Delaware Management Trust Company and Delaware
Investment & Retirement Services, Inc.
During the past five years, Mr. Jessup has served in various
executive capacities at different times within the Delaware
organization.

- ---------------
*Director affiliated with the Income Funds, Inc.'s investment manager and
considered an "interested person" as defined in the 1940 Act.

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<PAGE>

Richard G. Unruh, Jr. (57)
Executive Vice President of Income Funds, Inc. and each of the other
17 investment companies in the Delaware Group.
Executive Vice President and Director of Delaware Management Company,
Inc.
Senior Vice President of Delaware Management Holdings, Inc.
Director of Delaware International Advisers Ltd.
During the past five years, Mr. Unruh has served in various executive
capacities at different times within the Delaware
organization.

Paul E. Suckow (49)
Executive Vice President/Chief Investment Officer, Fixed Income of
Income Funds, Inc., each of the other 17 investment companies
in the Delaware Group and Delaware Management Company, Inc.
Executive Vice President and Director of Founders Holdings, Inc.
Senior Vice President/Chief Investment Officer, Fixed Income of
Delaware Management Holdings, Inc.
Director of Founders CBO Corporation.
Before returning to the Delaware Group in 1993, Mr. Suckow was
Executive Vice President and Director of Fixed Income for
Oppenheimer Management Corporation, New York, NY from 1985 to
1992. Prior to that, Mr. Suckow was a fixed-income portfolio
manager for the Delaware Group.

Walter P. Babich (69)
Director and/or Trustee of Income Funds, Inc. and each of the other
17 investment companies in the Delaware Group.
460 North Gulph Road, King of Prussia, PA 19406.
Board Chairman, Citadel Constructors, Inc.
From 1986 to 1988, Mr. Babich was a partner of Irwin & Leighton and
from 1988 to 1991, he was a partner of I&L Investors.

Anthony D. Knerr (58)
Director and/or Trustee of Income Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
500 Fifth Avenue, New York, NY 10110.
Founder and Managing Director, Anthony Knerr & Associates.
From 1982 to 1988, Mr. Knerr was Executive Vice President/Finance and
Treasurer of Columbia University, New York. From 1987 to
1989, he was also a lecturer in English at the University.
In addition, Mr. Knerr was Chairman of The Publishing Group,
Inc., New York, from 1988 to 1990. Mr. Knerr founded The
Publishing Group, Inc. in 1988.

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<PAGE>

Ann R. Leven (56)
Director and/or Trustee of Income Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
785 Park Avenue, New York, NY 10021.
Treasurer, National Gallery of Art.
From 1984 to 1990, Ms. Leven was Treasurer and Chief Fiscal Officer
of the Smithsonian Institution, Washington, DC, and from 1975
to 1992, she was Adjunct Professor of Columbia Business
School.

W. Thacher Longstreth (76)
Director and/or Trustee of Income Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
City Hall, Philadelphia, PA 19107.
Philadelphia City Councilman.

Charles E. Peck (71)
Director and/or Trustee of Income Funds, Inc. and each of the other 17
investment companies in the Delaware Group.
P.O. Box 1102, Columbia, MD 21044.
Secretary/Treasurer, Enterprise Homes, Inc.
From 1981 to 1990, Mr. Peck was Chairman and Chief Executive Officer
of The Ryland Group, Inc., Columbia, MD.

David K. Downes (56)
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer of Income Funds, Inc., each of the other 17 investment
companies in the Delaware Group and Delaware Management
Company, Inc.
Chairman and Director of Delaware Management Trust Company.
Chief Executive Officer and Director of Delaware Investment &
Retirement Services, Inc.
Executive Vice President/Chief Operating Officer/Chief Administrative
Officer/Chief Financial Officer/Treasurer of Delaware
Management Holdings, Inc.
Senior Vice President/Chief Financial Officer/Treasurer and Director
of DMH Corp.
Senior Vice President/Chief Administrative Officer and Director of
Delaware Distributors, Inc.
Senior Vice President/Chief Administrative Officer of Delaware
Distributors, L.P.
Senior Vice President/Chief Administrative Officer/Chief Financial
Officer and Director of
Delaware Service Company, Inc.
Chief Financial Officer and Director of Delaware International
Holdings Ltd.
Senior Vice President/Chief Financial Officer/Treasurer of Delaware
Capital Management, Inc.
Senior Vice President/Chief Financial Officer and Director of Founders
Holdings, Inc.
Director of Delaware International Advisers Ltd.
Before joining the Delaware Group in 1992, Mr. Downes was Chief
Administrative Officer, Chief Financial Officer and Treasurer
of Equitable Capital Management Corporation, New York, from
December 1985 through August 1992, Executive Vice President
from December 1985 through March 1992 and Vice Chairman from
March 1992 through August 1992.

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<PAGE>

George M. Chamberlain, Jr. (49)
Senior Vice President and Secretary of Income Funds, Inc., each of the
other 17 investment companies in the Delaware Group, Delaware
Management Holdings, Inc. and Delaware Distributors, L.P.
Executive Vice President, Secretary and Director of Delaware Management
Trust Company.
Senior Vice President, Secretary and Director of DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Service Company, Inc., Delaware Investment &
Retirement Services, Inc., Founders Holdings, Inc. and
Delaware Capital Management, Inc.
Secretary and Director of Delaware International Holdings Ltd.
Director of Delaware International Advisers Ltd.
Attorney.
During the past five years, Mr. Chamberlain has served in various
capacities at different times within the Delaware
organization.

Paul A. Matlack (37)
Vice President/Senior Portfolio Manager of Income Funds, Inc., of
11 other investment companies in the Delaware Group and of
Delaware Management Company, Inc.
President and Director of Founders CBO Corporation.
Vice President of Founders Holdings, Inc.
During the past five years, Mr. Matlack has served in various
capacities at different times within the Delaware
organization.

Gerald T. Nichols (38)
Vice President/Senior Portfolio Manager of Income Funds, Inc., of
11 other investment companies in the Delaware Group and of
Delaware Management Company, Inc.
Vice President of Founders Holdings, Inc.
Assistant Secretary, Treasurer and Director of Founders CBO
Corporation.
During the past five years, Mr. Nichols has served in various
capacities at different times within the Delaware
organization.

Babak Zenouzi (33)
Vice President/Portfolio Manager of Income Funds, Inc. and 10 other
investment companies in the Delaware Group.
Vice President/Assistant Portfolio Manager of Delaware Investment
Advisers.
Before joining the Delaware Group in 1992, he was with The Boston
Company where he held the positions of assistant vice
president, senior financial analyst, financial analyst and
portfolio accountant.

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<PAGE>

Paul Grillo (37)
Assistant Vice President/Portfolio Manager of Income Funds, Inc. and
of 11 other investment companies in the Delaware Group.
Before joining the Delaware Group in 1992, Mr. Grillo was a Mortgage
Strategist and Trader at the Dreyfus Corporation.

Joseph H. Hastings (47)
Vice President/Corporate Controller of Income Funds, Inc., each of
the other 17 investment companies in the Delaware Group,
Delaware Management Holdings, Inc., DMH Corp., Delaware
Management Company, Inc., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Capital Management, Inc., Founders Holdings, Inc. and
Delaware International Holdings Ltd.
Chief Financial Officer/Treasurer of Delaware Investment & Retirement
Services, Inc.
Executive Vice President/Chief Financial Officer/Treasurer of Delaware
Management Trust Company.
Assistant Treasurer of Founders CBO Corporation.
1818 Market Street, Philadelphia, PA 19103.
Before joining the Delaware Group in 1992, Mr. Hastings was Chief
Financial Officer for Prudential Residential Services, L.P.,
New York, NY from 1989 to 1992. Prior to that, Mr. Hastings
served as Controller and Treasurer for Fine Homes
International, L.P., Stamford, CT from 1987 to 1989.

Michael P. Bishof (34)
Vice President/Treasurer of Income Funds, Inc., each of the other
17 investment companies in the Delaware Group, Delaware
Management Company, Inc., Delaware Distributors, Inc.,
Delaware Distributors, L.P., Delaware Service Company, Inc.
and Founders Holdings, Inc.
Vice President/Manager of Investment Accounting of Delaware
International Holdings Ltd.
Assistant Treasurer of Founders CBO Corporation.
Before joining the Delaware Group in 1995, Mr. Bishof was a Vice
President for Bankers Trust, New York, NY from 1994 to 1995,
a Vice President for CS First Boston Investment Management,
New York, NY from 1993 to 1994 and an Assistant Vice
President for Equitable Capital Management Corporation,
New York, NY from 1987 to 1993.

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<PAGE>

The following is a compensation table listing for each director
entitled to receive compensation, the aggregate compensation received from
Income Funds, Inc. and the total compensation received from all Delaware Group
funds for the fiscal year ended July 31, 1996 and an estimate of annual benefits
to be received upon retirement under the Delaware Group Retirement Plan for
Directors/Trustees as of July 31, 1996.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits
Accrued Estimated Total
Aggregate as Part Annual Compensation
Compensation of Income Benefits from all 18
from Income Funds, Inc. Upon Delaware
Name Funds, Inc. Expenses Retirement* Group Funds
<S> <C> <C> <C> <C>
W. Thacher Longstreth $3,436 None $30,000 $47,993
Ann R. Leven $3,992 None $30,000 $56,129
Walter P. Babich $3,743 None $30,000 $51,993
Anthony D. Knerr $3,914 None $30,000 $55,129
Charles E. Peck $3,605 None $30,000 $51,129
</TABLE>

* Under the terms of the Delaware Group Retirement Plan for
Directors/Trustees, each disinterested director who, at the time of his
or her retirement from the Board, has attained the age of 70 and served
on the Board for at least five continuous years, is entitled to receive
payments from each fund in the Delaware Group for a period equal to the
lesser of the number of years that such person served as a director or
the remainder of such person's life. The amount of such payments will
be equal, on an annual basis, to the amount of the annual retainer that
is paid to directors of each fund at the time of such person's
retirement. If an eligible director retired as of July 31, 1996, he or
she would be entitled to annual payments totaling $30,000, in the
aggregate, from all of the funds in the Delaware Group, based on the
number of funds in the Delaware Group as of that date.

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<PAGE>

EXCHANGE PRIVILEGE

The exchange privileges available for shareholders of the Classes and
for shareholders of classes of other funds in the Delaware Group are set forth
in the relevant prospectuses for such classes. The following supplements that
information. The Funds may modify, terminate or suspend the exchange privilege
upon 60 days' notice to shareholders.

All exchanges involve a purchase of shares of the fund into which the
exchange is made. As with any purchase, an investor should obtain and carefully
read that fund's prospectus before buying shares in an exchange. The prospectus
contains more complete information about the fund, including charges and
expenses. A shareholder requesting an exchange will be sent a current prospectus
and an authorization form for any of the other mutual funds in the Delaware
Group. Exchange instructions must be signed by the record owner(s) exactly as
the shares are registered.

An exchange constitutes, for tax purposes, the sale of one fund and the
purchase of another. The sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes.

In addition, investment advisers and dealers may make exchanges between
funds in the Delaware Group on behalf of their clients by telephone or other
expedited means. This service may be discontinued or revised at any time by the
Transfer Agent. Such exchange requests may be rejected if it is determined that
a particular request or the total requests at any time could have an adverse
effect on any of the funds. Requests for expedited exchanges may be submitted
with a properly completed exchange authorization form, as described above.

Telephone Exchange Privilege
Shareholders owning shares for which certificates have not been issued
or their investment dealers of record may exchange shares by telephone for
shares in other mutual funds in the Delaware Group. This service is
automatically provided unless the relevant Fund receives written notice from the
shareholder to the contrary.

Shareholders or their investment dealers of record may contact the
Shareholder Service Center at 800-523-1918 or, in the case of shareholders of
the Institutional Classes, their Client Services Representative at 800-828-5052,
to effect an exchange. The shareholder's current Fund account number must be
identified, as well as the registration of the account, the share or dollar
amount to be exchanged and the fund into which the exchange is to be made.
Requests received on any day after the time the offering price and net asset
value are determined will be processed the following day. See Determining
Offering Price and Net Asset Value. Any new account established through the
exchange will automatically carry the same registration, shareholder information
and dividend option as the account from which the shares were exchanged. The
exchange requirements of the fund into which the exchange is being made, such as
sales charges, eligibility and investment minimums, must be met. (See the
prospectus of the fund desired or inquire by calling the Transfer Agent or, as
relevant, your Client Services Representative.) Certain funds are not available
for retirement plans.

The telephone exchange privilege is intended as a convenience to
shareholders and is not intended to be a vehicle to speculate on short-term
swings in the securities market through frequent transactions in and out of the
funds in the Delaware Group. Telephone exchanges may be subject to limitations
as to amounts or frequency. The Transfer Agent and the Funds reserve the right
to record exchange instructions received by telephone and to reject exchange
requests at any time in the future.

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<PAGE>

As described in the Funds' Prospectuses, neither the Funds nor the
Transfer Agent is responsible for any shareholder loss incurred in acting upon
written or telephone instructions for redemption or exchange of Fund shares
which are reasonably believed to be genuine.

Right to Refuse Timing Accounts
With regard to accounts that are administered by market timing services
("Timing Firms") to purchase or redeem shares based on changing economic and
market conditions ("Timing Accounts"), each Fund will refuse any new timing
arrangements, as well as any new purchases (as opposed to exchanges) in Delaware
Group funds from Timing Firms. Each Fund reserves the right to temporarily or
permanently terminate the exchange privilege or reject any specific purchase
order for any person whose transactions seem to follow a timing pattern who: (i)
makes an exchange request out of the Fund within two weeks of an earlier
exchange request out of the Fund, or (ii) makes more than two exchanges out of
the Fund per calendar quarter, or (iii) exchanges shares equal in value to at
least $5 million, or more than 1/4 of 1% of the Fund's net assets. Accounts
under common ownership or control, including accounts administered so as to
redeem or purchase shares based upon certain predetermined market indicators,
will be aggregated for purposes of the exchange limits.

Restrictions on Timed Exchanges
Timing Accounts operating under existing timing agreements may only
execute exchanges between the following eight Delaware Group funds: (1) Decatur
Income Fund, (2) Decatur Total Return Fund, (3) Delaware Fund, (4) Limited- Term
Government Fund, (5) Tax-Free USA Fund, (6) Delaware Cash Reserve, (7)
Delchester Fund and (8) Tax-Free Pennsylvania Fund. No other Delaware Group
funds are available for timed exchanges. Assets redeemed or exchanged out of
Timing Accounts in Delaware Group funds not listed above may not be reinvested
back into that Timing Account. Each Fund reserves the right to apply these same
restrictions to the account(s) of any person whose transactions seem to follow a
timing pattern (as described above).

Each Fund also reserves the right to refuse the purchase side of an
exchange request by any Timing Account, person, or group if, in the Manager's
judgment, the Fund would be unable to invest effectively in accordance with its
investment objectives and policies, or would otherwise potentially be adversely
affected. A shareholder's purchase exchanges may be restricted or refused if a
Fund receives or anticipates simultaneous orders affecting significant portions
of the Fund's assets. In particular, a pattern of exchanges that coincide with a
"market timing" strategy may be disruptive to a Fund and therefore may be
refused.

Except as noted above, only shareholders and their authorized brokers
of record will be permitted to make exchanges or redemptions.

* * *

Following is a summary of the investment objectives of the other
Delaware Group funds:

Delaware Fund seeks long-term growth by a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. Devon Fund
seeks current income and capital appreciation by investing primarily in
income-producing common stocks, with a focus on common stocks the Manager
believes have the potential for above average dividend increases over time.

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<PAGE>

Trend Fund seeks long-term growth by investing in common stock issued
by emerging growth companies exhibiting strong capital appreciation potential.

Value Fund seeks capital appreciation by investing primarily in common
stocks whose market values appear low relative to their underlying value or
future potential.

DelCap Fund seeks long-term capital growth by investing in common
stocks and securities convertible into common stocks of companies that have a
demonstrated history of growth and have the potential to support continued
growth.

Decatur Income Fund seeks the highest possible current income by
investing primarily in common stocks that provide the potential for income and
capital appreciation without undue risk to principal. Decatur Total Return Fund
seeks long-term growth by investing primarily in securities that provide the
potential for income and capital appreciation without undue risk to principal.

U.S. Government Fund seeks high current income by investing primarily
in long-term debt obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.

Limited-Term Government Fund seeks high, stable income by investing
primarily in a portfolio of short- and intermediate-term securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities and
instrumentalities secured by such securities. U.S. Government Money Fund seeks
maximum current income with preservation of principal and maintenance of
liquidity by investing only in short-term securities issued or guaranteed as to
principal and interest by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such securities,
while maintaining a stable net asset value.

Delaware Cash Reserve seeks the highest level of income consistent with
the preservation of capital and liquidity through investments in short-term
money market instruments, while maintaining a stable net asset value.

Tax-Free USA Fund seeks high current income exempt from federal income
tax by investing in municipal bonds of geographically-diverse issuers. Tax-Free
Insured Fund invests in these same types of securities but with an emphasis on
municipal bonds protected by insurance guaranteeing principal and interest are
paid when due. Tax-Free USA Intermediate Fund seeks a high level of current
interest income exempt from federal income tax, consistent with the preservation
of capital by investing primarily in municipal bonds.

Tax-Free Money Fund seeks high current income, exempt from federal
income tax, by investing in short-term municipal obligations, while maintaining
a stable net asset value.

Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal and, to the extent possible, certain Pennsylvania
state and local taxes, consistent with the preservation of capital.

International Equity Fund seeks to achieve long-term growth without
undue risk to principal by investing primarily in international securities that
provide the potential for capital appreciation and income. Global Bond Fund
seeks to achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation. Global

-71-

<PAGE>

Assets Fund seeks to achieve long-term total return by investing in global
securities which will provide higher current income than a portfolio comprised
exclusively of equity securities, along with the potential for capital growth.
Emerging Markets Fund seeks long-term capital appreciation by investing
primarily in equity securities of issuers located or operating in emerging
countries.

Enterprise Fund seeks to provide maximum appreciation of capital by
investing in medium-sized companies which have a dominant position within their
industry, are undervalued, or have potential for growth in earnings. U.S. Growth
Fund seeks to maximize capital appreciation by investing in companies of all
sizes which have low dividend yields, strong balance sheets and high expected
earnings growth rates relative to their industry. World Growth Fund seeks to
maximize total return (capital appreciation and income), principally through
investments in an internationally diversified portfolio of equity securities.
New Pacific Fund seeks long-term capital appreciation by investing primarily in
companies which are domiciled in or have their principal business activities in
the Pacific Basin. Federal Bond Fund seeks to maximize current income consistent
with preservation of capital. The fund attempts to achieve this objective by
investing primarily in securities issued by the U.S. government, its agencies
and instrumentalities. Corporate Income Fund seeks to provide high current
income consistent with preservation of capital. The fund attempts to achieve
this objective primarily by investing in a diversified portfolio of investment
grade fixed-income securities issued by U.S.
corporations.

Delaware Group Premium Fund offers ten funds available exclusively as
funding vehicles for certain insurance company separate accounts. Equity/Income
Series seeks the highest possible total rate of return by selecting issues that
exhibit the potential for capital appreciation while providing higher than
average dividend income. High Yield Series seeks as high a current income as
possible by investing in rated and unrated corporate bonds, U.S. government
securities and commercial paper. Capital Reserves Series seeks a high stable
level of current income while minimizing fluctuations in principal by investing
in a diversified portfolio of short- and intermediate-term securities. Money
Market Series seeks the highest level of income consistent with preservation of
capital and liquidity through investments in short-term money market
instruments. Growth Series seeks long-term capital appreciation by investing its
assets in a diversified portfolio of securities exhibiting the potential for
significant growth. Multiple Strategy Series seeks a balance of capital
appreciation, income and preservation of capital. It uses a dividend-oriented
valuation strategy to select securities issued by established companies that are
believed to demonstrate potential for income and capital growth. International
Equity Series seeks long-term growth without undue risk to principal by
investing primarily in equity securities of foreign issuers that provide the
potential for capital appreciation and income. Value Series seeks capital
appreciation by investing in small- to mid-cap common stocks whose market values
appear low relative to their underlying value or future earnings and growth
potential. Emphasis will also be placed on securities of companies that may be
temporarily out of favor or whose value is not yet recognized by the market.
Emerging Growth Series seeks long-term capital appreciation by investing
primarily in small-cap common stocks and convertible securities of emerging and
other growth-oriented companies. These securities will have been judged to be
responsive to changes in the marketplace and to have fundamental characteristics
to support growth. Income is not an objective. Global Bond Series seeks to
achieve current income consistent with the preservation of principal by
investing primarily in global fixed-income securities that may also provide the
potential for capital appreciation.

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<PAGE>

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

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

-73-

<PAGE>

GENERAL INFORMATION

The Manager is the investment manager of the Funds. The Manager and the
Sub-Adviser also provide investment management services to certain of the other
funds in the Delaware Group. The Manager, through a separate division, also
manages private investment accounts. While investment decisions of the Funds are
made independently from those of the other funds and accounts, investment
decisions for such other funds and accounts may be made at the same time as
investment decisions for the Funds.

Access persons and advisory persons of the Delaware Group of funds, as
those terms are defined in SEC Rule 17j-1 under the 1940 Act, who provide
services to the Manager, the Sub-Adviser or their affiliates, are permitted to
engage in personal securities transactions subject to the exceptions set forth
in Rule 17j-1 and the following general restrictions and procedures: (1) certain
blackout periods apply to personal securities transactions of those persons; (2)
transactions must receive advance clearance and must be completed on the same
day as the clearance is received; (3) certain persons are prohibited from
investing in initial public offerings of securities and other restrictions apply
to investments in private placements of securities; (4) opening positions may
only be closed-out at a profit after a 60-day holding period has elapsed; and
(5) the Compliance Officer must be informed periodically of all securities
transactions and duplicate copies of brokerage confirmations and account
statements must be supplied to the Compliance Officer.

The Distributor acts as national distributor for Income Funds, Inc. and
for the other mutual funds in the Delaware Group. As previously described, prior
to January 3, 1995, DDI served as the national distributor for Delchester Fund.
The Distributor and, in its capacity as such, DDI received net commissions from
Delchester Fund on behalf of Class A Shares, after reallowances to dealers, as
follows:

Total
Amount of Amounts Net
Underwriting Reallowed Commission
Fiscal Year Ended Commission to Dealers to Distributor
- ----------------- ------------ ----------- --------------

July 31, 1996 $3,186,228 $2,659,208 $ 527,020
July 31, 1995 5,089,170 4,248,856 840,314
July 31, 1994 8,625,370 7,218,669 1,406,701

The Distributor and, in its capacity as such, DDI received in the
aggregate Limited CDSC payments with respect to the Delchester Fund A Class as
follows:

Fiscal Year Ended Limited CDSC Payments
----------------- ---------------------

July 31, 1996 $2,090
July 31, 1995 966
July 31, 1994 6,497

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<PAGE>

The Distributor and, in its capacity as such, DDI received in the
aggregate CDSC payments with respect to the Class B Shares of the Delchester
Fund as follows:

Fiscal Year Ended CDSC Payments
----------------- -------------

July 31, 1996 $407,317
July 31, 1995 184,351
July 31, 1994* 1,555

*Date of initial public offering was May 2, 1994.

The Distributor received CDSC payments with respect to the Class C
Shares of the Delchester Fund as follows:

Fiscal Year Ended CDSC Payments
----------------- -------------

July 31, 1996* $502

*Date of initial public offering was November 29, 1995.

Effective as of January 3, 1995, all such payments described above have
been paid to the Distributor.

The Transfer Agent, an affiliate of the Manager, acts as shareholder
servicing, dividend disbursing and transfer agent for Income Funds, Inc. and for
the other mutual funds in the Delaware Group. The Transfer Agent is paid a fee
by the Funds for providing these services consisting of an annual per account
charge of $11.00, in the case of Delchester Fund and High-Yield Opportunities
Fund, and $5.50, in the case of Strategic Income Fund, plus, in each case,
transaction charges for particular services according to a schedule.
Compensation is fixed each year and approved by the Board of Directors,
including a majority of the disinterested directors. The Transfer Agent also
provides accounting services to the Funds. Those services include performing all
functions related to calculating each Fund's net asset value and providing all
financial reporting services, regulatory compliance testing and other related
accounting services. For its services, the Transfer Agent is paid a fee based on
total assets of all funds in the Delaware Group for which it provides such
accounting services. Such fee is equal to .25% multiplied by the total amount of
assets in the complex for which the Transfer Agent furnishes accounting
services, where such aggregate complex assets are $10 billion or less, and .20%
of assets if such aggregate complex assets exceed $10 billion. The fees are
charged to each fund, including the Funds, on an aggregate pro-rata basis. The
asset-based fee payable to the Transfer Agent is subject to a minimum fee
calculated by determining the total number of investment portfolios and
associated classes.

The Manager and its affiliates own the name "Delaware Group." Under
certain circumstances, including the termination of the Funds' advisory
relationships with the Manager or their distribution relationships with the
Distributor, the Manager and its affiliates could cause Income Funds, Inc. to
delete the words "Delaware Group" from Income Funds, Inc.'s name.

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<PAGE>

The Chase Manhattan Bank ("Chase"), 4 Chase Metrotech Center, Brooklyn,
NY 11245 is custodian of Delchester Fund's and High-Yield Opportunities Fund's
securities and cash. Bankers Trust Company ("Bankers"), One Bankers Trust Plaza,
New York, NY 10006, is custodian of Strategic Income Fund's securities and cash.
As custodian for a Fund, Chase or, as relevant, Bankers maintains a separate
account or accounts for the Fund; receives, holds and releases portfolio
securities on account of the Fund; receives and disburses money on behalf of the
Fund; and collects and receives income and other payments and distributions on
account of the Fund's portfolio securities.

The legality of the issuance of the shares offered hereby, registered
pursuant to Rule 24f-2 under the 1940 Act, has been passed upon for Income
Funds, Inc. by Stradley, Ronon, Stevens & Young, LLP, Philadelphia,
Pennsylvania.

Shares of the Funds are exempt from Pennsylvania personal property
taxes and qualify as an authorized investment for trustees in Pennsylvania if
such an investment is otherwise appropriate.

Capitalization
Income Funds, Inc. has a present authorized capitalization of one
billion shares of capital stock with a $1.00 par value per share. Five hundred
million shares have been allocated to the Delchester Fund series of shares, two
hundred million shares have been allocated to the Strategic Income Fund series
of shares, and two hundred million shares have been allocated to the High-Yield
Opportunities Fund series. Each Fund offers four classes of shares, each
representing a proportionate interest in the assets of that Fund, and each
having the same voting and other rights and preferences as the other classes,
except that shares of a Fund's Institutional Class may not vote on matters
affecting the Fund's Distribution Plans under Rule 12b-1. Similarly, as a
general matter, shareholders of Class A Shares, Class B Shares and Class C
Shares of a Fund may vote only on matters affecting the 12b-1 Plan that relates
to the class of shares that they hold. However, Class B Shares of a Fund may
vote on any proposal to increase materially the fees to be paid by the Fund
under the Rule 12b-1 Plans relating to its Class A Shares. General expenses of a
Fund will be allocated on a pro-rata basis to the classes according to asset
size, except that expenses of the Rule 12b-1 Plans of each Fund's Class A, Class
B and Class C Shares will be allocated solely to those classes. The Board of
Directors of Income Funds, Inc. has allocated three hundred fifty million shares
to the Delchester Fund A Class, and fifty million shares each to the Delchester
Fund B Class, the Delchester Fund C Class and the Delchester Fund Institutional
Class; one hundred million shares to the Strategic Income Fund A Class,
twenty-five million shares each to the Strategic Income Fund B Class and the
Strategic Income Fund C Class and fifty million shares to the Strategic Income
Fund Institutional Class; and one hundred million shares to the High-Yield
Opportunities Fund A Class, twenty-five million shares each to the High-Yield
Opportunities Fund B Class and the High-Yield Opportunities Fund C Class and
fifty million shares to the High-Yield Opportunities Fund Institutional Class.

Shares have no preemptive rights, are fully transferable and, when
issued, are fully paid and nonassessable.

Until May 31, 1992, the Delchester Fund offered shares of two retail
classes, Delchester I class and Delchester II class (now, the Class A Shares of
the Delchester Fund). Delchester I class shares were offered with a higher sales
charge than that applicable to the Delchester II class, but without the
imposition of a Rule 12b-1 fee. Effective June 1, 1992, following shareholder
approval of a Plan of Recapitalization on May 8, 1992, shareholders of the
Delchester I class had their shares converted into shares of the Delchester II
class and

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<PAGE>

became subject to that class' Rule 12b-1 charges. Effective at the same time,
following approval by shareholders, the name of the Delchester II class was
changed to the Delchester Fund class. Effective May 2, 1994, the Delchester Fund
class became known as the Delchester Fund A Class and the Delchester Fund
(Institutional) class became known as the Delchester Fund Institutional Class.

Until September 30, 1996, Income Funds, Inc. operated as Delaware Group
Delchester High-Yield Bond Fund, Inc., and offered one series of shares, the
Delchester Fund.

Noncumulative Voting
Income Funds, Inc.'s shares have noncumulative voting rights which
means that the holders of more than 50% of the shares of Income Funds, Inc.
voting for the election of directors can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares will not be
able to elect any directors.

This Part B does not include all of the information contained in the
Registration Statement which is on file with the SEC.

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<PAGE>

APPENDIX A--IRA INFORMATION

The Tax Reform Act of 1986 (the "Act") restructured, and in some cases
eliminated, the tax deductibility of IRA contributions. Under the Act, the full
deduction for IRAs ($2,000 for each working spouse and $2,250 for one-income
couples) was retained for all taxpayers who are not covered by an
employer-sponsored retirement plan. Even if a taxpayer (or his or her spouse) is
covered by an employer-sponsored retirement plan, the full deduction is still
available if the taxpayer's adjusted gross income is below $25,000 ($40,000 for
taxpayers filing joint returns). A partial deduction is allowed for married
couples with incomes between $40,000 and $50,000, and for single individuals
with incomes between $25,000 and $35,000. The Act does not permit deductions for
contributions to IRAs by taxpayers whose adjusted gross income before IRA
deductions exceeds $50,000 ($35,000 for singles) and who are active participants
in an employer-sponsored retirement plan. Taxpayers who were not allowed
deductions on IRA contributions still can make nondeductible IRA contributions
of as much as $2,000 for each working spouse ($2,250 for one-income couples),
and defer taxes on interest or other earnings from the IRAs. Special rules apply
for determining the deductibility of contributions made by married individuals
filing separate returns.

As illustrated in the following tables, maintaining an IRA remains a
valuable opportunity.

For many, an IRA will continue to offer both an up-front tax break with
its tax deduction each year and the real benefit that comes with tax-deferred
compounding. For others, losing the tax deduction will impact their taxable
income status each year. Over the long term, however, being able to defer taxes
on earnings still provides an impressive investment opportunity--a way to have
money grow faster due to tax-deferred compounding.

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<PAGE>

Even if your IRA contribution is no longer deductible, the benefits of
saving on a tax-deferred basis can be substantial. The following tables
illustrate the benefits of tax-deferred versus taxable compounding. Each
reflects a constant 10% rate of return, compounded annually, with the
reinvestment of all proceeds. The tables do not take into account any sales
charges or fees. Of course, earnings accumulated in your IRA will be subject to
tax upon withdrawal. If you choose a mutual fund with a fluctuating net asset
value, like the Funds, your bottom line at retirement could be lower--it could
also be much higher.

$2,000 Invested Annually Assuming a 10% Annualized Return
<TABLE>
<CAPTION>

15% Tax Bracket Single -- $0 - $24,000
--------------- Joint -- $0 - $40,100

How Much
Cumulative How Much You Have
End of Investment You Have With Full
Year Amount Without IRA IRA Deduction
<S> <C> <C> <C>
1 $ 2,000 $ 1,844 $ 2,200
5 10,000 10,929 13,431
10 20,000 27,363 35,062
15 30,000 52,074 69,899
20 40,000 89,231 126,005
25 50,000 145,103 216,364
30 60,000 229,114 361,887
35 70,000 355,438 596,254
40 80,000 545,386 973,704

[Without IRA--investment of $1,700 ($2,000 less 15%) earning 8.5% (10% less 15%)]

28% Tax Bracket Single -- $24,001 - $58,150
--------------- Joint -- $40,101 - $96,900

How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
1 $ 2,000 $ 1,544 $ 1,584 $ 2,200
5 10,000 8,913 9,670 13,431
10 20,000 21,531 25,245 35,062
15 30,000 39,394 50,328 69,899
20 40,000 64,683 90,724 126,005
25 50,000 100,485 155,782 216,364
30 60,000 151,171 260,559 361,887
35 70,000 222,927 429,303 596,254
40 80,000 324,512 701,067 973,704

[Without IRA--investment of $1,440 ($2,000 less 28%) earning 7.2% (10% less 28%)]

[With IRA--No Deduction--investment of $1,440 ($2,000 less 28%) earning 10%]
</TABLE>

-79-

<PAGE>

31% Tax Bracket Single -- $58,151 - $121,300
--------------- Joint -- $96,901 - $147,700

How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
<S> <C> <C> <C> <C>
1 $ 2,000 $ 1,475 $ 1,518 $ 2,200
5 10,000 8,467 9,268 13,431
10 20,000 20,286 24,193 35,062
15 30,000 36,787 48,231 69,899
20 40,000 59,821 86,943 126,005
25 50,000 91,978 149,291 216,364
30 60,000 136,868 249,702 361,887
35 70,000 199,536 411,415 596,254
40 80,000 287,021 671,855 973,704

[Without IRA--investment of $1,380 ($2,000 less 31%) earning 6.9% (10% less 31%)]

[With IRA--No Deduction--investment of $1,380 ($2,000 less 31%) earning 10%]

36% Tax Bracket* Single -- $121,301 - $263,750
--------------- Joint -- $147,701 - $263,750

How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction

1 $ 2,000 $ 1,362 $ 1,408 $ 2,200
5 10,000 7,739 8,596 13,431
10 20,000 18,292 22,440 35,062
15 30,000 32,683 44,736 69,899
20 40,000 52,308 80,643 126,005
25 50,000 79,069 138,473 216,364
30 60,000 115,562 231,608 361,887
35 70,000 165,327 381,602 596,254
40 80,000 233,190 623,170 973,704

[Without IRA--investment of $1,280 ($2,000 less 36%) earning 6.4% (10% less 36%)]

[With IRA--No Deduction--investment of $1,280 ($2,000 less 36%) earning 10%]

</TABLE>
-80-

39.6% Tax Bracket* Single -- over $263,750
----------------- Joint -- over $263,750

How Much How Much You Have
Cumulative You Have With Full IRA
End of Investment Without No
Year Amount IRA Deduction Deduction
<S> <C> <C> <C> <C>

1 $ 2,000 $ 1,281 $ 1,329 $ 2,200
5 10,000 7,227 8,112 13,431
10 20,000 16,916 21,178 35,062
15 30,000 29,907 42,219 69,899
20 40,000 47,324 76,107 126,005
25 50,000 70,677 130,684 216,364
30 60,000 101,986 218,580 361,887
35 70,000 143,965 360,137 596,254
40 80,000 200,249 588,117 973,704

[Without IRA--investment of $1,208 ($2,000 less 39.6%) earning 6.04% (10% less 39.6%)]

[With IRA--No Deduction--investment of $1,208 ($2,000 less 39.6%) earning 10%]
</TABLE>

- -----------------------
* For tax years beginning after 1992, a 36% tax rate applies to all
taxable income in excess of the maximum dollar amounts subject to the
31% tax rate. In addition, a 10% surtax (not applicable to capital
gains) applies to certain high-income taxpayers. It is computed by
applying a 39.6% rate to taxable income in excess of $263,750. The
above tables do not reflect the personal exemption phaseout nor the
limitations of itemized deductions that may apply.

-81-

<PAGE>

$2,000 SINGLE INVESTMENT AT A RETURN OF 10%
COMPOUNDED MONTHLY

TAXABLE-- TAXABLE-- TAXABLE--
YEARS 39.6%* 36%* 31%
- --------------------------------------------------------------------------------

10 $ 3,653 $ 3,787 $ 3,980
15 4,938 5,210 5,614
20 6,673 7,169 7,918
30 12,190 13,572 15,756
40 22,267 25,696 31,351

TAXABLE-- TAXABLE-- TAX
YEARS 28% 15% DEFERRED
- --------------------------------------------------------------------------------

10 $ 4,100 $ 4,665 $ 5,414
15 5,870 7,125 8,908
20 8,405 10,882 14,656
30 17,231 25,385 39,675
40 35,323 59,214 107,401

$2,000 INVESTED ANNUALLY AT A RETURN OF 10%
COMPOUNDED MONTHLY

TAXABLE-- TAXABLE-- TAXABLE--
YEARS 39.6%* 36%* 31%
- --------------------------------------------------------------------------------

10 $ 28,276 $ 28,891 $ 29,773
15 50,241 51,913 54,348
20 79,928 83,590 89,014
30 174,276 187,150 206,891
40 347,756 383,214 441,441

TAXABLE-- TAXABLE-- TAX
YEARS 28% 15% DEFERRED
- --------------------------------------------------------------------------------

10 $ 30,317 $ 32,819 $ 36,018
15 55,875 63,110 72,877
20 92,468 109,373 133,521
30 219,878 287,948 397,466
40 481,071 704,501 1,111,974

-82-

<PAGE>

THE VALUE OF STARTING YOUR IRA EARLY

The following illustrates how much more you would have contributing
$2,000 each January--the earliest opportunity--compared to contributing on April
15th of the following year--the latest, for each tax year.

After 5 years $3,528 more
10 years $6,113
20 years $17,228
30 years $47,295

Compounded returns for the longest period of time is the key. The above
illustration assumes a 10% rate of return and the reinvestment of all proceeds.
And it pays to shop around. If you get just 2% more per year, it can
make a big difference when you retire. A constant 8% versus 10% return,
compounded monthly, illustrates the point. This chart is based on a yearly
investment of $2,000 on January 1. After 30 years the difference can mean as
much as 50% more!

8% 10%
-- ---

10 years $ 31,828 $ 36,018
30 years 259,288 397,466

The statistical exhibits above are for illustration purposes only and
do not reflect the actual performance for the Funds either in the past or in the
future.

-83-

<PAGE>

FINANCIAL STATEMENTS

Ernst & Young LLP serves as the independent auditors for Income Funds,
Inc. (formerly, Delaware Group Delchester High-Yield Bond Fund, Inc.) and, in
its capacity as such, audits the financial statements contained in Income Funds,
Inc.'s Annual Report. Delchester Fund's Statement of Net Assets, Statement of
Operations, Statement of Changes in Net Assets and Notes to Financial
Statements, as well as the report of Ernst & Young LLP, independent auditors,
for the fiscal year ended July 31, 1996 are included in Delchester Fund's Annual
Report to shareholders. The financial statements, the notes relating thereto and
the report of Ernst & Young LLP listed above are incorporated by reference from
the Annual Report into this Part B. Strategic Income Fund was not offered to the
public prior to October 1, 1996 and High-Yield Opportunities Fund was not
offered to the public prior to the date of this Part B.

-84-

<PAGE>

PART C

Other Information

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Part A - Financial Highlights for Delchester Fund

*Part B - Statement of Net Assets
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Accountant's Report

* The financial statements and Accountant's Report
listed above for Delchester Fund for the fiscal year
ended July 31, 1996 are incorporated into Part B by
reference. Strategic Income Fund commenced operations
on October 1, 1996. High-Yield Opportunities Fund
is expected to commence operations on or about
December 30, 1996.

(b) Exhibits:

(1) Articles of Incorporation.

(a) Articles of Incorporation, as amended
and supplemented through November 22,
1995, incorporated into this filing by
reference to Post-Effective Amendment
No. 52 filed November 22, 1995.

(b) Executed Articles Supplementary
(November 28, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 53 filed
July 17, 1996.

(d) Executed Articles Supplementary
(September 24, 1996) attached as
Exhibit.

(e) Proposed Articles Supplementary (1996)
attached as Exhibit.

(2) By-Laws. By-Laws, as amended to date,
incorporated into this filing by reference to
Post-Effective Amendment No. 52 filed November
22, 1995.

(3) Voting Trust Agreement. Inapplicable.

<PAGE>

PART C - Other Information
(Continued)

(4) Copies of All Instruments Defining the Rights of
Holders.

(a) Articles of Incorporation, Articles of
Amendment and Articles Supplementary.

(i) Article Second of Articles
Supplementary (June 1, 1992 and
April 29, 1995), Article Fifth
of Articles of Incorporation
(March 4, 1983) and Article
Tenth of Articles of Amendment
(May 2, 1985) incorporated into
this filing by reference to
Post-Effective Amendment No. 52
filed November 22, 1995.

(ii) Article Third of Articles
Supplementary (November 28,
1995) incorporated into this
filing by reference to
Post-Effective Amendment No. 53
filed July 17, 1996.

(iii) Executed Article Fourth of
Articles Supplementary (1996)
attached as Exhibit
24(b)(1)(d).

(iv) Proposed Articles Supplementary
(1996) attached as Exhibit
24(b)(1)(e).

(b) By-Laws. Article II, Article III, as
amended, and Article XIII, which was
subsequently redesignated as Article
XIV, incorporated into this filing by
reference to Post-Effective Amendment
No. 52 filed November 22, 1995.

(5) Investment Management Agreements.

(a) Executed Investment Management
Agreement (April 3, 1995) between
Delaware Management Company, Inc. and
the Registrant on behalf of Delchester
Fund incorporated into this filing by
reference to Post- Effective Amendment
No. 52 filed November 22, 1995.

(b) Executed Investment Management
Agreement (September 30, 1996) between
Delaware Management Company, Inc. and
the Registrant on behalf of Strategic
Income Fund attached as Exhibit.

<PAGE>

PART C - Other Information
(Continued)

(c) Executed Sub-Advisory Agreement
(September 30, 1996) between Delaware
Management Company, Inc. and Delaware
International Advisers Ltd. with
respect to Strategic Income Fund
attached as Exhibit.

(d) Proposed Investment Management
Agreement (1996) between Delaware
Management Company, Inc. and the
Registrant on behalf of High-Yield
Opportunities Fund attached as Exhibit.

(6) (a) Distribution Agreements.

(i) Executed Distribution Agreement
(April 3, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Delchester Fund incorporated
into this filing by reference
to Post-Effective Amendment No.
53 filed July 17, 1996.

(ii) Executed Amendment No. 1 to
Distribution Agreement
(November 29, 1995) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Delchester Fund incorporated
into this filing by reference
to Post-Effective Amendment No.
53 filed July 17, 1996.

(iii) Executed Distribution Agreement
(September 30, 1996) between
Delaware Distributors, L.P. and
the Registrant on behalf of
Strategic Income Fund attached
as Exhibit.

(iv) Proposed Distribution Agreement
(1996) between Delaware
Distributors, L.P. and the
Registrant on behalf of
High-Yield Opportunities Fund
included as Module.

(b) Administration and Service Agreement.
Form of Administration and Service
Agreement (as amended November 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 52 filed November 22, 1995.

(c) Dealer's Agreement. Dealer's Agreement
(as amended November 1995) incorporated
into this filing by reference to
Post-Effective Amendment No. 52 filed
November 22, 1995.

(d) Mutual Fund Agreement for the Delaware
Group of Funds (as amended November
1995) incorporated into this filing by
reference to Post-Effective Amendment
No. 53 filed July 17, 1996.

<PAGE>

PART C - Other Information
(Continued)

(7) Bonus, Profit Sharing, Pension Contracts.

(a) Amended and Restated Profit Sharing
Plan (November 17, 1994) incorporated
into this filing by reference to
Post-Effective Amendment No. 52 filed
November 22, 1995.

(b) Amendment to Profit Sharing Plan
(December 21, 1995) incorporated into
this filing by reference to
Post-Effective Amendment No. 53 filed
July 17, 1996.

(8) Custodian Agreements.

(a) Executed Custodian Agreement (May 1,
1996) between The Chase Manhattan Bank
and the Registrant on behalf of
Delchester Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 53 filed July 17, 1996.

(b) Proposed Securities Lending Agreement
(1996) between The Chase Manhattan Bank
and the Registrant on behalf of
Delchester Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 53 filed July 17, 1996.

(c) Proposed Custodian Agreement (1996)
between Bankers Trust Company and the
Registrant on behalf of Strategic
Income Fund incorporated into this
filing by reference to Post-Effective
Amendment No. 53 filed July 17, 1996.

(d) Proposed Securities Lending Agreement
(1996) between Bankers Trust Company
and the Registrant on behalf of
Strategic Income Fund incorporated into
this filing by reference to
Post-Effective Amendment No. 53 filed
July 17, 1996.

(e) Proposed Custodian Agreement (1996)
between The Chase Manhattan Bank and
the Registrant on behalf of High-Yield
Opportunities Fund attached as Exhibit.

(f) Proposed Securities Lending Agreement
(1996) between The Chase Manhattan Bank
and the Registrant on behalf of
High-Yield Opportunities Fund attached
as Exhibit.

<PAGE>

PART C - Other Information
(Continued)

(9) Other Material Contracts.

(a) Executed Amended and Restated
Shareholders Services Agreement
(September 30, 1996) between Delaware
Service Company, Inc. and the
Registrant on behalf of Delchester Fund
and Strategic Income Fund attached as
Exhibit.

(i) Proposed Amended and Restated
Shareholders Services Agreement
(1996) between Delaware Service
Company, Inc. and the
Registrant on behalf of
Delchester Fund, Strategic
Income Fund and High-Yield
Opportunities Fund included
as Module.

(b) Executed Delaware Group of Funds Fund
Accounting Agreement between Delaware
Service Company, Inc. and the
Registrant (August 19, 1996)
incorporated into this filing by
reference to Post-Effective Amendment
No. 54 filed September 27, 1996.

(i) Executed Amendment No. 1
(September 30, 1996) to
Schedule A to Delaware Group of
Funds Fund Accounting Agreement
attached as Exhibit.

(ii) Proposed Amendment to Schedule
A to Delaware Group of Funds
Fund Accounting Agreement
included as Module.

(10) Opinion of Counsel. Filed with letter relating
to Rule 24f-2 on September 20, 1996.

(11) Consent of Auditors. Attached as Exhibit.

(12-13) Inapplicable.

(14) Model Plans. Incorporated into this filing by
reference to Post-Effective Amendment No. 49
filed September 28, 1993 and Post-Effective
Amendment No. 52 filed November 22, 1995.

**(15) Plans under Rule 12b-1.

(a) Plan under Rule 12b-1 for Delchester
Fund A Class (November 29, 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 53 filed July 17, 1996.

** Relates to the A, B and C Classes of Delchester Fund, Strategic Income Fund
and High-Yield Opportunities Fund.

<PAGE>

PART C - Other Information
(Continued)

(b) Plan under Rule 12b-1 for Delchester
Fund B Class (November 29, 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 53 filed July 17, 1996.

(c) Plan under Rule 12b-1 for Delchester
Fund C Class (November 29, 1995)
incorporated into this filing by
reference to Post-Effective Amendment
No. 53 filed July 17, 1996.

(d) Plan under Rule 12b-1 for Strategic
Income Fund A Class (September 30,
1996) attached as Exhibit.

(e) Plan under Rule 12b-1 for Strategic
Income Fund B Class (September 30,
1996) attached as Exhibit.

(f) Plan under Rule 12b-1 for Strategic
Income Fund C Class (September 30,
1996) attached as Exhibit.

(g) Proposed Plan under Rule 12b-1 for
High-Yield Opportunities Fund A
Class (1996) included as Module.

(h) Proposed Plan under Rule 12b-1 for
High-Yield Opportunities Fund B
Class (1996) included as Module.

(i) Proposed Plan under Rule 12b-1 for
High-Yield Opportunities Fund C
Class (1996) included as Module.

(16) Schedules of Computation for each Performance
Quotation.

(a) Incorporated into this filing by
reference to Post-Effective Amendment
No. 52 filed November 22, 1995 and
Post-Effective Amendment No. 54 filed
September 27, 1996.

(17) Financial Data Schedules. Incorporated into this
filing by reference to Post-Effective Amendment
No. 54 filed September 27, 1996.

<PAGE>

PART C - Other Information
(Continued)

***(18) Plan under Rule 18f-3.

(a) Plan under Rule 18f-3 (November 29,
1995) included as Module.

(b) Amended Appendix A (September 30, 1996)
to Plan under Rule 18f-3 attached as
Exhibit.

(19) Other: Directors' Power of Attorney.
Incorporated into this filing by reference to
Post-Effective Amendment No. 52 filed
November 22, 1995.

***Relates to Strategic Income Fund.

Item 25. Persons Controlled by or under Common Control with Registrant.
None.

Item 26. Number of Holders of Securities.

(1) (2)

Number of
Title of Class Record Holders
-------------- --------------

Delaware Group Income Funds, Inc.
Delchester Fund series:

Delchester Fund A Class
Common Stock Par Value 45,456 Accounts as of
$1.00 Per Share September 27, 1996

Delchester Fund B Class
Common Stock Par Value 7,395 Accounts as of
$1.00 Per Share September 27, 1996

Delchester Fund C Class
Common Stock Par Value 260 Accounts as of
$1.00 Per Share September 27, 1996

Delchester Fund Institutional Class
Common Stock Par Value 40 Accounts as of
$1.00 Per Share August 27, 1996

<PAGE>

PART C - Other Information
(Continued)
Number of
Title of Class Record Holders*
-------------- ---------------

Delaware Group Income Funds, Inc.
Strategic Income Fund series:

Strategic Income Fund A Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

Strategic Income Fund B Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

Strategic Income Fund C Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

Strategic Income Fund Institutional Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

Delaware Group Income Funds, Inc.
High-Yield Opportunities Fund series:

High-Yield Opportunities Fund A Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

High-Yield Opportunities Fund B Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

High-Yield Opportunities Fund C Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

High-Yield Opportunities Fund
Institutional Class
Common Stock Par Value 0 Accounts as of
$1.00 Per Share September 27, 1996

* Shares of Strategic Income Fund were not offered prior to October 1, 1996
and shares of High-Yield Opportunities Fund were not offered prior to
the effective date of this Registration Statement.

<PAGE>

PART C - Other Information
(Continued)

Item 27. Indemnification. Incorporated into this filing by reference
to Post-Effective Amendment No. 30 filed July 28, 1983 and
Article VII of the By-Laws, as amended, incorporated into this
filing by reference to Post-Effective Amendment No. 52 filed
November 22, 1995.

Item 28. Business and Other Connections of Investment Adviser and
Sub-Investment Adviser.

Delaware Management Company, Inc. (the "Manager") serves as
investment manager to the Registrant and also serves as investment manager or
sub-adviser to certain of the other funds in the Delaware Group (Delaware Group
Delaware Fund, Inc., Delaware Group Trend Fund, Inc., Delaware Group Value Fund,
Inc., Delaware Group DelCap Fund, Inc., Delaware Group Decatur Fund, Inc.,
Delaware Group Government Fund, Inc., Delaware Group Limited-Term Government
Funds, Inc., Delaware Group Cash Reserve, Inc., Delaware Group Tax-Free Fund,
Inc., DMC Tax-Free Income Trust-Pennsylvania, Delaware Group Tax-Free Money
Fund, Inc., Delaware Group Premium Fund, Inc., Delaware Group Global &
International Funds, Inc., Delaware Pooled Trust, Inc., Delaware Group Adviser
Funds, Inc., Delaware Group Dividend and Income Fund, Inc. and Delaware Group
Global Dividend and Income Fund, Inc.) and provides investment advisory services
to institutional accounts, primarily retirement plans and endowment funds. In
addition, certain directors of the Manager also serve as directors/trustees of
the other Delaware Group funds, and certain officers are also officers of these
other funds. A company indirectly owned by the Manager's parent company acts as
principal underwriter to the mutual funds in the Delaware Group (see Item 29
below) and another such company acts as the shareholder servicing, dividend
disbursing, fund accounting and transfer agent for all of the mutual funds in
the Delaware Group.

<PAGE>

PART C - Other Information
(Continued)

The following persons serving as directors or officers of the
Manager have held the following positions during the past two years:

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
Wayne A. Stork Chairman of the Board, President, Chief Executive Officer, Chief Investment
Officer and Director of Delaware Management Company, Inc.; President,
Chief Executive Officer, Chairman of the Board and Director of the
Registrant and, with the exception of Delaware Pooled Trust, Inc., each of the
other funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware International Holdings Ltd. and Founders Holdings,
Inc.; Chairman of the Board and Director of Delaware Pooled Trust, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc. and Delaware
Investment & Retirement Services, Inc.; Chairman, Chief Executive Officer
and Director of Delaware International Advisers Ltd.; and Director of
Delaware Service Company, Inc.

Winthrop S. Jessup Executive Vice President and Director of Delaware Management Company,
Inc., DMH Corp., Delaware International Holdings Ltd. and Founders
Holdings, Inc.; Executive Vice President of the Registrant and, with the
exception of Delaware Pooled Trust, Inc., each of the other funds in the
Delaware Group and Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delaware Pooled Trust, Inc.; Vice Chairman of
Delaware Distributors, L.P.; Vice Chairman and Director of Delaware
Distributors, Inc.; Director of Delaware Service Company, Inc., Delaware
Management Trust Company, Delaware International Advisers Ltd. and
Delaware Investment & Retirement Services, Inc.; and President and Director
of Delaware Capital Management, Inc.

Richard G. Unruh, Jr. Executive Vice President and Director of Delaware Management Company,
Inc.; Executive Vice President of the Registrant and each of the other funds in
the Delaware Group; Senior Vice President of Delaware Management
Holdings, Inc.; and Director of Delaware International Advisers Ltd.

Board of Directors, Chairman of Finance Committee, Keystone Insurance Company since
1989, 2040 Market Street, Philadelphia, PA; Board of Directors, Chairman of Finance
Committee, Mid Atlantic, Inc. since 1989, 2040 Market Street, Philadelphia, PA

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
Paul E. Suckow Executive Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Company, Inc., the Registrant and each of the other funds in the Delaware
Group; Senior Vice President/Chief Investment Officer, Fixed Income of Delaware
Management Holdings, Inc.; Executive Vice President and Director of Founders
Holdings, Inc.; and Director of Founders CBO Corporation

David K. Downes Senior Vice President, Chief Administrative Officer and Chief Financial Officer of
Delaware Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Chairman and Director of Delaware Management Trust Company;
Executive Vice President, Chief Operating Officer, Chief Administrative Officer,
Chief Financial Officer and Treasurer of Delaware Management Holdings, Inc.; Senior
Vice President, Chief Financial Officer, Treasurer and Director of DMH Corp.; Senior
Vice President and Chief Administrative Officer of Delaware Distributors, L.P.;
Senior Vice President, Chief Administrative Officer and Director of Delaware
Distributors, Inc.; Senior Vice President, Chief Administrative Officer, Chief
Financial Officer and Director of Delaware Service Company, Inc.; Chief Financial
Officer and Director of Delaware International Holdings Ltd.; Senior Vice President,
Chief Financial Officer and Treasurer of Delaware Capital Management, Inc.; Senior
Vice President, Chief Financial Officer and Director of Founders Holdings, Inc.;
Chief Executive Officer and Director of Delaware Investment & Retirement Services,
Inc.; and Director of Delaware International Advisers Ltd.

Chief Executive Officer, Chief Financial Officer and Treasurer of Forewarn, Inc.
since 1992, 8 Clayton Place, Newtown Square, PA

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
George M. Chamberlain, Jr. Senior Vice President, Secretary and Director of Delaware Management
Company, Inc., DMH Corp., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware Capital Management, Inc.
and Delaware Investment & Retirement Services, Inc.; Senior Vice President
and Secretary of the Registrant, each of the other funds in the Delaware
Group, Delaware Distributors, L.P. and Delaware Management Holdings, Inc.;
Executive Vice President, Secretary and Director of Delaware Management
Trust Company; Secretary and Director of Delaware International Holdings
Ltd.; and Director of Delaware International Advisers Ltd.

Richard J. Flannery Managing Director/Corporate Tax & Affairs of Delaware Management
Company, Inc., Delaware Management Holdings, Inc., DMH Corp., Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc., Delaware Management Trust Company, Founders CBO Corporation,
Delaware Capital Management, Inc. and Delaware Investment & Retirement
Services, Inc.; Vice President of the Registrant and each of the other funds in
the Delaware Group; Managing Director/Corporate Tax & Affairs and
Director of Founders Holdings, Inc.; Managing Director and Director of
Delaware International Holdings Ltd.; and Director of Delaware International
Advisers Ltd.

Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton,
PA; Director and Member of Executive Committee of Stonewall Links, Inc.
since 1991, Bulltown Rd., Elverton, PA

Michael P. Bishof(1) Vice President and Treasurer of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Distributors, L.P., Delaware Distributors, Inc., Delaware Service Company,
Inc. and Founders Holdings, Inc.; Assistant Treasurer of Founders CBO
Corporation; and Vice President and Manager of Investment Accounting of
Delaware International Holdings Ltd.

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
Eric E. Miller Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Delaware Capital
Management, Inc. and Delaware Investment & Retirement Services, Inc.

Richelle S. Maestro Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., Delaware Distributors, L.P., Delaware
Distributors, Inc., Delaware Service Company, Inc., DMH Corp., Delaware
Management Trust Company, Delaware Capital Management, Inc., Delaware
Investment & Retirement Services, Inc. and Founders Holdings, Inc.;
Secretary of Founders CBO Corporation; and Assistant Secretary of Delaware
International Holdings Ltd.

General Partner of Tri-R Associates since 1989, 10001 Sandmeyer Ln.,
Philadelphia, PA

John M. Zerr(2) Vice President and Assistant Secretary of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, DMH
Corp., Delaware Distributors, L.P., Delaware Capital Management, Inc. and
Delaware Investment & Retirement Services, Inc.

Joseph H. Hastings Vice President/Corporate Controller of Delaware Management Company, Inc.,
the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Capital Management, Inc., Founders Holdings, Inc. and Delaware
International Holdings Ltd.; Executive Vice President, Chief Financial Officer
and Treasurer of Delaware Management Trust Company; Chief Financial
Officer and Treasurer of Delaware Investment & Retirement Services, Inc.;
and Assistant Treasurer of Founders CBO Corporation

Bruce A. Ulmer Vice President/Director of Internal Audit of Delaware Management Company,
Inc., the Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp. and Delaware Management Trust
Company; and Vice President/Internal Audit of Delaware Investment &
Retirement Services, Inc.
</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
Steven T. Lampe(3) Vice President/Taxation of Delaware Management Company, Inc., the
Registrant, each of the other funds in the Delaware Group, Delaware
Management Holdings, Inc., DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware
Management Trust Company, Founders Holdings, Inc., Founders CBO
Corporation, Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.

Lisa O. Brinkley Vice President/Compliance of Delaware Management Company, Inc., the Registrant, each
of the other funds in the Delaware Group, DMH Corp., Delaware Distributors, L.P.,
Delaware Distributors, Inc., Delaware Service Company, Inc., Delaware Management
Trust Company, Delaware Capital Management, Inc. and Delaware Investment &
Retirement Services, Inc.

Rosemary E. Milner Vice President/Legal of Delaware Management Company, Inc., the Registrant, each of
the other funds in the Delaware Group, Delaware Distributors, L.P. and Delaware
Distributors, Inc.

Douglas L. Anderson Vice President/Operations of Delaware Management Company, Inc. and Delaware Service
Company, Inc.; and Vice President/Operations and Director of Delaware Management
Trust Company

Michael T. Taggart Vice President/Facilities Management and Administrative Services of Delaware
Management Company, Inc.

Gerald T. Nichols Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end
funds in the Delaware Group; Vice President of Founders Holdings, Inc.; and
Treasurer, Assistant Secretary and Director of Founders CBO Corporation

J. Michael Pokorny Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., the Registrant, each of the tax-exempt funds and the fixed income funds
in the Delaware Group

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
Gary A. Reed Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware
Group and Delaware Capital Management, Inc.

Paul A. Matlack Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds, the fixed income funds and the closed-end
funds in the Delaware Group; Vice President of Founders Holdings, Inc.; and
President and Director of Founders CBO Corporation

Patrick P. Coyne Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware
Group

Roger A. Early Vice President/Senior Portfolio Manager of Delaware Management Company, Inc., the
Registrant, each of the tax-exempt funds and the fixed income funds in the Delaware
Group

Edward N. Antoian Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group

General Partner of Zeke Investment Partners since 1991, 569 Canterbury Lane, Berwyn,
PA

George H. Burwell Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group

John B. Fields Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc., each of the equity funds in the Delaware Group and Delaware Capital
Management, Inc.

David C. Dalrymple Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group

Gerald S. Frey(4) Vice President/Senior Portfolio Manager of Delaware Management Company,
Inc. and each of the equity funds in the Delaware Group

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with the Manager and its
Business Address* Affiliates and Other Positions and Offices Held
- ----------------- -----------------------------------------------

<S> <C>
Faye P. Staples(5) Vice President/Human Resources of Delaware Management Company, Inc.,
Delaware Distributors, L.P. and Delaware Distributors, Inc.; and Vice
President/Director of Human Resources of Delaware Service Company, Inc.

Daniel H. Carlson(6) Vice President/Marketing Manager of Delaware Management Company, Inc.,
Delaware Distributors, L.P. and Delaware Investment & Retirement Services,
Inc.

</TABLE>

1 VICE PRESIDENT/GLOBAL INVESTMENT MANAGEMENT OPERATIONS, Bankers Trust and
VICE PRESIDENT, CS First Boston Investment Management prior to June 1995.
2 ATTORNEY, Ballard Spahr Andrews & Ingersoll prior to July 1995.
3 TAX MANAGER, Price Waterhouse prior to October 1995.
4 SENIOR DIRECTOR, Morgan Grenwell Capital Management prior to June 1996.
5 VICE PRESIDENT/HUMAN RESOURCES, Nova Care prior to September 1995.
6 PRINCIPAL AND CONSULTANT, Buck Consultants prior to October 1995.

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Delaware International Advisers Ltd. ("Delaware International") serves as
sub-investment adviser to the Strategic Income Fund of the Registrant and also
serves as investment manager or sub-investment adviser to certain of the other
funds in the Delaware Group (Delaware Group Global Dividend and Income Fund,
Inc., Delaware Group Global & International Funds, Inc., Delaware Pooled Trust,
Inc. and Delaware Group Premium Fund, Inc.) and provides investment advisory
services to institutional accounts, primarily retirement plans and endowment
funds.

<PAGE>

PART C - Other Information
(Continued)

The following persons serving as directors or officers of Delaware
International have held the following positions during the past two years:

Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
*Wayne A. Stork Chairman of the Board, Chief Executive Officer and Director of
Delaware International Advisers Ltd.; President, Chief Executive
Officer, Chairman of the Board and Director of the Registrant and,
with the exception of Delaware Pooled Trust, Inc., each of the other
funds in the Delaware Group, Delaware Management Holdings, Inc.,
DMH Corp., Delaware International Holdings Ltd. and Founders
Holdings, Inc.; Chairman of the Board, President, Chief Executive
Officer, Chief Investment Officer and Director of Delaware
Management Company, Inc.; Chairman of the Board and Director of
Delaware Pooled Trust, Inc., Delaware Distributors, Inc., Delaware
Capital Management, Inc. and Delaware Investment & Retirement
Services, Inc.; and Director of Delaware Service Company, Inc.

**G. Roger H. Kitson Vice Chairman and Director of Delaware International Advisers Ltd.

**David G. Tilles Managing Director, Chief Investment Officer and Director of
Delaware International Advisers Ltd.

**John Emberson Secretary/Compliance Officer/Finance Director and Director of
Delaware International Advisers Ltd.

</TABLE>

* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices with Delaware International Advisers Ltd.
Business Address and its Affiliates and Other Positions and Offices Held
- ---------------- -------------------------------------------------------
<S> <C>
*David K. Downes Director of Delaware International Advisers Ltd.; Executive Vice President,
Chief Operating Officer, Chief Administrative Officer, Chief Financial Officer
and Treasurer of Delaware Management Holdings, Inc.; Senior Vice
President, Chief Administrative Officer, Chief Financial Officer of Delaware
Management Company, Inc., the Registrant and each of the other funds in the
Delaware Group; Chairman and Director of Delaware Management Trust
Company; Senior Vice President, Chief Financial Officer, Treasurer and
Director of DMH Corp.; Senior Vice President and Chief Administrative
Officer of Delaware Distributors, L.P.; Senior Vice President, Chief
Administrative Officer and Director of Delaware Distributors, Inc.; Senior
Vice President, Chief Administrative Officer, Chief Financial Officer and
Director of Delaware Service Company, Inc.; Chief Financial Officer and
Director of Delaware International Holdings Ltd.; Senior Vice President,
Chief Financial Officer and Treasurer of Delaware Capital Management, Inc.;
Senior Vice President, Chief Financial Officer and Director of Founders
Holdings, Inc.; and Chief Executive Officer and Director of Delaware
Investment & Retirement Services, Inc.

Chief Executive Officer, Chief Financial Officer and Treasurer of Forewarn,
Inc. since 1992, 8 Clayton Place, Newtown Square, PA

*Winthrop S. Jessup Director of Delaware International Advisers Ltd., Delaware Service Company,
Inc., Delaware Management Trust Company and Delaware Investment &
Retirement Services, Inc.; Executive Vice President of the Registrant and,
with the exception of Delaware Pooled Trust, Inc., each of the other funds in
the Delaware Group and Delaware Management Holdings, Inc.; President and
Chief Executive Officer of Delaware Pooled Trust, Inc.; Executive Vice
President and Director of DMH Corp., Delaware Management Company, Inc.,
Delaware International Holdings Ltd. and Founders Holdings, Inc.; Vice
Chairman of Delaware Distributors, L.P.; Vice Chairman and Director of
Delaware Distributors, Inc.; and President and Director of Delaware Capital
Management, Inc.

</TABLE>

* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.

<PAGE>

PART C - Other Information
(Continued)

*Richard J. Flannery Director of Delaware International Advisers Ltd.; Managing
Director/Corporate Tax & Affairs of Delaware Management Holdings, Inc.,
DMH Corp., Delaware Management Company, Inc., Delaware Distributors,
L.P., Delaware Distributors, Inc., Delaware Service Company, Inc.,
Delaware Management Trust Company, Delaware Capital Management, Inc.,
Founders CBO Corporation and Delaware Investment & Retirement
Services, Inc.; Vice President of the Registrant and each of the other funds
in the Delaware Group; Managing Director/Corporate & Tax Affairs and
Director of Founders Holdings, Inc.; and Managing Director and Director of
Delaware International Holdings Ltd.

Limited Partner of Stonewall Links, L.P. since 1991, Bulltown Rd., Elverton, PA;
Director and Member of Executive Committee of Stonewall Links, Inc. since 1991,
Bulltown Rd., Elverton, PA

*John C. E. Campbell Director of Delaware International Advisers Ltd.

*George M. Chamberlain, Jr. Director of Delaware International Advisers Ltd.; Senior Vice President and
Secretary of the Registrant, each of the other funds in the Delaware Group,
Delaware Distributors, L.P. and Delaware Management Holdings, Inc.;
Senior Vice President, Secretary and Director of Delaware Management
Company, Inc., DMH Corp., Delaware Distributors, Inc., Delaware Service
Company, Inc., Founders Holdings, Inc., Delaware Capital Management,
Inc. and Delaware Investment & Retirement Services, Inc.; Executive Vice
President, Secretary and Director of Delaware Management Trust Company;
and Secretary and Director of Delaware International Holdings Ltd.

</TABLE>

* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.

<PAGE>

PART C - Other Information
(Continued)

**Timothy W. Sanderson Senior Portfolio Manager, Deputy Compliance Officer, Director Equity
Research and Director of Delaware International Advisers Ltd.

**Clive A. Gillmore Senior Portfolio Manager, Director U.S. Mutual Fund Liaison and Director
of Delaware International Advisers Ltd.

**Hamish O. Parker Senior Portfolio Manager, Director U.S. Marketing Liaison and Director of
Delaware International Advisers Ltd.

**Ian G. Sims Senior Portfolio Manager, Deputy Managing Director and Director of
Delaware International Advisers Ltd.

**Elizabeth A. Desmond Senior Portfolio Manager of Delaware International Advisers Ltd.

**Gavin A. Hall Senior Portfolio Manager of Delaware International Advisers Ltd.

</TABLE>

* Business address is 1818 Market Street, Philadelphia, PA 19103.
** Business address is Veritas House, 125 Finsbury Pavement, London, England
EC2A 1NQ.

Item 29. Principal Underwriters.

(a) Delaware Distributors, L.P. serves as principal underwriter
for all the mutual funds in the Delaware Group.

(b) Information with respect to each director, officer or
partner of principal underwriter:

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>

Delaware Distributors, Inc. General Partner None

Delaware Management
Company, Inc. Limited Partner Investment Manager

</TABLE>
*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Delaware Capital
Management, Inc. Limited Partner None

Winthrop S. Jessup Vice Chairman Executive Vice President

Keith E. Mitchell President and Chief None
Executive Officer

David K. Downes Senior Vice President and Senior Vice President/Chief
Chief Administrative Officer Administrative Officer/Chief
Financial Officer

George M. Chamberlain, Jr. Senior Vice President/ Senior Vice President/
Secretary Secretary

J. Lee Cook Senior Vice President/ None
Eastern Sales Division

Thomas E. Sawyer Senior Vice President/ None
Western Sales Division

Stephen H. Slack Senior Vice President/ None
Wholesaler

William F. Hostler Senior Vice President/ None
Marketing Services

Dana B. Hall Senior Vice President/ None
Key Accounts

Minette van Noppen Senior Vice President/ None
Retirement Services

J. Chris Meyer Senior Vice President/ None
Product Development

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Richard J. Flannery Managing Director/Corporate Vice President
& Tax Affairs

Eric E. Miller Vice President/ Vice President/
Assistant Secretary Assistant Secretary

Richelle S. Maestro Vice President/ Vice President/
Assistant Secretary Assistant Secretary

John M. Zerr Vice President/ Vice President/
Assistant Secretary Assistant Secretary

Michael P. Bishof Vice President/Treasurer Vice President/Treasurer

Steven T. Lampe Vice President/Taxation Vice President/Taxation

Joseph H. Hastings Vice President/ Vice President/
Corporate Controller Corporate Controller

Lisa O. Brinkley Vice President/ Vice President/
Compliance Compliance

Rosemary E. Milner Vice President/Legal Vice President/Legal

Susan J. Black Vice President/ None
Manager Key Accounts

Daniel H. Carlson Vice President/ None
Marketing Manager

Diane M. Anderson Vice President/ None
Retirement Services

Denise F. Guerriere Vice President/Client Services None

Julia R. Vander Els Vice President/ None
Client Services

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Jerome J. Alrutz Vice President/ None
Client Services

Joanne A. Mettenheimer Vice President/ None
National Accounts

Christopher H. Price Vice President/Annuity None
Marketing & Administration

Steven J. DeAngelis Vice President/ None
Product Development

Susan T. Friestedt Vice President/ None
Customer Service

Dinah J. Huntoon Vice President/ None
Product Development

Soohee Lee Vice President/ None
Product Development

Ellen M. Krott Vice President/ None
Communications

Holly W. Riemel Vice President/ None
Telemarketing

Frank Albanese Vice President/Wholesaler None

Terrence L. Bussard Vice President/Wholesaler None

William S. Carroll Vice President/Wholesaler None

William S. Castetter Vice President/Wholesaler None

Thomas J. Chadie Vice President/Wholesaler None

Douglas R. Glennon Vice President/Wholesaler None

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

<PAGE>

PART C - Other Information
(Continued)

Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
William M. Kimbrough Vice President/Wholesaler None

Mac McAuliffe Vice President/Wholesaler None

Patrick L. Murphy Vice President/Wholesaler None

Henry W. Orvin Vice President/Wholesaler None

Philip G. Rickards Vice President/Wholesaler None

Elizabeth Roman Vice President/Wholesaler None

Michael W. Rose Vice President/Wholesaler None

Robert E. Stansbury Vice President/Wholesaler None

Larry D. Stone Vice President/Wholesaler None

Faye P. Staples Vice President/Human Resources None

</TABLE>

*Business address of each is 1818 Market Street, Philadelphia, PA 19103.

Item 30. Location of Accounts and Records.

All accounts and records are maintained in Philadelphia at 1818
Market Street, Philadelphia, PA 19103 or One Commerce Square,
Philadelphia, PA 19103 and in London at Veritas House, 125
Finsbury Pavement, London, England EC2A 1NQ.

Item 31. Management Services. None.

Item 32. Undertakings.

(a) Not applicable.

(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the public offering
of shares of the Strategic Income Fund.

<PAGE>

PART C - Other Information
(Continued)

The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be
certified, within four to six months from the public offering
of shares of the High-Yield Opportunities Fund.

(c) The Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's annual report to shareholders, upon request and
without charge.

(d) The Registrant hereby undertakes to promptly call a meeting
of shareholders for the purpose of voting upon the question
of removal of any director when requested in writing to do so
by the record holders of not less than 10% of the outstanding
shares.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, this Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
this City of Philadelphia, Commonwealth of Pennsylvania on this 15th day of
October, 1996.

DELAWARE GROUP INCOME FUNDS, INC.

By /s/Wayne A. Stork
------------------------------------
Wayne A. Stork
Chairman of the Board, President,
Chief Executive Officer and Director

Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:

Signature Title Date
--------- ----- ----
<S> <C> <C>

Chairman of the Board, President,
/s/Wayne A. Stork Chief Executive Officer and Director October 15, 1996
- ---------------------------------
Wayne A. Stork

Senior Vice President/Chief Financial
Officer/Chief Administrative Officer
(Principal Financial Officer and
/s/David K. Downes Principal Accounting Officer) October 15, 1996
- --------------------------------
David K. Downes

/s/Charles E. Peck Director October 15, 1996
- --------------------------------
Charles E. Peck

/s/Walter P. Babich Director October 15, 1996
- --------------------------------
Walter P. Babich

/s/Anthony D. Knerr Director October 15, 1996
- --------------------------------
Anthony D. Knerr

/s/Ann R. Leven Director October 15, 1996
- --------------------------------
Ann R. Leven

/s/W. Thacher Longstreth Director October 15, 1996
- --------------------------------
W. Thacher Longstreth

</TABLE>

<PAGE>

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Exhibits

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Exhibit
- ----------- -------

EX-99.B1C Executed Articles of Amendment (September 24, 1996)

EX-99.B1D Executed Articles Supplementary (September 24, 1996)

EX-99.B1E Proposed Articles Supplementary (1996)

EX-99.B5B Executed Investment Management Agreement (September 30, 1996)
between Delaware Management Company, Inc. and the Registrant
on behalf of Strategic Income Fund

EX-99.B5C Executed Sub-Advisory Agreement (September 30, 1996) between
Delaware Management Company, Inc. and Delaware International
Advisers Ltd. with respect to Strategic Income Fund

EX-99.B5D Proposed Investment Management Agreement (1996) between
Delaware Management Company, Inc. and the Registrant on
behalf of High-Yield Opportunities Fund

EX-99.B6AIII Executed Distribution Agreement (September 30, 1996) between
Delaware Distributors, L.P. and the Registrant on behalf of
Strategic Income Fund

EX-99.B6AIV Proposed Distribution Agreement (1996) between Delaware
Module Name Distributors, L.P. and the Registrant on behalf
(PROP_DIS_AGT) of High-Yield Opportunities Fund

EX-99.B8E Proposed Custodian Agreement (1996) between The Chase
Manhattan Bank and the Registrant on behalf of High-Yield
Opportunities Fund

EX-99.B8F Proposed Securities Lending Agreement (1996) between The
Chase Manhattan Bank and the Registrant on behalf of
High-Yield Opportunities Fund

EX-99.B9A Executed Amended and Restated Shareholders Services Agreement
(September 30, 1996) between Delaware Service Company, Inc.
and the Registrant on behalf of Delchester Fund and Strategic
Income Fund

<PAGE>

INDEX TO EXHIBITS
(Continued)

Exhibit No. Exhibit
- ------- -----------

EX-99.B9AI Proposed Amended and Restated Shareholders Services Agreement
Module Name (1996) between Delaware Service Company, Inc. and the
(SH_SVC_AGT) Registrant on behalf of Delchester Fund, Strategic Income
Fund and High-Yield Opportunities Fund

EX-99.B9BI Executed Amendment No. 1 (September 30, 1996) to Schedule A
to Delaware Group of Funds Fund Accounting Agreement

EX-99.B9BII Proposed Amendment to Schedule A to Delaware Group of Funds
Module Name Fund Accounting Agreement
(ACCT_AGT_SCHD_A)

EX-99.B11 Consent of Auditors

EX-99.B15D Plan under Rule 12b-1 for Strategic Income Fund A Class
(September 30, 1996)

EX-99.B15E Plan under Rule 12b-1 for Strategic Income Fund B Class
(September 30, 1996)

EX-99.B15F Plan under Rule 12B-1 for Strategic Income Fund C Class
(September 30, 1996)

EX-99.B15G Proposed Plan under Rule 12b-1 for High-Yield Opportunities
Module Name Fund A Class (1996)
(RULE_12B1_PL_A)

EX-99.B15H Proposed Plan under Rule 12b-1 for High-Yield Opportunities
Module Name Fund B Class (1996)
(RULE_12B1_PL_B)

EX-99.B15I Proposed Plan under Rule 12b-1 for High-Yield Opportunities
Module Name Fund C Class (1996)
(RULE_12B1_PL_C)

EX-99.B18A Plan under Rule 18f-3 (November 29, 1996)
Module Name
(RULE_18F3_PLAN)

<PAGE>

INDEX TO EXHIBITS
(Continued)

Exhibit No. Exhibit
- ------- -----------

EX-99.B18B Amended Appendix A (September 30, 1996) to Plan under Rule
18f-3

<PAGE>

DELAWARE GROUP DELCHESTER HIGH-YIELD BOND FUND, INC.

ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION

DELAWARE GROUP DELCHESTER HIGH-YIELD BOND FUND, INC., a
Maryland corporation having its principal office in Baltimore, Maryland
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:

FIRST: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.

SECOND: The first sentence of ARTICLE SECOND of the Articles
of Incorporation, as amended and supplemented, is hereby amended to read as
follows:

SECOND: The name of the corporation is Delaware Group
Income Funds, Inc.

THIRD: The Articles of Incorporation of the Corporation, as
amended and supplemented, are further amended by changing the name of the
existing series of the Corporation's shares (the "Series"), the Common Stock
Series, to the Delchester Fund series, and by deleting the old series name from
the Articles of Incorporation, as amended and supplemented to date, and
inserting in lieu thereof the new series name as changed hereby.

FOURTH: The Articles of Incorporation of the Corporation, as
amended and supplemented, are further amended by changing the name of the
Delchester Fund class of shares of the Series to the Delchester Fund A Class of
shares; by changing the name of the Delchester Fund (Institutional) class of
shares of Series to the Delchester Fund Institutional Class of Shares; and by
deleting the old names of such classes from the Articles of Incorporation, as
amended and supplemented to date, and inserting in lieu thereof, the new names
of such classes as changed hereby.

The name of the other two classes of Common Stock of
the Series, the Delchester Fund B Class and the Delchester Fund C Class, shall
remain unchanged.

FIFTH: The amendments to the Articles of Incorporation of the
Corporation as set forth above have been duly approved by a majority of the
entire Board of Directors of the Corporation as required by law and are limited
to changes permitted by Section 2-605(a)(4) of the Maryland General Corporation
Law to be made without action by the stockholders of

<PAGE>

the Corporation.

SIXTH: The amendments to the Articles of Incorporation of the
Corporation as set forth above do not change the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, or terms or conditions of redemption of the shares that are the
subject of the name changes.

SEVENTH: The Articles of Amendment shall become effective at
5:00 P.M. on September 27, 1996.

IN WITNESS WHEREOF, DELAWARE GROUP DELCHESTER HIGH-YIELD BOND
FUND, INC. has caused these Articles of Amendment to be signed in its name and
on its behalf by its Senior Vice President and attested by its Assistant
Secretary on September 24, 1996.

DELAWARE GROUP DELCHESTER
HIGH-YIELD BOND FUND, INC.

By: /s/ George M. Chamberlain, Jr.
-----------------------------------
George M. Chamberlain, Jr.
Senior Vice President

Attest:

/s/ Richelle S. Maestro
- -----------------------------
Richelle S. Maestro
Assistant Secretary

-2-

<PAGE>

THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP
DELCHESTER HIGH-YIELD BOND FUND, INC., who executed on behalf of said
Corporation the foregoing Articles of Amendment, of which this certificate is
made a part, hereby acknowledges, in the name and on behalf of said Corporation,
the foregoing Articles of Amendment to be the corporate act of said Corporation
and further certifies that, to the best of his knowledge, information and
belief, the matters and facts set forth therein with respect to the approval
thereof are true in all material respects, under the penalties of perjury.

/s/ George M. Chamberlain, Jr.
------------------------------------
George M. Chamberlain, Jr.
Senior Vice President

-3-

<PAGE>

DELAWARE GROUP INCOME FUNDS, INC.

ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION

Delaware Group Income Funds, Inc. (formerly known as Delaware
Group Delchester High-Yield Bond Fund, Inc.), a Maryland corporation having its
principal office in Baltimore, Maryland (the "Corporation"), hereby certifies,
in accordance with Sections 2-208 and 2-208.1 of the Maryland General
Corporation Law, to the State Department of Assessments and Taxation of Maryland
that:

FIRST: The Corporation has authority to issue a total of Five
Hundred Million (500,000,000) shares of common stock with a par value of One
Dollar ($1.00) per share (the "Common Stock") of the Corporation, having an
aggregate par value of Five Hundred Million Dollars ($500,000,000). Of such Five
Hundred Million (500,000,000) shares of the Corporation's Common Stock, Five
Hundred Million (500,000,000) shares have been allocated to the Delchester Fund
series of the Common Stock as follows: (1) Fifty Million (50,000,000) shares of
the Delchester Fund series of the Common Stock have been allocated to each of
the Delchester Fund Institutional Class, the Delchester Fund B Class and the
Delchester Fund C Class, and (2) Three Hundred Fifty Million (350,000,000)
shares of the Delchester Fund series of the Common Stock have been allocated to
the Delchester Fund A Class.

SECOND: The Board of Directors of the Corporation, at a
meeting held on September 19, 1996, adopted resolutions increasing the aggregate
number of shares of Common Stock that the Corporation has authority to issue
from Five Hundred Million (500,000,000) shares to One Billion (1,000,000,000)
shares, designating one additional series of the Corporation's Common Stock as
the Strategic Income Fund series, and classifying and allocating Two Hundred
Million (200,000,000) shares of authorized, unissued and unclassified Common
Stock to the Strategic Income Fund series. Of such Two Hundred Million
(200,000,000) shares of the Common Stock, One Hundred Million (100,000,000)
shares of the Strategic Income Fund series of the Common Stock have been
allocated to the Strategic Income Fund A Class, Twenty-Five Million (25,000,000)
shares of the Strategic Income Fund series of the Common Stock have been
allocated to each of the Strategic Income Fund B Class and the Strategic Income
Fund C Class, and Fifty Million (50,000,000) shares of the Strategic Income Fund
series of the Common Stock have been allocated to the Strategic Income Fund
Institutional Class. Three Hundred Million (300,000,000) shares of the Common
Stock remain authorized but unissued and unallocated shares.

<PAGE>

THIRD: As a result of the aforesaid increase in the authorized
Common Stock and classifications, the Corporation has authority to issue One
Billion (1,000,000,000) shares of Common Stock, having an aggregate par value of
One Billion Dollars ($1,000,000,000). Of such One Billion (1,000,000,000) shares
of Common Stock, Seven Hundred Million (700,000,000) shares of the Common Stock
have been allocated as follows: Five Hundred Million (500,000,000) shares have
been allocated to the Delchester Fund series, and Two Hundred Million
(200,000,000) shares have been allocated to the Strategic Income Fund series. Of
such Five Hundred Million (500,000,000) shares of the Corporation's Common Stock
allocated to the Delchester Fund series, such shares have been further
classified and allocated as follows: (1) Fifty Million (50,000,000) shares of
the Delchester Fund series of the Common Stock have been allocated to each of
the Delchester Fund Institutional Class, the Delchester Fund B Class and the
Delchester Fund C Class, and (2) Three Hundred Fifty Million (350,000,000)
shares have been allocated to the Delchester Fund A Class. Of such Two Hundred
Million (200,000,000) shares of the Corporation's Common Stock allocated to the
Strategic Income Fund series, such shares have been further classified as
follows: (1) One Hundred Million (100,000,000) shares of the Strategic Income
Fund series of the Common Stock have been allocated to the Strategic Income Fund
A Class, and (2) Twenty-Five Million (25,000,000) shares of the Strategic Income
Fund series of the Common Stock have been allocated to each of the Strategic
Income Fund B Class and the Strategic Income Fund C Class, and (3) Fifty Million
(50,000,000) shares of the Strategic Income Fund series of the Common Stock have
been allocated to the Strategic Income Fund Institutional Class.

FOURTH: The shares of the Strategic Income Fund A Class, the
Strategic Income Fund B Class, the Strategic Income Fund C Class and the
Strategic Income Fund Institutional Class of the Strategic Income Fund series
shall represent proportionate interests in the same portfolio of investments.
The shares of the Strategic Income Fund A Class, the Strategic Income Fund B
Class, the Strategic Income Fund C Class and the Strategic Income Fund
Institutional Class of the Strategic Income Fund series shall have the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption, all as set forth in the Articles of Incorporation of the
Corporation, except for the differences hereinafter set forth:

1. The dividends and distributions of investment income and
capital gains with respect to shares of the Strategic Income
Fund A Class, the Strategic Income Fund B Class, the Strategic
Income Fund C Class and the Strategic Income Fund
Institutional Class of the Strategic Income Fund series of the
Common Stock shall

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<PAGE>

be in such amounts as may be declared from time to time by the
Board of Directors, and such dividends and distributions may
vary with respect to each such class from the dividends and
distributions of investment income and capital gains with
respect to the other classes of the Strategic Income Fund
series of the Common Stock, to reflect differing allocations
of the expenses of the Corporation among the classes and any
resultant difference among the net asset values per share of
the classes, to such extent and for such purposes as the Board
of Directors may deem appropriate. The allocation of
investment income and capital gains and expenses and
liabilities of the Strategic Income Fund series among its four
classes of Common Stock shall be determined by the Board of
Directors in a manner that is consistent with the orders, as
applicable, dated April 10, 1987 and September 6, 1994
(Investment Company Act of 1940 Release Nos. 15675 and 20529)
issued by the Securities and Exchange Commission, and any
amendments to such orders, any existing or future order or any
Multiple Class Plan adopted by the Corporation in accordance
with Rule 18f-3 under the Investment Company Act of 1940, as
amended, that modifies or supersedes such orders.

2. Except as may otherwise be required by law, pursuant to any
applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, the holders
of shares of the Strategic Income Fund A Class, the Strategic
Income Fund B Class, the Strategic Income Fund C Class and the
Strategic Income Fund Institutional Class of the Strategic
Income Fund series of the Common Stock shall have (i)
exclusive voting rights with respect to any matter submitted
to a vote of stockholders that affects only holders of shares
of the Strategic Income Fund A Class, the Strategic Income
Fund B Class, the Strategic Income Fund C Class and the
Strategic Income Fund Institutional Class of the Strategic
Income Fund series, respectively, including, without
limitation, the provisions of any Distribution Plan adopted
pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (a "Distribution Plan"), applicable to shares
of the Strategic Income Fund A Class, the Strategic Income
Fund B Class and the Strategic Income Fund C Class, and (ii)
no voting rights with respect to the provisions of any
Distribution Plan applicable to any other class of the
Strategic Income Fund series of the Common Stock or with
regard to any other matter submitted to a vote of stockholders
which does not affect holders of shares of the Strategic
Income Fund A

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<PAGE>

Class, the Strategic Income Fund B Class and the Strategic
Income Fund C Class.

3. (a) Other than shares described in paragraph (3)(b) herein,
each share of the Strategic Income Fund B Class shall be
converted automatically, and without any action or choice on
the part of the holder thereof, into shares of the Strategic
Income Fund A Class on the Conversion Date. The term
"Conversion Date" when used herein shall mean a date set forth
in the prospectus of the Strategic Income Fund B Class, as
such prospectus may be amended from time to time, that is no
later than three months after either (i) the date on which the
eighth anniversary of the date of issuance of the share
occurs, or (ii) any such other anniversary date as may be
determined by the Board of Directors and set forth in the
prospectus of the Strategic Income Fund B Class, as such
prospectus may be amended from time to time; provided that any
such other anniversary date determined by the Board of
Directors shall be a date that will occur prior to the
anniversary date set forth in clause (i) and any such other
date theretofore determined by the Board of Directors pursuant
to this clause (ii); but further provided that, subject to the
provisions of the next sentence, for any shares of the
Strategic Income Fund B Class acquired through an exchange, or
through a series of exchanges, as permitted by the Corporation
as provided in the prospectus of the Strategic Income Fund B
Class, as such prospectus may be amended from time to time,
from another investment company or another series of the
Corporation (an "eligible investment company"), the Conversion
Date shall be the conversion date applicable to the shares of
stock of the eligible investment company originally subscribed
for in lieu of the Conversion Date of any stock acquired
through exchange if such eligible investment company issuing
the stock originally subscribed for had a conversion feature,
but not later than the Conversion Date determined under (i)
above. For the purpose of calculating the holding period
required for conversion, the date of issuance of a share of
the Strategic Income Fund B Class shall mean (i) in the case
of a share of the Strategic Income Fund B Class obtained by
the holder thereof through an original subscription to the
Corporation, the date of the issuance of such share of the
Strategic Income Fund B Class, or (ii) in the case of a share
of the Strategic Income Fund B Class obtained by the holder
thereof through an exchange, or through a series of exchanges,
from an eligible investment company, the date of issuance of
the share of the eligible investment company to which the
holder originally

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<PAGE>

subscribed.

(b) Each share of the Strategic Income Fund B Class
(i) purchased through the automatic reinvestment of a dividend
or distribution with respect to the Strategic Income Fund B
Class or the corresponding class of any other investment
company or of any other series of the Corporation issuing such
class of shares or (ii) issued pursuant to an exchange
privilege granted by the Corporation in an exchange or series
of exchanges for shares originally purchased through the
automatic reinvestment of a dividend or distribution with
respect to shares of capital stock of an eligible investment
company, shall be segregated in a separate sub-account on the
stock records of the Corporation for each of the holders of
record thereof. On any Conversion Date, a number of the shares
held in the separate sub-account of the holder of record of
the share or shares being converted, calculated in accordance
with the next following sentence, shall be converted
automatically, and without any action or choice on the part of
the holder, into shares of the Strategic Income Fund A Class.
The number of shares in the holder's separate sub-account so
converted shall (i) bear the same ratio to the total number of
shares maintained in the separate sub-account on the
Conversion Date (immediately prior to conversion) as the
number of shares of the holder converted on the Conversion
Date pursuant to paragraph (3)(a) hereof bears to the total
number of Strategic Income Fund B Class shares of the holder
on the Conversion Date (immediately prior to conversion) after
subtracting the shares then maintained in the holder's
separate sub-account, or (ii) be such other number as may be
calculated in such other manner as may be determined by the
Board of Directors and set forth in the prospectus of the
Strategic Income Fund B Class, as such prospectus may be
amended from time to time.

(c) The number of shares of the Strategic Income Fund
A Class into which a share of the Strategic Income Fund B
Class is converted pursuant to paragraphs 3(a) and 3(b) hereof
shall equal the number (including for this purpose fractions
of a share) obtained by dividing the net asset value per share
of the Strategic Income Fund B Class for purposes of sales and
redemption thereof on the Conversion Date by the net asset
value per share of the Strategic Income Fund A Class for
purposes of sales and redemption thereof on the Conversion
Date.

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<PAGE>

(d) On the Conversion Date, the shares of the
Strategic Income Fund B Class converted into shares of the
Strategic Income Fund A Class will no longer be deemed
outstanding and the rights of the holders thereof (except the
right to receive (i) the number of shares of the Strategic
Income Fund A Class into which the shares of the Strategic
Income Fund B Class have been converted and (ii) declared but
unpaid dividends to the Conversion Date or such other date set
forth in the prospectus of the Strategic Income Fund B Class,
as such prospectus may be amended from time to time and (iii)
the right to vote converting shares of the Strategic Income
Fund B Class held as of any record date occurring on or before
the Conversion Date and theretofore set with respect to any
meeting held after the Conversion Date) will cease.
Certificates representing shares of the Strategic Income Fund
A Class resulting from the conversion need not be issued until
certificates representing shares of the Strategic Income Fund
B Class converted, if issued, have been received by the
Corporation or its agent duly endorsed for transfer.

(e) The automatic conversion of the Strategic Income
Fund B Class into the Strategic Income Fund A Class, as set
forth in paragraphs 3(a) and 3(b) of this Article FOURTH shall
be suspended at any time that the Board of Directors
determines (i) that there is not available a reasonably
satisfactory opinion of counsel to the effect that (x) the
assessment of the higher fee under the Distribution Plan with
respect to the Strategic Income Fund B Class does not result
in the Corporation's dividends or distributions constituting a
"preferential dividend" under the Internal Revenue Code of
1986, as amended, and (y) the conversion of the Strategic
Income Fund B Class does not constitute a taxable event under
federal income tax law, or (ii) any other condition to
conversion set forth in the prospectus of the Strategic Income
Fund B Class, as such prospectus may be amended from time to
time, is not satisfied.

(f) The automatic conversion of the Strategic Income
Fund B Class into Strategic Income Fund A Class, as set forth
in paragraphs 3(a) and 3(b) hereof, may also be suspended by
action of the Board of Directors at any time that the Board of
Directors determines such suspension to be appropriate in
order to comply with, or satisfy the requirements of the
Investment Company Act of 1940, as amended, and in effect from
time to time, or any rule, regulation or order issued
thereunder relating to voting by the holders of the

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<PAGE>

Strategic Income Fund B Class on any Distribution Plan with
respect to, as relevant, the Strategic Income Fund A Class and
in effect from time to time, and in connection with, or in
lieu of, any such suspension, the Board of Directors may
provide holders of the Strategic Income Fund B Class with
alternative conversion or exchange rights into other classes
of stock of the Corporation in a manner consistent with the
law, rule, regulation or order giving rise to the possible
suspension of the conversion right.

4. The shares of the Strategic Income Fund C Class and the
Strategic Income Fund Institutional Class shall not
automatically convert into shares of the Strategic Income Fund
A Class of the Strategic Income Fund series of the Common
Stock as do the shares of the Strategic Income Fund B Class of
the Strategic Income Fund series of the Common Stock.

FIFTH: The shares of the Strategic Income Fund A Class, the
Strategic Income Fund B Class, the Strategic Income Fund C Class and the
Strategic Income Fund Institutional Class of the Strategic Income Fund series
have been classified by the Board of Directors pursuant to authority contained
in the Articles of Incorporation of the Corporation.

SIXTH: The Corporation is registered as an open-end
management investment company under the Investment Company Act of
1940, as amended.

SEVENTH: The total number of shares of Common Stock that the
Corporation has authority to issue has been increased by the Board of Directors
in accordance with Section 2-105(c) of the Maryland General Corporation Law.

EIGHTH: These Articles Supplementary shall become effective at
9:00 a.m. on September 30, 1996.

IN WITNESS WHEREOF, Delaware Group Income Funds, Inc.
has caused these Articles Supplementary to be signed in its name
and on its behalf this 24th day of September, 1996.

DELAWARE GROUP INCOME FUNDS, INC.

By:/s/ George M. Chamberlain, Jr.
--------------------------------------
George M. Chamberlain, Jr.
Senior Vice President

ATTEST:

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<PAGE>

/s/ Richelle S. Maestro
- --------------------------------------
Richelle S. Maestro
Assistant Secretary

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<PAGE>

THE UNDERSIGNED, Senior Vice President of DELAWARE GROUP
INCOME FUNDS, INC., who executed on behalf of the said Corporation the foregoing
Articles Supplementary, of which this instrument is made a part, hereby
acknowledges, in the name of and on behalf of said Corporation, said Articles
Supplementary to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth therein with respect to the authorization and approval thereof
are true in all material respects, under the penalties of perjury.

/s/ George M. Chamberlain, Jr.
------------------------------------
George M. Chamberlain, Jr.
Senior Vice President

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<PAGE>

DELAWARE GROUP INCOME FUNDS, INC.

ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION

FIRST: As of the filing of these Articles Supplementary, the
Corporation had authority to issue a total of One Billion (1,000,000,000) shares
of common stock with a par value of One Dollar ($1.00) per share (the "Common
Stock") of the Corporation, having an aggregate par value of One Billion Dollars
($1,000,000,000). Of these shares of Common Stock, Seven Hundred Million
(700,000,000) shares of the Common Stock have been allocated as follows: Five
Hundred Million (500,000,000) shares have been allocated to the Delchester Fund
series, and Two Hundred Million (200,000,000) shares have been allocated to the
Strategic Income Fund series. Of such Five Hundred Million (500,000,000) shares
of the Corporation's Common Stock allocated to the Delchester Fund series, such
shares have been further classified and allocated as follows: (1) Fifty Million
(50,000,000) shares of the Delchester Fund series of the Common Stock have been
allocated to each of the Delchester Fund Institutional Class, the Delchester
Fund B Class and the Delchester Fund C Class, and (2) Three Hundred Fifty
Million (350,000,000) shares have been allocated to the Delchester Fund A Class.
Of such Two Hundred Million (200,000,000) shares of the Corporation's Common
Stock allocated to the Strategic Income Fund series, such shares have been
further classified and allocated as follows: (1) One Hundred Million
(100,000,000) shares of the Strategic Income Fund series of the Common Stock
have been allocated to the Strategic Income Fund A Class, (2) Twenty-Five
Million (25,000,000) shares of the Strategic Income Fund series of the Common
Stock have been allocated to each of the Strategic Income Fund B Class and the
Strategic Income Fund C Class, and (3) Fifty Million (50,000,000) shares of the
Strategic Income Fund series of the Common Stock have been allocated to the
Strategic Income Fund Institutional Class. The Corporation has Three Hundred
Million (300,000,000) authorized, unissued and unclassified shares of Common
Stock.

SECOND: The Board of Directors of the Corporation, at a
meeting held on __________, 1996, adopted resolutions designating one additional
series of the Corporation's Common Stock as the High-Yield Opportunities Fund
series, and classifying and allocating Two Hundred Million (200,000,000)

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<PAGE>

shares of authorized, unissued and unclassified Common Stock to the High-Yield
Opportunities Fund series. Pursuant to such resolutions, of such Two Hundred
Million (200,000,000) shares of the Corporation's Common Stock allocated to the
High-Yield Opportunities Fund series, such shares have been further classified
and allocated as follows: (1) One Hundred Million (100,000,000) shares of the
High-Yield Opportunities Fund series of the Common Stock have been allocated to
the High-Yield Opportunities Fund A Class, (2) Twenty-Five Million (25,000,000)
shares of the High-Yield Opportunities Fund series of the Common Stock have been
allocated to each of the High-Yield Opportunities Fund B Class and the
High-Yield Opportunities Fund C Class, and (3) Fifty Million (50,000,000) shares
of the High-Yield Opportunities Fund series of the Common Stock have been
allocated to the High-Yield Opportunities Fund Institutional Class. One Hundred
Million (100,000,000) shares of the Common Stock remain authorized but unissued
and unallocated shares.

THIRD: As of the effectiveness of these Articles
Supplementary, the Corporation shall have authority to issue One Billion
(1,000,000,000) shares of Common Stock, having an aggregate par value of One
Billion Dollars ($1,000,000,000). Of these shares of Common Stock, Nine Hundred
Million (900,000,000) shares of the Common Stock shall be allocated as follows:
Five Hundred Million (500,000,000) shares shall be allocated to the Delchester
Fund series, Two Hundred Million (200,000,000) shares shall be allocated to the
Strategic Income Fund series and Two Hundred Million (200,000,000) shares shall
be allocated to the High-Yield Opportunities Fund series. Of such Five Hundred
Million (500,000,000) shares of the Corporation's Common Stock allocated to the
Delchester Fund series, such shares shall be further classified and allocated as
follows: (1) Fifty Million (50,000,000) shares of the Delchester Fund series of
the Common Stock shall be allocated to each of the Delchester Fund Institutional
Class, the Delchester Fund B Class and the Delchester Fund C Class, and (2)
Three Hundred Fifty Million (350,000,000) shares shall be allocated to the
Delchester Fund A Class. Of such Two Hundred Million (200,000,000) shares of the
Corporation's Common Stock allocated to the Strategic Income Fund series, such
shares shall be further classified as follows: (1) One Hundred Million
(100,000,000) shares of the Strategic Income Fund series of the Common Stock
shall be allocated to the Strategic Income Fund A Class, (2) Twenty-Five Million
(25,000,000) shares of the Strategic Income Fund series of the Common Stock
shall be allocated to each of the Strategic Income Fund B Class and the
Strategic Income Fund C Class, and (3) Fifty Million (50,000,000) shares of the
Strategic Income Fund series of the Common Stock shall be allocated to the
Strategic Income Fund Institutional Class. Of such Two Hundred Million
(200,000,000) shares of the Corporation's Common Stock allocated to the
High-Yield Opportunities Fund series, such shares shall be further classified as
follows: (1) One Hundred Million

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<PAGE>

(100,000,000) shares of the High-Yield Opportunities Fund series of the Common
Stock shall be allocated to the High-Yield Opportunities Fund A Class, (2)
Twenty-Five Million (25,000,000) shares of the High-Yield Opportunities Fund
series of the Common Stock shall be allocated to each of the High-Yield
Opportunities Fund B Class and the High-Yield Opportunities Fund C Class, and
(3) Fifty Million (50,000,000) shares of the High-Yield Opportunities Fund
series of the Common Stock shall be allocated to the High-Yield Opportunities
Fund Institutional Class.

FOURTH: The shares of the High-Yield Opportunities Fund A
Class, the High-Yield Opportunities Fund B Class, the High-Yield Opportunities
Fund C Class and the High-Yield Opportunities Fund Institutional Class of the
High-Yield Opportunities Fund series shall represent proportionate interests in
the same portfolio of investments. The shares of the High-Yield Opportunities
Fund A Class, the High-Yield Opportunities Fund B Class, the High-Yield
Opportunities Fund C Class and the High-Yield Opportunities Fund Institutional
Class of the High-Yield Opportunities Fund series shall have the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption, all as set
forth in the Articles of Incorporation of the Corporation, except for the
differences hereinafter set forth:

1. The dividends and distributions of investment income and
capital gains with respect to shares of the High-Yield
Opportunities Fund A Class, the High-Yield Opportunities Fund
B Class, the High-Yield Opportunities Fund C Class and the
High-Yield Opportunities Fund Institutional Class of the High-
Yield Opportunities Fund series of the Common Stock shall be
in such amounts as may be declared from time to time by the
Board of Directors, and such dividends and distributions may
vary with respect to each such class from the dividends and
distributions of investment income and capital gains with
respect to the other classes of the High-Yield Opportunities
Fund series of the Common Stock, to reflect differing
allocations of the expenses of the Corporation among the
classes and any resultant difference among the net asset
values per share of the classes, to such extent and for such
purposes as the Board of Directors may deem appropriate. The
allocation of investment income and capital gains and expenses
and liabilities of the High-Yield Opportunities Fund series
among its four classes of Common Stock shall be determined by
the Board of Directors in a manner that is consistent with the
orders, as applicable, dated April 10, 1987 and September 6,
1994 (Investment Company Act of 1940 Release Nos. 15675 and
20529) issued by the Securities

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<PAGE>

and Exchange Commission, and any amendments to such orders,
any existing or future order or any Multiple Class Plan
adopted by the Corporation in accordance with Rule 18f-3 under
the Investment Company Act of 1940, as amended, that modifies
or supersedes such orders.

2. Except as may otherwise be required by law, pursuant to any
applicable order, rule or interpretation issued by the
Securities and Exchange Commission, or otherwise, the holders
of shares of the High-Yield Opportunities Fund A Class, the
High-Yield Opportunities Fund B Class, the High-Yield
Opportunities Fund C Class and the High-Yield Opportunities
Fund Institutional Class of the High- Yield Opportunities Fund
series of the Common Stock shall have (i) exclusive voting
rights with respect to any matter submitted to a vote of
stockholders that affects only holders of shares of the
High-Yield Opportunities Fund A Class, the High-Yield
Opportunities Fund B Class, the High-Yield Opportunities Fund
C Class and the High-Yield Opportunities Fund Institutional
Class of the High- Yield Opportunities Fund series,
respectively, including, without limitation, the provisions of
any Distribution Plan adopted pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (a "Distribution
Plan"), applicable to shares of the High-Yield Opportunities
Fund A Class, the High-Yield Opportunities Fund B Class and
the High-Yield Opportunities Fund C Class, and (ii) no voting
rights with respect to the provisions of any Distribution Plan
applicable to any other class of the High-Yield Opportunities
Fund series of the Common Stock or with regard to any other
matter submitted to a vote of stockholders which does not
affect holders of shares of the High-Yield Opportunities Fund
A Class, the High-Yield Opportunities Fund B Class and the
High-Yield Opportunities Fund C Class.

3. (a) Other than shares described in paragraph (3)(b) herein,
each share of the High-Yield Opportunities Fund B Class shall
be converted automatically, and without any action or choice
on the part of the holder thereof, into shares of the High-
Yield Opportunities Fund A Class on the Conversion Date. The
term "Conversion Date" when used herein shall mean a date set
forth in the prospectus of the High-Yield Opportunities Fund B
Class, as such prospectus may be amended from time to time,
that is no later than three months after either (i) the date
on which the eighth anniversary of the date of issuance of

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<PAGE>

the share occurs, or (ii) any such other anniversary date as
may be determined by the Board of Directors and set forth in
the prospectus of the High-Yield Opportunities Fund B Class,
as such prospectus may be amended from time to time; provided
that any such other anniversary date determined by the Board
of Directors shall be a date that will occur prior to the
anniversary date set forth in clause (i) and any such other
date theretofore determined by the Board of Directors pursuant
to this clause (ii); but further provided that, subject to the
provisions of the next sentence, for any shares of the
High-Yield Opportunities Fund B Class acquired through an
exchange, or through a series of exchanges, as permitted by
the Corporation as provided in the prospectus of the
High-Yield Opportunities Fund B Class, as such prospectus may
be amended from time to time, from another investment company
or another series of the Corporation (an "eligible investment
company"), the Conversion Date shall be the conversion date
applicable to the shares of stock of the eligible investment
company originally subscribed for in lieu of the Conversion
Date of any stock acquired through exchange if such eligible
investment company issuing the stock originally subscribed for
had a conversion feature, but not later than the Conversion
Date determined under (i) above. For the purpose of
calculating the holding period required for conversion, the
date of issuance of a share of the High-Yield Opportunties
Fund B Class shall mean (i) in the case of a share of the
High-Yield Opportunities Fund B Class obtained by the holder
thereof through an original subscription to the Corporation,
the date of the issuance of such share of the High-Yield
Opportunities Fund B Class, or (ii) in the case of a share of
the High-Yield Opportunties Fund B Class obtained by the
holder thereof through an exchange, or through a series of
exchanges, from an eligible investment company, the date of
issuance of the share of the eligible investment company to
which the holder originally subscribed.

(b) Each share of the High-Yield Opportunties Fund B
Class (i) purchased through the automatic reinvestment of a
dividend or distribution with respect to the High-Yield
Opportunties Fund B Class or the corresponding class of any
other investment company or of any other series of the
Corporation issuing such class of shares or (ii) issued
pursuant to an exchange privilege granted by the Corporation
in an exchange or series of exchanges for shares originally
purchased through the automatic reinvestment of a dividend or

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<PAGE>

distribution with respect to shares of capital stock of an
eligible investment company, shall be segregated in a separate
sub-account on the stock records of the Corporation for each
of the holders of record thereof. On any Conversion Date, a
number of the shares held in the separate sub-account of the
holder of record of the share or shares being converted,
calculated in accordance with the next following sentence,
shall be converted automatically, and without any action or
choice on the part of the holder, into shares of the
High-Yield Opportunities Fund A Class. The number of shares in
the holder's separate sub-account so converted shall (i) bear
the same ratio to the total number of shares maintained in the
separate sub-account on the Conversion Date (immediately prior
to conversion) as the number of shares of the holder converted
on the Conversion Date pursuant to paragraph (3)(a) hereof
bears to the total number of High-Yield Opportunities Fund B
Class shares of the holder on the Conversion Date (immediately
prior to conversion) after subtracting the shares then
maintained in the holder's separate sub-account, or (ii) be
such other number as may be calculated in such other manner as
may be determined by the Board of Directors and set forth in
the prospectus of the High-Yield Opportunities Fund B Class,
as such prospectus may be amended from time to time.

(c) The number of shares of the High-Yield
Opportunities Fund A Class into which a share of the
High-Yield Opportunities Fund B Class is converted pursuant to
paragraphs 3(a) and 3(b) hereof shall equal the number
(including for this purpose fractions of a share) obtained by
dividing the net asset value per share of the High-Yield
Opportunities Fund B Class for purposes of sales and
redemption thereof on the Conversion Date by the net asset
value per share of the High-Yield Opportunities Fund A Class
for purposes of sales and redemption thereof on the Conversion
Date.

(d) On the Conversion Date, the shares of the
High-Yield Opportunities Fund B Class converted into shares of
the High-Yield Opportunities Fund A Class will no longer be
deemed outstanding and the rights of the holders thereof
(except the right to receive (i) the number of shares of the
High-Yield Opportunities Fund A Class into which the shares of
the High-Yield Opportunities Fund B Class have been converted
and (ii) declared but unpaid dividends to the Conversion Date
or such other date set forth in the prospectus of the
High-Yield Opportunities Fund B Class, as such prospectus may
be amended from time to time and (iii)

-6-

<PAGE>

the right to vote converting shares of the High-Yield
Opportunities Fund B Class held as of any record date
occurring on or before the Conversion Date and theretofore set
with respect to any meeting held after the Conversion Date)
will cease. Certificates representing shares of the High-Yield
Opportunities Fund A Class resulting from the conversion need
not be issued until certificates representing shares of the
High-Yield Opportunities Fund B Class converted, if issued,
have been received by the Corporation or its agent duly
endorsed for transfer.

(e) The automatic conversion of the High-Yield
Opportunities Fund B Class into the High-Yield Opportunities
Fund A Class, as set forth in paragraphs 3(a) and 3(b) of this
Article FOURTH shall be suspended at any time that the Board
of Directors determines (i) that there is not available a
reasonably satisfactory opinion of counsel to the effect that
(x) the assessment of the higher fee under the Distribution
Plan with respect to the High-Yield Opportunities Fund B Class
does not result in the Corporation's dividends or
distributions constituting a "preferential dividend" under the
Internal Revenue Code of 1986, as amended, and (y) the
conversion of the High-Yield Opportunities Fund B Class does
not constitute a taxable event under federal income tax law,
or (ii) any other condition to conversion set forth in the
prospectus of the High- Yield Opportunities Fund B Class, as
such prospectus may be amended from time to time, is not
satisfied.

(f) The automatic conversion of the High-Yield
Opportunities Fund B Class into High-Yield Opportunties Fund A
Class, as set forth in paragraphs 3(a) and 3(b) hereof, may
also be suspended by action of the Board of Directors at any
time that the Board of Directors determines such suspension to
be appropriate in order to comply with, or satisfy the
requirements of the Investment Company Act of 1940, as
amended, and in effect from time to time, or any rule,
regulation or order issued thereunder relating to voting by
the holders of the High-Yield Opportunities Fund B Class on
any Distribution Plan with respect to, as relevant, the
High-Yield Opportunities Fund A Class and in effect from time
to time, and in connection with, or in lieu of, any such
suspension, the Board of Directors may provide holders of the
High-Yield Opportunities Fund B Class with alternative
conversion or exchange rights into other classes of stock of
the Corporation in a manner consistent with the law, rule,
regulation or order giving rise to the possible suspension of
the conversion right.

-7-

<PAGE>

4. The shares of the High-Yield Opportunities Fund C Class and
the High-Yield Opportunities Fund Institutional Class shall
not automatically convert into shares of the High-Yield
Opportunities Fund A Class of the High-Yield Opportunities
Fund series of the Common Stock as do the shares of the
High-Yield Opportunities Fund B Class of the High-Yield
Opportunities Fund series of the Common Stock.

FIFTH: The shares of the High-Yield Opportunities Fund A
Class, the High-Yield Opportunities Fund B Class, the High-Yield Opportunities
Fund C Class and the High-Yield Opportunities Fund Institutional Class of the
High-Yield Opportunities Fund series have been classified by the Board of
Directors pursuant to authority contained in the Articles of Incorporation of
the Corporation.

SIXTH: The Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended.

SEVENTH: These Articles Supplementary shall become effective
at 9:00 a.m. on ____________, 1996.

The undersigned Senior Vice President acknowledges these
Articles Supplementary to be the corporate act of the Corporation and states
that to the best of his knowledge, information and belief, the matters and facts
set forth in these Articles with respect to authorization and approval are true
in all material respects and that this statement is made under the penalities
for perjury.

IN WITNESS WHEREOF, Delaware Group Income Funds, Inc. has
caused these Articles Supplementary to be signed in its name and on its behalf
this ______ day of _________, 1996.

DELAWARE GROUP INCOME FUNDS, INC.

By:
---------------------------------------
George M. Chamberlain, Jr.
Senior Vice President

ATTEST:

- -------------------------------
David P. O'Connor
Assistant Secretary

-8-

<PAGE>

DELAWARE GROUP INCOME FUNDS, INC.

STRATEGIC INCOME FUND

INVESTMENT MANAGEMENT AGREEMENT

AGREEMENT, made by and between DELAWARE GROUP INCOME FUNDS,
INC. (the "Fund"), a Maryland corporation, for the STRATEGIC
INCOME FUND series (the "Series"), and DELAWARE MANAGEMENT
COMPANY, INC. (the "Investment Manager"), a Delaware corporation.

W I T N E S S E T H:

WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and

WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and

WHEREAS, the Investment Manager serves as the investment manager for
the other series of the Fund, known as the Delchester Fund series, pursuant to
an Investment Management Agreement dated as of April 3, 1995, and the Fund
desires to retain the Investment Manager to serve as the investment manager for
this Series effective as of the date of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:

1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Board

<PAGE>

and officers of the Fund for the period and on the terms hereinafter set forth.
The Investment Manager hereby accepts such employment and agrees during such
period to render the services and assume the obligations herein set forth for
the compensation herein provided. The Investment Manager shall, for all purposes
herein, be deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized, have no authority to act for or represent the
Fund in any way, or in any way be deemed an agent of the Fund. The Investment
Manager shall regularly make decisions as to what securities to purchase and
sell on behalf of the Series, shall effect the purchase and sale of investments
in furtherance of the Series' objectives and policies, and shall furnish the
Board of Directors of the Fund with such information and reports regarding the
Series' investments as the Investment Manager deems appropriate or as the
Directors of the Fund may reasonably request.

2. The Fund shall conduct its own business and affairs and shall bear
the expenses and salaries necessary and incidental thereto including, but not in
limitation of the foregoing, the costs incurred in: the maintenance of its
corporate existence; the maintenance of its own books, records and procedures;
dealing with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian

-2-

<PAGE>

fees; legal and accounting fees; taxes; and federal and state registration fees.
The Series shall bear all of its own organizational costs.

Directors, officers and employees of the Investment Manager
may be directors, officers and employees of the funds of which Delaware
Management Company, Inc. is Investment Manager. Directors, officers and
employees of the Investment Manager who are directors, officers and/or employees
of the funds shall not receive any compensation from the funds for acting in
such dual capacity.

In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment Manager
may share facilities common to each, with appropriate proration of expenses
between them.

3. (a) The Fund shall place and execute its own orders for the purchase
and sale of domestic portfolio securities with broker/dealers. Subject to the
primary objective of obtaining the best available prices and execution, the Fund
will place orders for the purchase and sale of portfolio securities with such
broker/dealers selected from among those designated from time to time by the
Investment Manager, who provide statistical, factual and financial information
and services to the Fund, to the Investment Manager, or to any other fund for
which the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides

-3-

<PAGE>

investment advisory services. Broker/dealers who sell shares of the funds of
which Delaware Management Company, Inc. or Delaware International Advisers Ltd.
is investment manager, shall only receive orders for the purchase or sale of
portfolio securities to the extent that the placing of such orders is in
compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.

(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund, and
the Fund may agree, to pay a member of an exchange, broker or dealer an amount
of commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it, and the Investment
Manager, have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Investment Manager's overall responsibilities with
respect to the Fund and to other funds or other advisory accounts for which the
Investment Manager exercises investment discretion.

4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager monthly

-4-

<PAGE>

from the Series' assets a fee based on the average daily net assets of the
Series during the month. Such fee shall be calculated in accordance with the
following schedule.

Equivalent
Monthly Rate Annual Rate Average Daily Net Assets
- ------------ ----------- ------------------------

6.50/120 of 1% 0.650% on the first $500,000,000

6.25/120 of 1% 0.625% on the next $500,000,000

6.00/120 of 1% 0.600% on assets over $1,000,000,000

5. The Investment Manager may, at its expense, select and contract with
one or more registered investment advisers (the "Sub-Adviser") for the Fund to
perform some or all of the services for the Series for which it is responsible
under this Agreement. Notwithstanding Paragraph 3 hereof, such Sub-Adviser may
be responsible for executing orders for the purchase and sale of foreign
portfolio securities. The Investment Manager will compensate any Sub-Adviser for
its services to the Fund. The Investment Manager may terminate the services of
any Sub-Adviser at any time in its sole discretion, and shall at such time
assume the responsibilities of such Sub-Adviser unless and until a successor
Sub-Adviser is selected.

-5-

<PAGE>

6. The services to be rendered by the Investment Manager to the Fund
under the provisions of this Agreement are not to be deemed to be exclusive, and
the Investment Manager shall be free to render similar or different services to
others so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.

7. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.

8. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.

9. This Agreement shall be executed and become effective as of the date
written below. It shall continue in effect for a period of two years from such
date and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of Directors of the Fund

-6-

<PAGE>

or by vote of a majority of the outstanding voting securities of the Series and
only if the terms and the renewal hereof have been approved by the vote of a
majority of the Directors of the Fund who are not parties hereto or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. Notwithstanding the foregoing, this Agreement may be
terminated by the Fund at any time, without the payment of a penalty, on sixty
days' written notice to the Investment Manager of the Fund's intention to do so,
pursuant to action by the Board of Directors of the Fund or pursuant to vote of
a majority of the outstanding voting securities of the Series. The Investment
Manager may terminate this Agreement at any time, without the payment of
penalty, on sixty days' written notice to the Fund of its intention to do so.
Upon termination of this Agreement, the obligations of all the parties hereunder
shall cease and terminate as of the date of such termination, except for any
obligation to respond for a breach of this Agreement committed prior to such
termination, and except for the obligation of the Fund to pay to the Investment
Manager the fee provided in paragraph 4 hereof, prorated to the date of
termination. This Agreement shall automatically terminate in the event of its
assignment.

10. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.

11. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested

-7-

<PAGE>

persons;" and "assignment" shall have the meanings defined in the Investment
Company Act of 1940.

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by having it signed by their duly authorized officers as of the 30th
day of September, 1996.

DELAWARE GROUP INCOME FUNDS, INC.
for the STRATEGIC INCOME FUND

By:/s/ Wayne A. Stork
--------------------------------------------
Name: Wayne A. Stork
Title: Chairman/President/Chief
Executive Officer

Attest:/s/ Richelle S. Maestro
--------------------------------------------
Name: Richelle S. Maestro
Title: Assistant Secretary

DELAWARE MANAGEMENT COMPANY, INC.

By:/s/ David K. Downes
--------------------------------------------
Name: David K. Downes
Title: Senior Vice President/Chief Administrative
Office/Chief Financial Officer

Attest:/s/ Eric E. Miller
--------------------------------------------
Name: Eric E. Miller
Title: Assistant Secretary

-8-

<PAGE>

DELAWARE GROUP INCOME FUNDS, INC.

STRATEGIC INCOME FUND

SUB-ADVISORY AGREEMENT

AGREEMENT, made by and between DELAWARE MANAGEMENT COMPANY, INC., a
Delaware corporation (the "Investment Manager"), and DELAWARE INTERNATIONAL
ADVISERS LTD., a U.K. company (the "Sub- Adviser").

W I T N E S S E T H:

WHEREAS, DELAWARE GROUP INCOME FUNDS, INC., a Maryland corporation (the
"Fund"), has been organized and operates as an investment company registered
under the Investment Company Act of 1940 and engages in the business of
investing and reinvesting its assets in securities; and

WHEREAS, the Investment Manager and the Sub-Adviser are registered
Investment Advisers under the Investment Advisers Act of 1940 and engage in the
business of providing investment management services; and

WHEREAS, the Investment Manager and the Fund on behalf of the Strategic
Income Fund series (the "Series") have entered into an agreement dated as of
September 30, 1996 (the "Investment Management Agreement") whereby the
Investment Manager will provide investment advisory services to the Fund on
behalf of the Series; and

<PAGE>

WHEREAS, the Investment Management Agreement permits the Investment
Manager to hire one or more sub-advisers to assist the Investment Manager in
providing investment advisory services to the Fund;

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:

1. The Investment Manager hereby employs the Sub-Adviser, subject
always to the Investment Manager's control and supervision, to manage the
foreign securities portion of the Series' portfolio and to furnish the
Investment Manager with investment recommendations, asset allocation advice,
research and other investment services with respect to foreign securities,
subject to the direction of the Board and officers of the Fund for the period
and on the terms hereinafter set forth. The Sub-Adviser hereby accepts such
employment and agrees during such period to render the services and assume the
obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall for all purposes herein be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and authorized, have
no authority to act for or represent the Fund in any way, or in any way be
deemed an agent of the Fund. The Sub-Adviser shall regularly make decisions as
to what securities to purchase and sell on behalf of the Series, shall effect
the purchase and sale of investments in furtherance of the Series' objectives
and policies, and shall furnish the Board of Directors

-2-

<PAGE>

of the Fund with such information and reports regarding the Series' investments
as the Investment Manager deems appropriate or as the Directors of the Fund may
reasonably request.

2. Under the terms of the Investment Management Agreement, the Fund
shall conduct its own business and affairs and shall bear the expenses and
salaries necessary and incidental thereto including, but not in limitation of
the foregoing, the costs incurred in: the maintenance of its corporate
existence; the maintenance of its own books, records and procedures; dealing
with its own shareholders; the payment of dividends; transfer of stock,
including issuance, redemption and repurchase of shares; preparation of share
certificates; reports and notices to shareholders; calling and holding of
shareholders' meetings; miscellaneous office expenses; brokerage commissions;
custodian fees; legal and accounting fees; taxes; and federal and state
registration fees.

Directors, officers and employees of the Sub-Adviser may be directors,
officers and employees of other funds which have employed the Sub-Adviser as
sub-adviser or investment manager. Directors, officers and employees of the
Sub-Adviser who are directors, officers and/or employees of the Fund shall not
receive any compensation from the Fund for acting in such dual capacity.

In the conduct of the respective businesses of the parties hereto and
in the performance of this Agreement, the Fund, the Investment Manager and the
Sub-Adviser may share facilities

-3-

<PAGE>

common to each, with appropriate proration of expenses between
and among them.

3. (a) Subject to the primary objective of obtaining the best available
prices and execution, the Sub-Adviser will place orders for the purchase and
sale of portfolio securities with such broker/dealers who provide statistical,
factual and financial information and services to the Fund, to the Investment
Manager, to the Sub-Adviser or to any other fund for which the Investment
Manager or Sub-Adviser provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager or Sub-Adviser provides investment advisory
services. Broker/dealers who sell shares of the funds for which the Investment
Manager or Sub-Adviser provides advisory services shall only receive orders for
the purchase or sale of portfolio securities to the extent that the placing of
such orders is in compliance with the Rules of the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.

(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Sub-Adviser may ask the Fund and the
Fund may agree to pay a member of an exchange, broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would

-4-

<PAGE>

have charged for effecting that transaction, in such instances where it and the
Sub-Adviser have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to the Fund and to other funds and other advisory accounts for which the
Investment Manager or the Sub-Adviser exercises investment discretion.

4. As compensation for the services to be rendered to the Fund by the
Sub-Adviser under the provisions of this Agreement, the Investment Manager shall
pay to the Sub-Adviser a monthly fee equal to one-third of the fee paid to the
Investment Manager under the terms of the Investment Management Agreement.

If this Agreement is terminated prior to the end of any calendar month,
the sub-advisory fee shall be prorated for the portion of any month in which
this Agreement is in effect according to the proportion which the number of
calendar days during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within 10 days after the date
of termination.

5. The services to be rendered by the Sub-Adviser to the Fund under the
provisions of this Agreement are not to be deemed to be exclusive, and the
Sub-Adviser shall be free to render similar or different services to others so
long as its ability to

-5-

<PAGE>

render the services provided for in this Agreement shall not be
impaired thereby.

6. The Sub-Adviser, its directors, officers, employees, agents and
shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.

7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Sub-Adviser to the
Fund, the Sub-Adviser shall not be subject to liabilities to the Fund or to any
shareholder of the Fund for any action or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security, or otherwise.

8. This Agreement shall be executed and become effective as of the date
written below. It shall continue in effect for a period of two years and may be
renewed thereafter only so long as such renewal and continuance is specifically
approved at least annually by the Board of Directors or by vote of a majority of
the outstanding voting securities of the Series and only if the terms and the
renewal hereof have been approved by the vote of a majority of the Directors of
the Fund who are not parties hereto or interested persons of any such party,
cast in person at a

-6-

<PAGE>

meeting called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Investment Manager or the
Fund at any time, without the payment of a penalty, on sixty days' written
notice to the Sub-Adviser, of the Investment Manager's or the Fund's intention
to do so, in the case of the Fund pursuant to action by the Board of Directors
of the Fund or pursuant to vote of a majority of the outstanding voting
securities of the Series. The Sub-Adviser may terminate this Agreement at any
time, without the payment of a penalty on sixty days' written notice to the
Investment Manager and the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Investment Manager to pay to the Sub-Adviser
the fee provided in Paragraph 4 hereof, prorated to the date of termination.
This Agreement shall automatically terminate in the event of its assignment.
This Agreement shall automatically terminate upon the termination of the
Investment Management Agreement.

9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.

10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested

-7-

<PAGE>

person;" and "assignment" shall have the meanings defined in the Investment
Company Act of 1940.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
having it signed by their duly authorized officers as of the 30th day of
September, 1996.

DELAWARE MANAGEMENT COMPANY,
INC.

Attest:/s/ Eric E. Miller By: /s/ David K. Downes
-------------------------- ----------------------------------
Name: Eric E. Miller Name: David K. Downes
Title: Assistant Secretary Title: Senior Vice President/
Chief Financial Officer/
Chief Administrative Officer

DELAWARE INTERNATIONAL ADVISERS LTD.

Attest: /s/ John Emberson By: /s/ David G. Tilles
-------------------------- ----------------------------------
Name: John Emberson Name: David G. Tilles
Title: Secretary Title: Managing Director/
Chief Investment Officer

Agreed to and accepted as of the day and year first above written:

DELAWARE GROUP INCOME FUNDS, INC.
for the STRATEGIC INCOME FUND

Attest: /s/ Richelle S. Maestro By: /s/ Wayne A. Stork
-------------------------- ----------------------------------
Name: Richelle S. Maestro Name: Wayne A. Stork
Title: Assistant Secretary Title: Chairman/President/
Chief Financial Officer

-8-

<PAGE>

PROPOSED AGREEMENT
SUBJECT TO BOARD APPROVAL

[NAME OF INVESTMENT COMPANY]

[NAME OF PORTFOLIO]

INVESTMENT MANAGEMENT AGREEMENT

AGREEMENT, made by and between [NAME OF INVESTMENT COMPANY] (the
"Fund"), a Maryland corporation, for its [NAME OF PORTFOLIO] (the "Series"), and
DELAWARE MANAGEMENT COMPANY, INC. (the "Investment Manager"), a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, the Fund has been organized and operates as an investment
company registered under the Investment Company Act of 1940 and engages in the
business of investing and reinvesting its assets in securities; and
WHEREAS, the Investment Manager is a registered Investment Adviser
under the Investment Advisers Act of 1940 and engages in the business of
providing investment management services; and
WHEREAS, the Investment Manager serves as the investment manager for
the other series of the Fund, known as the [NAME OF PORTFOLIO], pursuant to an
Investment Management Agreement dated as of ________________, and the Fund
desires to retain the Investment Manager to serve as the investment manager for
this Series effective as of the date of this Agreement.

-2-

<PAGE>

NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and each of the parties hereto intending to be legally bound, it is
agreed as follows:
1. The Fund hereby employs the Investment Manager to manage the
investment and reinvestment of the Series' assets and to administer its affairs,
subject to the direction of the Board and officers of the Fund for the period
and on the terms hereinafter set forth. The Investment Manager hereby accepts
such employment and agrees during such period to render the services and assume
the obligations herein set forth for the compensation herein provided. The
Investment Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent of the Fund. The Investment Manager shall regularly
make decisions as to what securities to purchase and sell on behalf of the
Series, and shall give written instructions to the Trading Department maintained
by the Fund for implementation of such decisions, and shall furnish the Board of
Directors of the Fund with such information and reports regarding the Series'
investments as the Investment Manager deems appropriate or as the Directors of
the Fund may reasonably request.
2. The Fund shall conduct its own business and affairs and
shall bear the expenses and salaries necessary and incidental
thereto including, but not in limitation of the foregoing, the

-3-

<PAGE>

costs incurred in: the maintenance of its corporate existence; the maintenance
of its own books, records and procedures; dealing with its own shareholders; the
payment of dividends; transfer of stock, including issuance, redemption and
repurchase of shares; preparation of share certificates; reports and notices to
shareholders; calling and holding of shareholders' meetings; miscellaneous
office expenses; brokerage commissions; custodian fees; legal and accounting
fees; taxes; and federal and state registration fees. The Series shall bear all
of its own organizational costs.
Directors, officers and employees of the Investment Manager
may be directors, officers and employees of the funds of which Delaware
Management Company, Inc. is Investment Manager. Directors, officers and
employees of the Investment Manager who are directors, officers and/or employees
of the funds shall not receive any compensation from the funds for acting in
such dual capacity.
In the conduct of the respective businesses of the parties
hereto and in the performance of this Agreement, the Fund and Investment Manager
may share facilities common to each, with appropriate proration of expenses
between them.
3. (a) The Fund shall place and execute its own orders
for the purchase and sale of portfolio securities with
broker/dealers. Subject to the primary objective of obtaining the
best available prices and execution, the Fund will place orders
for the purchase and sale of portfolio securities with such

-4-

<PAGE>

broker/dealers selected from among those designated from time to time by the
Investment Manager, who provide statistical, factual and financial information
and services to the Fund, to the Investment Manager, or to any other fund for
which the Investment Manager provides investment advisory services and/or with
broker/dealers who sell shares of the Fund or who sell shares of any other fund
for which the Investment Manager provides investment advisory services.
Broker/dealers who sell shares of the funds of which Delaware Management
Company, Inc. is investment manager, shall only receive orders for the purchase
or sale of portfolio securities to the extent that the placing of such orders is
in compliance with the Rules of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc.
(b) Notwithstanding the provisions of subparagraph (a) above
and subject to such policies and procedures as may be adopted by the Board of
Directors and officers of the Fund, the Investment Manager may ask the Fund, and
the Fund may agree, to pay a member of an exchange, broker or dealer an amount
of commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker or dealer would have charged
for effecting that transaction, in such instances where it, and the Investment
Manager, have determined in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such member, broker or dealer, viewed in terms of

-5-

<PAGE>

either that particular transaction or the Investment Manager's overall
responsibilities with respect to the Fund and to other funds or other advisory
accounts for which the Investment Manager exercises investment discretion.
4. As compensation for the services to be rendered to the Fund by the
Investment Manager under the provisions of this Agreement, the Fund shall pay to
the Investment Manager monthly from the Series' assets a fee based on the
average daily net assets of the Series during the month. Such fee shall be
calculated in accordance with the following schedule.
Equivalent
Monthly Rate Annual Rate Average Daily Net Assets
- ------------ ----------- ------------------------
6.00/120 of 1% 0.600% on the first $500,000,000

5.75/120 of 1% 0.575% on the next $250,000,000

5.50/120 of 1% 0.550% on assets over $750,000,000

If this Agreement is terminated prior to the end of any
calendar month, the management fee shall be prorated for the portion of any
month in which this Agreement is in effect according to the proportion which the
number of calendar days during which the Agreement is in effect bears to the
number of calendar days in the month, and shall be payable within 10 days after
the date of termination.
5. The services to be rendered by the Investment Manager to the
Fund under the provisions of this Agreement are not to be deemed to be
exclusive, and the Investment Manager shall be free to render similar or
different services to others so long as its

-6-

<PAGE>

ability to render the services provided for in this Agreement shall not be
impaired thereby.
6. The Investment Manager, its directors, officers, employees, agents
and shareholders may engage in other businesses, may render investment advisory
services to other investment companies, or to any other corporation,
association, firm or individual, and may render underwriting services to the
Fund or to any other investment company, corporation, association, firm or
individual.
7. In the absence of willful misfeasance, bad faith, gross negligence,
or a reckless disregard of the performance of duties of the Investment Manager
to the Fund, the Investment Manager shall not be subject to liabilities to the
Fund or to any shareholder of the Fund for any action or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security, or otherwise.
8. This Agreement shall be executed and become effective as of the date
written below. It shall continue in effect for a period of two years from such
date and may be renewed thereafter only so long as such renewal and continuance
is specifically approved at least annually by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities of the Series and
only if the terms and the renewal hereof have been approved by the vote of a
majority of the Directors of the Fund who are not parties hereto or interested
persons of any such

-7-

<PAGE>

party, cast in person at a meeting called for the purpose of voting on such
approval. Notwithstanding the foregoing, this Agreement may be terminated by the
Fund at any time, without the payment of a penalty, on sixty days' written
notice to the Investment Manager of the Fund's intention to do so, pursuant to
action by the Board of Directors of the Fund or pursuant to vote of a majority
of the outstanding voting securities of the Series. The Investment Manager may
terminate this Agreement at any time, without the payment of penalty, on sixty
days' written notice to the Fund of its intention to do so. Upon termination of
this Agreement, the obligations of all the parties hereunder shall cease and
terminate as of the date of such termination, except for any obligation to
respond for a breach of this Agreement committed prior to such termination, and
except for the obligation of the Fund to pay to the Investment Manager the fee
provided in paragraph 4 hereof, prorated to the date of termination. This
Agreement shall automatically terminate in the event of its assignment.
9. This Agreement shall extend to and bind the heirs, executors,
administrators and successors of the parties hereto.
10. For the purposes of this Agreement, the terms "vote of a majority
of the outstanding voting securities;" "interested persons;" and "assignment"
shall have the meanings defined in the Investment Company Act of 1940.

-8-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement by having it signed by their duly authorized officers as of the day of
, .

[NAME OF INVESTMENT COMPANY]
for the [NAME OF PORTFOLIO]

By:
------------------------------
Name:

Title:

Attest:
--------------------------
Name:

Title:

DELAWARE MANAGEMENT COMPANY, INC.

By:
------------------------------
Name:

Title:

Attest:
--------------------------
Name:

Title:

-9-

<PAGE>

DELAWARE GROUP INCOME FUNDS, INC.
STRATEGIC INCOME FUND
DISTRIBUTION AGREEMENT

Distribution Agreement (the "Agreement") made as of this 30th day of
September, 1996 by and between DELAWARE GROUP INCOME FUNDS, INC., a Maryland
corporation (the "Fund"), for the STRATEGIC INCOME FUND series (the "Series"),
and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware limited
partnership.

WITNESSETH

WHEREAS, the Fund is an investment company regulated by
Federal and State regulatory bodies, and

WHEREAS, the Distributor is engaged in the business of
promoting the distribution of the securities of investment companies and, in
connection therewith and acting solely as agent for such investment companies
and not as principal, advertising, promoting, offering and selling their
securities to the public, and

WHEREAS, the Fund desires to enter into an agreement with the
Distributor on behalf of the Series, pursuant to which the Distributor shall
serves as the national distributor of the Series' Strategic Income Fund A Class
("Class A Shares"), Strategic Income Fund B Class (the "Class B Shares"),
Strategic Income Fund C Class (the "Class C Shares"), and Strategic Income Fund
Institutional Class (the "Institutional Class Shares"), which Series and classes
may do business under these or such other names as the Board of Directors may
designate from time to time, on the terms and conditions set forth below,

<PAGE>

NOW, THEREFORE, the parties hereto, intending to be
legally bound hereby, agree as follows:

1. The Fund hereby engages the Distributor to promote the
distribution of the Series' shares and, in connection therewith and as
agent for the Fund and not as principal, to advertise, promote, offer
and sell the Series' shares to the public.

2. (a) The Distributor agrees to serve as distributor of the
Series' shares and, as agent for the Fund and not as
principal, to advertise, promote and use its best efforts
to sell the Series' shares wherever their sale is legal,
either through dealers or otherwise, in such places and
in such manner, not inconsistent with the law and the
provisions of this Agreement and the Fund's Registration
Statement under the Securities Act of 1933, including the
Prospectuses contained therein, and the Statement of
Additional Information contained therein as may be
mutually determined by the Fund and the Distributor from
time to time.

(b) For the Institutional Class Shares, the Distributor will bear
all costs of financing any activity which is primarily
intended to result in the sale of that class of shares,
including, but not necessarily limited to, advertising,
compensation of underwriters, dealers and sales personnel, the
printing and mailing of sales literature and distribution of
that class of shares.

-2-

<PAGE>

(c) For its services as agent for the Class A Shares, Class
B Shares, and Class C Shares, the Distributor shall be
entitled to compensation on each sale or redemption, as
appropriate, of shares of such classes equal to any
front-end or deferred sales charge described in the
Prospectus from time to time and may allow concessions to
dealers in such amounts and on such terms as are therein
set forth.

(d) For the Class A Shares, Class B Shares, and Class C
Shares, the Fund shall, in addition, compensate the
Distributor for its services as provided in the
Distribution Plan as adopted on behalf of the Class A
Shares, Class B Shares, and Class C Shares, respectively,
pursuant to Rule 12b-1 under the Investment Company Act
of 1940 (the "Plans"), copies of which as presently in
force are attached hereto as, respectively, Exhibit "A,"
"B," and "C."

3. (a) The Fund agrees to make available for sale by the Fund
through the Distributor all or such part of the authorized but
unissued shares of the Series as the Distributor shall require
from time to time, and except as provided in Paragraph 3(b)
hereof, the Fund will not sell Series' shares other than
through the efforts of the Distributor.

(b) The Fund reserves the right from time to time (1) to sell and
issue shares other than for cash; (2) to issue shares

-3-

<PAGE>

in exchange for substantially all of the assets of any
corporation or trust, or in exchange of shares of any
corporation or trust; (3) to pay stock dividends to its
shareholders, or to pay dividends in cash or stock at the
option of its stockholders, or to sell stock to existing
stockholders to the extent of dividends payable from time to
time in cash, or to split up or combine its outstanding shares
of common stock; (4) to offer shares for cash to its
stockholders as a whole, by the use of transferable rights or
otherwise, and to sell and issue shares pursuant to such
offers; and (5) to act as its own distributor in any
jurisdiction in which the Distributor is not registered as a
broker-dealer.

4. The Fund warrants the following:

(a) The Fund is, or will be, a properly registered investment
company, and any and all Series' shares which it will sell
through the Distributor are, or will be, properly registered
with the Securities and Exchange Commission ("SEC").

(b) The provisions of this Agreement do not violate the terms of
any instrument by which the Fund is bound, nor do they violate
any law or regulation of any body having jurisdiction over the
Fund or its property.

5. (a) The Fund will supply to the Distributor a conformed copy
of the Registration Statement, all amendments thereto,

-4-

<PAGE>

all exhibits, and each Prospectus and Statement of
Additional Information.

(b) The Fund will register or qualify the Series' shares for
sale in such states as is deemed desirable.

(1) will give and continue to give such financial
statements and other information as may be required
by the SEC or the proper public bodies of the states
in which the Series' shares may be qualified;

(2) from time to time, will furnish to the Distributor
as soon as reasonably practicable true copies of
its periodic reports to stockholders;

(3) will promptly advise the Distributor in person or by
telephone or telegraph, and promptly confirm such
advice in writing, (a) when any amendment or
supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for
amendments or supplements to the Registration
Statement or the Prospectuses or for additional
information, and (c) of the issuance by the SEC of
any Stop Order suspending the effectiveness of the
Registration Statement, or the initiation of any
proceedings for that purpose;

(4) if at any time the SEC shall issue any Stop Order
suspending the effectiveness of the Registration
Statement, will make every reasonable effort to
obtain the lifting of such order at the earliest
possible moment;

(5) will from time to time, use its best effort to keep a
sufficient supply of Series' shares authorized, any
increases being subject to the approval of
shareholders as may be required;

-5-

<PAGE>

Statement, file any amendment to the Registration
Statement or supplement to any Prospectus of which
the Distributor shall not previously have been
advised or to which the Distributor shall reasonably
object (based upon the accuracy or completeness
thereof) in writing;

(7) will continue to make available to its stockholders
(and forward copies to the Distributor) of such
periodic, interim and any other reports as are now,
or as hereafter may be, required by the provisions of
the Investment Company Act of 1940; and

(8) will, for the purpose of computing the offering price
of Series' shares, advise the Distributor within one
hour after the close of the New York Stock Exchange
(or as soon as practicable thereafter) on each
business day upon which the New York Stock Exchange
may be open of the net asset value per share of the
Series' shares of common stock outstanding,
determined in accordance with any applicable
provisions of law and the provisions of the Articles
of Incorporation, as amended, of the Fund as of the
close of business on such business day. In the event
that prices are to be calculated more than once
daily, the Fund will promptly advise the Distributor
of the time of each calculation and the price
computed at each such time.

-6-

<PAGE>

from time to time may be appropriate, considering practices then
current in the industry. The Distributor agrees not to use such form of
dealers' sales contract or to use or to permit others to use such sales
literature or advertisements without the written consent of the Fund if
any regulatory agency expresses objection thereto or if the Fund
delivers to the Distributor a written objection thereto.

7. The purchase price of each share sold hereunder shall be the offering
price per share mutually agreed upon by the parties hereto, and as
described in the Fund's Prospectuses, as amended from time to time,
determined in accordance with any applicable provision of law, the
provisions of its Articles of Incorporation and the Rules of Fair
Practice of the National Association of Securities Dealers, Inc.

8. The responsibility of the Distributor hereunder shall be
limited to the promotion of sales of Series' shares. The
Distributor shall undertake to promote such sales solely as
agent of the Fund, and shall not purchase or sell such shares
as principal. Orders for Series' shares and payment for such
orders shall be directed to the Fund's agent, Delaware Service
Company, Inc. for acceptance on behalf of the Fund. The
Distributor is not empowered to approve orders for sales of
Series' shares or accept payment for such orders. Sales of
Series' shares shall be deemed to be made when and where
accepted by Delaware Service Company, Inc. on behalf of the
Fund.

-7-

<PAGE>

9. With respect to the apportionment of costs between the Fund
and the Distributor of activities with which both are
concerned, the following will apply:

(a) The Fund and the Distributor will cooperate in preparing
the Registration Statements, the Prospectuses, the
Statement of Additional Information, and all amendments,
supplements and replacements thereto. The Fund will pay
all costs incurred in the preparation of the Fund's
Registration Statement, including typesetting, the costs
incurred in printing and mailing Prospectuses and Annual,
Semi-Annual and other financial reports to its own
shareholders and fees and expenses of counsel and
accountants.

(b) The Distributor will pay the costs incurred in printing
and mailing copies of Prospectuses to prospective
investors.

(c) The Distributor will pay advertising and promotional
expenses, including the costs of literature sent to
prospective investors.

(d) The Fund will pay the costs and fees incurred in registering
or qualifying the Series' shares with the various states and
with the SEC.

(e) The Distributor will pay the costs of any additional copies of
Fund financial and other reports and other Fund literature
supplied to the Distributor by the Fund for sales promotion
purposes.

-8-

<PAGE>

10. The Distributor may engage in other business, provided such other
business does not interfere with the performance by the Distributor of
its obligations under this Agreement.

11. The Fund agrees to indemnify, defend and hold harmless from
the assets of the Series the Distributor and each person, if
any, who controls the Distributor within the meaning of
Section 15 of the Securities Act of 1933, from and against any
and all losses, damages, or liabilities to which, jointly or
severally, the Distributor or such controlling person may
become subject, insofar as the losses, damages or liabilities
arise out of the performance of its duties hereunder except
that the Fund shall not be liable for indemnification of the
Distributor or any controlling person thereof for any
liability to the Fund or its security holders to which they
would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of their
duties under this Agreement.

-9-

<PAGE>

service, in all cases within the time or times herein prescribed,
addressed to the recipient at 1818 Market Street, Philadelphia,
Pennsylvania 19103, or at such other address as the Fund or the
Distributor may designate in writing and furnish to the other.

13. This Agreement shall not be assigned, as that term is defined
in the Investment Company Act of 1940, by the Distributor and
shall terminate automatically in the event of its attempted
assignment by the Distributor. This Agreement shall not be
assigned by the Fund without the written consent of the
Distributor signed by its duly authorized officers and
delivered to the Fund. Except as specifically provided in the
indemnification provision contained in Paragraph 11 herein,
this Agreement and all conditions and provisions hereof are
for the sole and exclusive benefit of the parties hereto and
their legal successors and no express or implied provision of
this Agreement is intended or shall be construed to give any
person other than the parties hereto and their legal
successors any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provisions herein
contained.

-10-

<PAGE>

voting securities of the Series and only if the terms and the
renewal thereof have been approved by the vote of a majority
of the Directors of the Fund who are not parties hereto or
interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval.

(b) The Distributor may terminate this Agreement on written
notice to the Fund at any time in case the effectiveness
of the Registration Statement shall be suspended, or in
case Stop Order proceedings are initiated by the SEC in
respect of the Registration Statement and such
proceedings are not withdrawn or terminated within thirty
days. The Distributor may also terminate this Agreement
at any time by giving the Fund written notice of its
intention to terminate the Agreement at the expiration of
three months from the date of delivery of such written
notice of intention to the Fund.

-11-

<PAGE>

state commission, regulatory body, or administrative agency or
other governmental body, the Distributor shall be prevented
from selling securities in the United States or because of any
action or conduct on the Distributor's part, sales of the
shares are not qualified for sale. The Fund may also terminate
this Agreement at any time upon prior written notice to the
Distributor of its intention to so terminate at the expiration
of three months from the date of the delivery of such written
notice to the Distributor.

15. The validity, interpretation and construction of this
Agreement, and of each part hereof, will be governed by the
laws of the Commonwealth of Pennsylvania.

-12-

<PAGE>

16. In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of
the Agreement, which shall continue to be in force.

DELAWARE DISTRIBUTORS, L.P.

By: DELAWARE DISTRIBUTORS, INC.,
General Partner

Attest:

/s/ Eric E. Miller By:/s/ Keith E. Mitchell
- ------------------------------- -------------------------------------
Name: Eric E. Miller Name: Keith E. Mitchell
Title: Assistant Secretary Title: President/Chief Executive

DELAWARE GROUP INCOME FUNDS, INC.
for the STRATEGIC INCOME FUND

Attest:

/s/ Richelle S. Maestro By:/s/ Wayne A. Stork
- ------------------------------- -------------------------------------
Name: Richelle S. Maestro Name: Wayne A. Stork
Title: Assistant Secretary Title:Chairman/President/
Chief Executive Officer

-13-
<PAGE>

EXHIBIT A

DISTRIBUTION PLAN

DELAWARE GROUP INCOME FUNDS, INC.

STRATEGIC INCOME FUND

STRATEGIC INCOME FUND A CLASS

The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule l2b-l under the Investment Company Act of l940 (the "Act") by
Delaware Group Income Funds, Inc. (the "Fund"), for the Strategic Income Fund
series (the "Series") on behalf of the Strategic Income Fund A Class ("Class"),
which Fund, Series and Class may do business under these or such other names as
the Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a majority of the outstanding voting securities of the Class, as
defined in the Act.

A-1

<PAGE>

The Fund is a corporation organized under the laws of the
State of Maryland, is authorized to issue different series and
classes of securities and is an open-end management investment
company registered under the Act. Delaware Management Company,
Inc. serves as the Series' investment adviser and manager pursuant
to an Investment Management Agreement. Delaware Service Company,
Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the
"Distributor") is the principal underwriter and national
distributor for the Series' shares, including shares of the Class,
pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

l. The Fund shall pay to the Distributor a monthly fee not to
exceed 0.3% (3/10 of l%) per annum of the Series' average daily net assets
represented by shares of the Class (the "Maximum Amount") as may be determined
by the Fund's Board of Directors from time to time. Such monthly fee shall be
reduced by the aggregate sums paid by the Fund on behalf of the Series to
persons other than broker-dealers (the "Service Providers") who may, pursuant to
servicing agreements, provide to the Series services in the Series' marketing of
shares of the Class.

2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph l above to furnish, or cause or encourage others to
furnish, services and incentives in connection with the

A-2

<PAGE>

promotion, offering and sale of Class shares and, where suitable and
appropriate, the retention of Class shares by shareholders.

(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs they have
incurred in confirming that their customers have received the Prospectus and
Statement of Additional Information, if applicable, and as a fee for (l)
assisting such customers in maintaining proper records with the Fund, (2)
answering questions relating to their respective accounts, and (3) aiding in
maintaining the investment of their respective customers in the Class.

3. The Distributor shall report to the Fund at least monthly
on the amount and the use of the monies paid to it under the Plan. The Service
Providers shall inform the Fund monthly and in writing of the amounts each
claims under the Plan; both the Distributor and the Service Providers shall
furnish the Board of Directors of the Fund with such other information as the
Board may reasonably request in connection with the payments made under the Plan
and the use thereof by the Distributor and the Service Providers, respectively,
in order to enable the Board to make an informed determination of the amount of
the Fund's payments and whether the Plan should be continued.

4. The officers of the Fund shall furnish to the Board of
Directors of the Fund, for their review, on a quarterly basis, a written report
of the amounts expended under the Plan and the purposes for which such
expenditures were made.

A-3

<PAGE>

5. This Plan shall take effect at such time as the Distributor
shall notify the Fund in writing of the commencement of the Plan (the
"Commencement Date"); thereafter, the Plan shall continue in effect for a period
of more than one year from the Commencement Date only so long as such
continuance is specifically approved at least annually by a vote of the Board of
Directors of the Fund, and of the non-interested Directors, cast in person at a
meeting called for the purpose of voting on such Plan.

6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Directors or by vote of a majority of the
outstanding voting securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph l thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by
the non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Directors shall be committed to the
discretion of such non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42)
of the Act shall govern the meaning of "interested person(s)" and "vote of a
majority of the outstanding voting securities," respectively, for the purposes
of this Plan.

A-4

<PAGE>

This Plan shall take effect on the Commencement Date, as
previously defined.

September 30, 1996
EXHIBIT B

DISTRIBUTION PLAN

DELAWARE GROUP INCOME FUNDS, INC.

STRATEGIC INCOME FUND

STRATEGIC INCOME FUND B CLASS

The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Strategic Income Fund series (the
"Series") on behalf of the Strategic Income Fund B Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit

B-1

<PAGE>

the Series and shareholders of the Class. The Plan has been approved by a vote
of the holders of a majority of the outstanding voting securities of the Class,
as defined in the Act.

The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

1. (a) The Fund shall pay to the Distributor a monthly fee not to
exceed 0.75% (3/4 of 1%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.

(b) In addition to the amounts described in (a) above, the
Fund shall pay (i) to the Distributor for payment to dealers or others, or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.

B-2

<PAGE>

2. (a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.

(b) The monies to be paid pursuant to paragraph 1(b) above
shall be used to pay dealers or others for, among other things, furnishing
personal services and maintaining shareholder accounts, which services include
confirming that customers have received the Prospectus and Statement of
Additional Information, if applicable; assisting such customers in maintaining
proper records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

B-3

<PAGE>

connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

5. This Plan shall take effect at such time as the Distributor shall
notify the Fund of the commencement of the Plan (the "Commencement Date");
thereafter, the Plan shall continue in effect for a period of more than one year
from the Commencement Date only so long as such continuance is specifically
approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.

6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

B-4

<PAGE>

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

September 30, 1996

B-5

<PAGE>

EXHIBIT C

DISTRIBUTION PLAN

DELAWARE GROUP INCOME FUNDS, INC.

STRATEGIC INCOME FUND

STRATEGIC INCOME FUND C CLASS

The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Strategic Income Fund series (the
"Series) on behalf of the Strategic Income Fund C Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.

C-1

<PAGE>

The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Series' average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.

(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Series' average daily net assets represented by shares of the Class, as a
service fee pursuant to dealer or servicing agreements.

C-2

<PAGE>

2.(a) The Distributor shall use the monies paid to it
pursuant to paragraph 1(a) above to assist in the distribution and
promotion of shares of the Class. Payments made to the Distributor under the
Plan may be used for, among other things, preparation and distribution of
advertisements, sales literature and prospectuses and reports used for sales
purposes, as well as compensation related to sales and marketing personnel, and
holding special promotions. In addition, such fees may be used to pay for
advancing the commission costs to dealers with respect to the sale of Class
shares.

(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

C-3

<PAGE>

under the Plan shall furnish the Board of Directors of the Fund with such other
information as the Board may reasonably request in connection with the payments
made under the Plan and the use thereof by the Distributor and others in order
to enable the Board to make an informed determination of the amount of the
Fund's payments and whether the Plan should be continued.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.

(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.

C-4

<PAGE>

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

September 30, 1996

C-5

<PAGE>

PROPOSED AGREEMENT
SUBJECT TO BOARD APPROVAL

[Name of Investment Company]

[Name of Portfolio]

DISTRIBUTION AGREEMENT

Distribution Agreement (the "Agreement") made as of this ____ day of
_________, 199_ by and between [Name of Investment Company], a Maryland
corporation (the "Fund"), for the [Name of Portfolio] series (the "Series"),
and DELAWARE DISTRIBUTORS, L.P. (the "Distributor"), a Delaware limited
partnership.

WITNESSETH

WHEREAS, the Fund is an investment company regulated by
Federal and State regulatory bodies, and

WHEREAS, the Fund desires to enter into an agreement with the
Distributor on behalf of the Series, pursuant to which the Distributor shall
serves as the national distributor of the Series' [Name of Portfolio] A Class
("Class A Shares"), [Name of Portfolio] B Class (the "Class B Shares"),
[Name of Portfolio] C Class (the "Class C Shares"), and [Name of Portfolio]
Institutional Class (the "Institutional Class Shares"), which Series and classes
may do business under these or such other names as the Board of Directors may
designate from time to time, on the terms and conditions set forth below,

NOW, THEREFORE, the parties hereto, intending to be legally
bound hereby, agree as follows:

1. The Fund hereby engages the Distributor to promote the distribution of the
Series' shares and, in connection therewith and as agent for the Fund and not
as principal, to advertise, promote, offer and sell the Series' shares
to the public.

<PAGE>

2. (a) The Distributor agrees to serve as distributor of the Series' shares
and, as agent for the Fund and not as principal, to advertise, promote
and use its best efforts to sell the Series' shares wherever their sale
is legal, either through dealers or otherwise, in such places and in such
manner, not inconsistent with the law and the provisions of this
Agreement and the Fund's Registration Statement under the Securities Act
of 1933, including the Prospectuses contained therein, and the Statement
of Additional Information contained therein as may be mutually determined
by the Fund and the Distributor from time to time.

(b) For the Institutional Class Shares, the Distributor will bear all costs
of financing any activity which is primarily intended to result in the
sale of that class of shares, including, but not necessarily limited to,
advertising, compensation of underwriters, dealers and sales personnel,
the printing and mailing of sales literature and distribution of that
class of shares.

(c) For its services as agent for the Class A Shares, Class B Shares, and
Class C Shares, the Distributor shall be entitled to compensation on each
sale or redemption, as appropriate, of shares of such classes equal to
any front-end or deferred sales charge described in the Prospectus from
time to time and may allow concessions to dealers in such amounts and on
such terms as are therein set forth.

(d) For the Class A Shares, Class B Shares, and Class C Shares, the Fund
shall, in addition, compensate the Distributor for its services as
provided in the Distribution Plan as adopted on behalf of the Class A
Shares, Class B Shares, and Class C Shares, respectively, pursuant to
Rule 12b-1 under the Investment Company Act of 1940 (the "Plans"), copies
of which as presently in force are attached hereto as, respectively,
Exhibit "A," "B," and "C."
<PAGE>

3. (a) The Fund agrees to make available for sale by the Fund through the
Distributor all or such part of the authorized but unissued shares of the
Series as the Distributor shall require from time to time, and except as
provided in Paragraph 3(b) hereof, the Fund will not sell Series' shares
other than through the efforts of the Distributor.

(b) The Fund reserves the right from time to time (1) to sell and issue
shares other than for cash; (2) to issue shares in exchange for
substantially all of the assets of any corporation or trust, or in
exchange of shares of any corporation or trust; (3) to pay stock
dividends to its shareholders, or to pay dividends in cash or stock at
the option of its stockholders, or to sell stock to existing stockholders
to the extent of dividends payable from time to time in cash, or to split
up or combine its outstanding shares of common stock; (4) to offer shares
for cash to its stockholders as a whole, by the use of transferable
rights or otherwise, and to sell and issue shares pursuant to such
offers; and (5) to act as its own distributor in any jurisdiction in
which the Distributor is not registered as a broker-dealer.

4. The Fund warrants the following:

(a) The Fund is, or will be, a properly registered investment company, and
any and all Series' shares which it will sell through the Distributor
are, or will be, properly registered with the Securities and Exchange
Commission ("SEC").

(b) The provisions of this Agreement do not violate the terms of any
instrument by which the Fund is bound, nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.

5. (a) The Fund will supply to the Distributor a conformed copy of the
Registration Statement, all amendments thereto, all exhibits, and each
Prospectus and Statement of Additional Information.

(b) The Fund will register or qualify the Series' shares for sale in such
states as is deemed desirable.
<PAGE>

(1) will give and continue to give such financial statements and other
information as may be required by the SEC or the proper public bodies
of the states in which the Series' shares may be qualified;

(2) from time to time, will furnish to the Distributor as soon as
reasonably practicable true copies of its periodic reports to
stockholders;

(3) will promptly advise the Distributor in person or by telephone or
telegraph, and promptly confirm such advice in writing, (a) when any
amendment or supplement to the Registration Statement becomes
effective, (b) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectuses or for
additional information, and (c) of the issuance by the SEC of any
Stop Order suspending the effectiveness of the Registration
Statement, or the initiation of any proceedings for that purpose;

(4) if at any time the SEC shall issue any Stop Order suspending the
effectiveness of the Registration Statement, will make every
reasonable effort to obtain the lifting of such order at the earliest
possible moment;

(5) will from time to time, use its best effort to keep a sufficient
supply of Series' shares authorized, any increases being subject to
the approval of shareholders as may be required;

(6) before filing any further amendment to the Registration Statement or
to any Prospectus, will furnish to the Distributor copies of the
proposed amendment and will not, at any time, whether before or after
the effective date of the Registration Statement, file any amendment
to the Registration Statement or supplement to any Prospectus of
which the Distributor shall not previously have been advised or to
which the Distributor shall reasonably object (based upon the
accuracy or completeness thereof) in writing;

(7) will continue to make available to its stockholders (and forward
copies to the Distributor) of such periodic, interim and any other
reports as are now, or as hereafter may be, required by the
provisions of the Investment Company Act of 1940; and

(8) will, for the purpose of computing the offering price of Series'
shares, advise the Distributor within one hour after the close of the
New York Stock Exchange (or as soon as practicable thereafter) on
each business day upon which the New York Stock Exchange may be open
of the net asset value per share of the Series' shares of common
stock outstanding, determined in accordance with any applicable
provisions of law and the provisions of the Articles of
Incorporation, as amended, of the Fund as of the close of business on
such business day. In the event that prices are to be calculated more
than once daily, the Fund will promptly advise the Distributor of the
time of each calculation and the price computed at each such time.
<PAGE>

6. The Distributor agrees to submit to the Fund, prior to its use, the form of
all sales literature proposed to be generally disseminated by or for the
Distributor, all advertisements proposed to be used by the Distributor, all
sales literature or advertisements prepared by or for the Distributor for
such dissemination or for use by others in connection with the sale of the
Series' shares, and the form of dealers' sales contract the Distributor
intends to use in connection with sales of the Series' shares. The
Distributor also agrees that the Distributor will submit such sales
literature and advertisements to the NASD, SEC or other regulatory agency as
from time to time may be appropriate, considering practices then current in
the industry. The Distributor agrees not to use such form of dealers' sales
contract or to use or to permit others to use such sales literature or
advertisements without the written consent of the Fund if any regulatory
agency expresses objection thereto or if the Fund delivers to the Distributor
a written objection thereto.

7. The purchase price of each share sold hereunder shall be the offering price
per share mutually agreed upon by the parties hereto, and as described in the
Fund's Prospectuses, as amended from time to time, determined in accordance
with any applicable provision of law, the provisions of its Articles of
Incorporation and the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.

8. The responsibility of the Distributor hereunder shall be limited to the
promotion of sales of Series' shares. The Distributor shall undertake to
promote such sales solely as agent of the Fund, and shall not purchase or
sell such shares as principal. Orders for Series' shares and payment for such
orders shall be directed to the Fund's agent, Delaware Service Company, Inc.
for acceptance on behalf of the Fund. The Distributor is not empowered to
approve orders for sales of Series' shares or accept payment for such orders.
Sales of Series' shares shall be deemed to be made when and where accepted by
Delaware Service Company, Inc. on behalf of the Fund.
<PAGE>

9. With respect to the apportionment of costs between the Fund and the
Distributor of activities with which both are concerned, the following will
apply:

(a) The Fund and the Distributor will cooperate in preparing the Registration
Statements, the Prospectuses, the Statement of Additional Information,
and all amendments, supplements and replacements thereto. The Fund will
pay all costs incurred in the preparation of the Fund's Registration
Statement, including typesetting, the costs incurred in printing and
mailing Prospectuses and Annual, Semi-Annual and other financial reports
to its own shareholders and fees and expenses of counsel and accountants.

(b) The Distributor will pay the costs incurred in printing and mailing
copies of Prospectuses to prospective investors.

(c) The Distributor will pay advertising and promotional expenses, including
the costs of literature sent to prospective investors.

(d) The Fund will pay the costs and fees incurred in registering or
qualifying the Series' shares with the various states and with the SEC.

(e) The Distributor will pay the costs of any additional copies of Fund
financial and other reports and other Fund literature supplied to the
Distributor by the Fund for sales promotion purposes.

10. The Distributor may engage in other business, provided such other business
does not interfere with the performance by the Distributor of its
obligations under this Agreement.

<PAGE>

1933, from and against any and all losses, damages, or liabilities to which,
jointly or severally, the Distributor or such controlling person may become
subject, insofar as the losses, damages or liabilities arise out of the
performance of its duties hereunder except that the Fund shall not be liable
for indemnification of the Distributor or any controlling person thereof for
any liability to the Fund or its security holders to which they would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of their duties under this Agreement.

12. Copies of financial reports, Registration Statements and Prospectuses, as
well as demands, notices, requests, consents, waivers, and other
communications in writing which it may be necessary or desirable for either
party to deliver or furnish to the other will be duly delivered or
furnished, if delivered to such party at its address shown below during
regular business hours, or if sent to that party by registered mail or by
prepaid telegram filed with an office or with an agent of Western Union or
another nationally recognized telegraph service, in all cases within the
time or times herein prescribed, addressed to the recipient at 1818 Market
Street, Philadelphia, Pennsylvania 19103, or at such other address as the
Fund or the Distributor may designate in writing and furnish to the other.

13. This Agreement shall not be assigned, as that term is defined in the
Investment Company Act of 1940, by the Distributor and shall terminate
automatically in the event of its attempted assignment by the Distributor.
This Agreement shall not be assigned by the Fund without the written consent
of the Distributor signed by its duly authorized officers and delivered to
the Fund. Except as specifically provided in the indemnification provision
contained in Paragraph 11 herein, this Agreement and all conditions and
provisions hereof are for the sole and exclusive benefit of the parties
hereto and their legal successors and no express or implied provision of
this Agreement is intended or shall be construed to give any person other
than the parties hereto and their legal successors any legal or equitable
right, remedy or claim under or in respect of this Agreement or any
provisions herein contained.

<PAGE>

14. (a) This Agreement shall remain in force for a period of two years from
the date hereof and from year to year thereafter, but only so long as
such continuance is specifically approved at least annually by the Board
of Directors or by vote of a majority of the outstanding voting
securities of the Series and only if the terms and the renewal thereof
have been approved by the vote of a majority of the Directors of the
Fund who are not parties hereto or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval.

(b) The Distributor may terminate this Agreement on written notice to the
Fund at any time in case the effectiveness of the Registration Statement
shall be suspended, or in case Stop Order proceedings are initiated by
the SEC in respect of the Registration Statement and such proceedings
are not withdrawn or terminated within thirty days. The Distributor may
also terminate this Agreement at any time by giving the Fund written
notice of its intention to terminate the Agreement at the expiration of
three months from the date of delivery of such written notice of
intention to the Fund.

(c) The Fund may terminate this Agreement at any time on at least thirty
days prior written notice to the Distributor (1) if proceedings are
commenced by the Distributor or any of its partners for the
Distributor's liquidation or dissolution or the winding up of the
Distributor's affairs; (2) if a receiver or trustee of the Distributor
or any of its property is appointed and such appointment is not vacated
within thirty days thereafter; (3) if, due to any action by or before
any court or any federal or state commission, regulatory body, or
administrative agency or other governmental body, the Distributor shall
be prevented from selling securities in the United States or because of
any action or conduct on the Distributor's part, sales of the shares are
not qualified for sale. The Fund may also terminate this Agreement at
any time upon prior written notice to the Distributor of its intention
to so terminate at the expiration of three months from the date of the
delivery of such written notice to the Distributor.

<PAGE>

15. The validity, interpretation and construction of this Agreement, and of each
part hereof, will be governed by the laws of the Commonwealth of
Pennsylvania.

16. In the event any provision of this Agreement is determined to be void or
unenforceable, such determination shall not affect the remainder of the
Agreement, which shall continue to be in force.

DELAWARE DISTRIBUTORS, L.P.

By: DELAWARE DISTRIBUTORS, INC.,
----------------------------
General Partner

Attest:

By:
- ------------------------------ ------------------------------
Name: Name:
Title: Title:

[Name of Investment Company] for the

[Name of Portfolio]

Attest:

By:
- ------------------------------ ------------------------------
Name: Name:
Title: Title:

<PAGE>

EXHIBIT A

DISTRIBUTION PLAN

[Name of Investment Company]

[Name of Portfolio]

[Name of Portfolio] A CLASS

The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule l2b-l under the Investment Company Act of l940 (the "Act") by
[Name of Investment Company] (the "Fund"), for the [Name of Portfolio] series
(the "Series") on behalf of the [Name of Portfolio] A Class ("Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a majority of the outstanding voting securities of the Class, as
defined in the Act.

<PAGE>

The Fund is a corporation organized under the laws of the
State of Maryland, is authorized to issue different series and classes of
securities and is an open-end management investment company registered under the
Act. Delaware Management Company, Inc. serves as the Series' investment adviser
and manager pursuant to an Investment Management Agreement. Delaware Service
Company, Inc. serves as the Series' shareholder servicing, dividend disbursing
and transfer agent. Delaware Distributors, L.P. (the "Distributor") is the
principal underwriter and national distributor for the Series' shares, including
shares of the Class, pursuant to the Distribution Agreement between the
Distributor and the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

l. (a) The Fund shall pay to the Distributor a monthly fee not
to exceed 0.75% (3/4 of l%) per annum of the Series' average daily net assets
represented by shares of the Class as may be determined by the Fund's Board of
Directors from time to time.

(b) In addition to the amounts described in (a) above,
the Fund shall pay (i) to the Distributor for payment to dealers or others, or
(ii) directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum
of the Series' average daily net assets represented by shares of the Class, as
a service fee pursuant to dealer or servicing agreements.

2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph l(a) above to assist in the distribution and promotion
of shares of the Class. Payments made to the Distributor under the Plan may be
used for, among other things, preparation and distribution of advertisements,
sales literature and prospectuses and reports used for sales purposes, as well
as compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sales of Class shares.
<PAGE>

(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

3. The Distributor shall report to the Fund at least monthly on the
amount and the use of the monies paid to it under paragraph 1(a) above. In
addition, the Distributor and others shall inform the Fund monthly and in
writing of the amounts paid under paragraph 1(b) above; both the Distributor and
any others receiving fees under the Plan shall furnish the Board of Directors of
the Fund with such other information as the Board may reasonably request in
connection with the payments made under the Plan and the use thereof by the
Distributor and others in order to enable the Board to make an informed
determination of the amount of the Fund's payments and whether the Plan should
be continued.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.
<PAGE>

6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Directors or by vote of a majority of the
outstanding voting securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph l thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by
the non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Directors shall be committed to the
discretion of such non-interested Directors.

This Plan shall take effect on the Commencement Date, as
previously defined.

_________ __, 199_

<PAGE>

EXHIBIT B

DISTRIBUTION PLAN

[Name of Investment Company]

[Name of Portfolio]

[Name of Portfolio] B CLASS

The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [Name of
Investment Company] (the "Fund"), for the [Name of Portfolio] series (the
"Series") on behalf of the [Name of Portfolio] B Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.

<PAGE>

The Fund is a corporation organized under the laws of the
State of Maryland, is authorized to issue different series and classes of
securities and is an open-end management investment company registered under the
Act. Delaware Management Company, Inc. serves as the Series' investment adviser
and manager pursuant to an Investment Management Agreement. Delaware Service
Company, Inc. serves as the Series' shareholder servicing, dividend disbursing
and transfer agent. Delaware Distributors, L.P. (the "Distributor") is the
principal underwriter and national distributor for the Series' shares, including
shares of the Class, pursuant to the Distribution Agreement between the
Distributor and the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

2. (a) The Distributor shall use the monies paid to it
pursuant to paragraph l above to furnish, or cause or encourage others to
furnish, services and incentives in connection with the promotion, offering and
sale of Class shares and, where suitable and appropriate, the retention of Class
shares by shareholders.
<PAGE>

<PAGE>

6. (a) The Plan may be terminated at any time by vote of a majority
of the non-interested Directors or by vote of a majority of the outstanding
voting securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

_________ __, 199_

<PAGE>

EXHIBIT C

DISTRIBUTION PLAN

[Name of Investment Company]

[Name of Portfolio]

[Name of Portfolio] C CLASS

The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [Name of
Investment Company] (the "Fund"), for the [Name of Portfolio] series (the
"Series") on behalf of the [Name of Portfolio] C Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.

<PAGE>

The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Series' investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company, Inc.
serves as the Series' shareholder servicing, dividend disbursing and transfer
agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Series' shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Series' average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.

<PAGE>

among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.

(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

<PAGE>

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.

(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

_________ __, 199_

<PAGE>

CHASE PROPOSED AGREEMENT

GLOBAL CUSTODY AGREEMENT

AGREEMENT, effective May 1, 1996, between THE CHASE MANHATTAN BANK,
N.A. (the "Bank") and those registered investment companies listed on Schedule A
hereto (each a "Customer') on behalf of certain of their respective series, as
listed on Schedule A (individually and collectively the "Series").

1. Customer Accounts.

The Bank agrees to establish and maintain the following accounts
("Accounts"):

(a) A custody account in the name of the Customer on behalf of each
Series ("Custody Account") for any and all stocks, shares, bonds, debentures,
notes, mortgages or other obligations for the payment of money, bullion, coin
and any certificates, receipts, warrants or other instruments representing
rights to receive, purchase or subscribe for the same or evidencing or
representing any other rights or interests therein and other similar property
whether certificated or uncertificated as may be received by the Bank or its
Subcustodian (as defined in Section 3) for the account of the Customer
("Securities"); and

(b) A deposit account in the name of the Customer on behalf of each
Series ("Deposit Account") for any and all cash in any currency received by the
Bank or its Subcustodian for the account of the Customer, which cash shall not
be subject to withdrawal by draft or check.

The Customer warrants its authority to: 1) deposit the cash and
Securities ("Assets") received in the Accounts and 2) give Instructions (as
defined in Section 11) concerning the Accounts. Such Instructions shall
specifically indicate to which Series such Assets belong or, if such Assets
belong to more than one Series, shall allocate such Assets to the appropriate
Series. The Bank may deliver securities of the same class in place of those
deposited in the Custody Account.

Upon written agreement between the Bank and the Customer, additional
Accounts may be established and separately accounted for as additional Accounts
under the terms of this Agreement.

2. Maintenance of Securities and Cash at Bank and Subcustodian Locations.

Unless Instructions specifically require another location acceptable to
the Bank:

(a) Securities will be held in the country or other jurisdiction in
which the principal trading market for such Securities is located, where such
Securities are to be presented for payment or where such Securities are
acquired; and

(b) Cash will be credited to an account in a country or other

<PAGE>

jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts.

To the extent available and permissible under applicable law and
regulation, Cash held pursuant to Instructions shall be held in interest bearing
accounts. If interest bearing accounts are not available, such cash may be held
in non-interest bearing accounts. The Bank is authorized to maintain cash
balances on deposit for the Customer with itself or one of its affiliates.
Interest bearing accounts shall bear interest at such reasonable rates of
interest as may from time to time be paid on such accounts by the Bank or its
affiliates.

(iii) For each Series that is exclusively a domestic Series, the following
additional provisions shall apply:

(x) In the event that during a given calendar month a Series has maintained an
average daily cash balance greater than zero, the Bank shall provide an earnings
credit against custody fees otherwise owing hereunder by such Series during such
calendar month in an amount equal to the product of (A) 75% of the 90 day U.S.
government Treasury bill rate as quoted in the Wall Street Journal for the last
"Business Day" (being a day on which the Bank is open for the transaction of all
its ordinary business) of such calendar month, (B) the average daily cash
balance for such month, and (C) the number of days in such calendar month
divided by 365.

(y) In the event that during a given calendar month a Series has maintained an
average daily cash balance less than or equal to zero, the Bank shall be paid
interest on such amount by such Series in an amount equal to the product of (A)
the "Overnight Fed Funds Rate" (as defined below) plus 25 basis points for the
last Business Day of such calendar month, (B) the average daily cash balance for
such month, and (C) the number of days in such calendar month divided by 365.

(z) For purposes of (y) above, the term "Overnight Fed Funds Rate" shall mean
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published by the Federal Reserve Bank of New York (with the rate for the last
Business Day of a given calendar month being the rate so published on the
Business Day immediately following such Day), or, if such rate is note so
published, the average quotations, for the last Business Day of a given calendar
month, of such transactions received by the Bank from three Federal funds
brokers of recognized standing selected by the Bank.

If the Customer wishes to have any of its Assets held in the custody of
an institution other than the established Subcustodians as defined in Section 3
(or their securities depositories), such arrangement must be authorized by a
written agreement, signed by the Bank and the Customer.

3. Subcustodians and Securities Depositories.

The Bank may act under this Agreement through the subcustodians listed
in Schedule B of this Agreement with which the Bank has entered into
subcustodial agreements ("Subcustodians"). The Customer authorizes the Bank

<PAGE>

to hold Assets in the Accounts in accounts which the Bank has established with
one or more of its branches or Subcustodians. The Bank and Subcustodians are
authorized to hold any of the Securities in their account with any securities
depository in which they participate.

The Bank reserves the right to add new, replace or remove
Subcustodians. The Customer will be given reasonable notice by the Bank of any
amendment to Schedule B. Upon request by the Customer, the Bank will identify
the name, address and principal place of business of any Subcustodian of the
Customer's Assets and the name and address of the governmental agency or other
regulatory authority that supervises or regulates such Subcustodian.

Upon receipt of Instructions, the Bank shall cease using any
Subcustodian with respect to the customer, and arrange for delivery of
Securities held with such Subcustodian to another entity as designated by the
Customer; provided that, the Bank shall have no responsibility for the
performance of such other entity.

4. Use of Subcustodian.

(a) The Bank will identify the Assets on its books as belonging to the
Customer.

(b) A Subcustodian will hold such Assets together with assets belonging
to other customers of the Bank in accounts identified on such Subcustodian's
books as special custody accounts for the exclusive benefit of customers of the
Bank.

(c) Any Assets in the Accounts held by a Subcustodian will be subject
only to the instructions of the Bank or its agent. Any Securities held in a
securities depository for the account of a Subcustodian will be subject only to
the instructions of such Subcustodian.

(d) Any agreement the Bank enters into with a Subcustodian for holding
its customer's assets shall provide that: (i) such assets will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of such
Subcustodian except for safe custody or administration, (ii) the beneficial
ownership of such assets will be freely transferable without the payment of
money or value other than for safe custody or administration; (iii) adequate
records will be maintained identifying the assets held pursuant to such
agreement as belonging to the customers of the Bank; (iv) subject to applicable
law, Subcustodian shall permit independent public accountants for Bank and
customers of the Bank reasonable access to Subcustodian's books and records as
they pertain to the subcustody account in connection with such accountants'
examination of the books and records of such account; and (v) the Bank will
receive periodic reports with respect to the safekeeping of assets in the
subcustody account, including advices and/or notifications of any transfers to
or from such subcustody account. The foregoing shall not apply to the extent of
any special agreement or arrangement made by the Customer with any particular
Subcustodian.

(e) Upon request of the Customer, the Bank shall deliver to the
Customer annually a report stating: (i) the identity of each Subcustodian then
acting

<PAGE>

on behalf of the Bank and the name and address of the governmental agency or
other regulatory authority that supervises or regulates such Subcustodian; (ii)
the countries in which each Subcustodian is located; and (iii) as long as
Securities and Exchange Commission ("SEC") Rule 17f-5 under the Investment
Company Act of 1940, as amended ("1940 Act"), requires the Customer's Board of
Directors/Trustees directly to approve its foreign custody arrangements, such
other information relating to such Subcustodians as may reasonably be requested
by the Customer to ensure compliance with Rule 17f-5. As long as Rule 17f-5
requires the Customer's Board of Directors/Trustees directly to approve its
foreign custody arrangements, the Bank shall also furnish annually to the
Customer information concerning such Subcustodians similar in kind and scope as
that furnished to the Customer in connection with the initial approval hereof.
The Bank shall timely advise the Customer of any material adverse change in the
facts or circumstances upon which such information is based where such changes
would affect the eligibility of the Subcustodian under Rule 17f-5 as soon as
practicable after it becomes aware of any such material adverse change in the
normal course of its custodial activities.

5. Deposit Account Transactions

(a) The Bank or its Subcustodians will make payments from the Deposit
Account upon receipt of Instructions which include all information required by
the Bank.

(b) In the event that any payment to be made under this Section 5
exceeds the funds available in the Deposit Account, the Bank, in its discretion,
may advance the Customer such excess amount which shall be deemed a loan payable
on demand, bearing interest at the rate customarily charged by the Bank on
similar loans.

(c) If the Bank credits the Deposit Account on a payable date, or at
any time prior to actual collection and reconciliation to the Deposit Account,
with interest, dividends, redemptions or any other amount due, the Customer will
promptly return any such amount upon oral or written notification: (i) that such
amount has not been received in the ordinary course of business or (ii) that
such amount was incorrectly credited. If the Customer does not promptly return
any amount upon such notification, the Bank shall be entitled, upon oral or
written notification to the Customer, to reverse such credit by debiting the
Deposit Account for the amount previously credited. The Bank or its Subcustodian
shall have no duty or obligation to institute legal proceedings, file a claim or
a proof of claim in any insolvency proceeding or take any other action with
respect to the collection of such amount, but may act for the Customer upon
Instructions after consultation with the Customer.

6. Custody Account Transactions.

(a) Securities will be transferred, exchanged or delivered by the Bank
or its Subcustodian upon receipt by the Bank of Instructions which include all
information required by the Bank. Settlement and payment for Securities received
for, and delivery of Securities out of, the Custody Account may be made in
accordance with the customary or established securities trading or

<PAGE>

securities processing practices and procedures in the jurisdiction or market in
which the transaction occurs, including, without limitation, delivery of
Securities to a purchaser, dealer or their agents against a receipt with the
expectation of receiving later payment and free delivery. Delivery of Securities
out of the Custody Account may also be made in any manner specifically required
by Instructions acceptable to the Bank.

(b) The Bank shall credit or debit the Accounts on a contractual
settlement date with cash or Securities with respect to any sale, exchange or
purchase of Securities in those countries set forth in Appendix A hereto;
provided that, the Bank may amend Appendix A from time to time in its sole
discretion and shall advise the Customer of such amendments. Otherwise,
transactions will be credited or debited to the Accounts on the date cash or
Securities are actually received by the Bank and reconciled to the Account.

(i) The Bank may reverse credits or debits made to the Accounts in its
discretion if the related transaction fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date for the related transaction; provided that, the Bank shall give
Customer prior notification of any such reversal. Where the foregoing
notification is oral, the Bank shall promptly provide written confirmation of
the same (which confirmation may be electronic).

(ii) If any Securities delivered pursuant to this Section 6 are
returned by the recipient thereof, the Bank may reverse the credits and debits
of the particular transaction at any time.

7. Actions of the Bank.

The Bank shall follow Instructions received regarding assets held in
the Accounts. However, until it receives Instructions to the contrary, the Bank
will:

(a) Present for payment any Securities which are called, redeemed or
retired or otherwise become payable and all coupons and other income items which
call for payment upon presentation, to the extent that the Bank or Subcustodian
is actually aware of such opportunities.

(b) Execute in the name of the Customer such ownership and other
certificates as may be required to obtain payments in respect of Securities.

(d) Appoint brokers and agents for any transaction involving the
Securities, including, without limitation, affiliates of the Bank or any
Subcustodian, subject to applicable SEC rules and regulations under the Act.

(e) Issue statements to the Customer, at times mutually agreed
upon, identifying the Assets in the Accounts.

The Bank will send the Customer an advice or notification of any
transfers of Assets to or from the Accounts. Such statements, advices or

<PAGE>

notifications shall indicate the identity of the entity having custody of the
Assets. Unless the Customer advises the Bank orally and then promptly sends the
Bank a written exception or objection to any Bank statement within 180 days of
receipt, the Customer shall be deemed to have approved such statement.

All collections of funds or other property paid or distributed in
respect of Securities in the Custody Account shall be made at the risk of the
Customer. Subject to the standard of care in Section 12 hereof, the Bank shall
have no liability for any loss occasioned by delay in the actual receipt of
notice by the Bank or by its Subcustodians of any payment, redemption or other
transaction regarding Securities in the Custody Account in respect of which the
Bank has agreed to take any action under this Agreement.

8. Corporate Actions; Proxies; Tax Reclaims.

a. Corporate Actions. Whenever the Bank receives information concerning
the Securities which requires discretionary action by the beneficial owner of
the Securities (other than a proxy), such as subscription rights, bonus issues,
stock repurchase plans and rights offerings, or legal notices or other material
intended to be transmitted to securities holders ("Corporate Actions"), the Bank
will give the Customer written notice (which may be electronic) of such
Corporate Actions to the extent that the Bank's central corporate actions
department has actual knowledge of a Corporate Action in time to notify its
customers.

When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank will endeavor to obtain
Instructions from the Customer or its Authorized Person (as defined in ss.10
hereof), but if Instructions are not received in time for the Bank to take
timely action, or actual notice of such Corporate Action was received too late
to seek Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the Deposit Account with the proceeds or take
any other action it deems, in good faith, to be appropriate in which case it
shall be held harmless for any such action.

b. Proxy Voting. With respect to domestic U.S. and Canadian Securities
(the latter if held in DTC), the Bank will send to the Customer or the
Authorized Person (as defined in ss.10) for a Custody Account, such proxies
(signed in blank, if issued in the name of the Bank's nominee or the nominee of
a central depository) and communications with respect to Securities in the
Custody Account as call for voting or relate to legal proceedings within a
reasonable time after sufficient copies are received by the Bank for forwarding
to its customers. In addition, the Bank will follow coupon payments,
redemptions, exchanges or similar matters with respect to Securities in the
Custody Account and advise the Customer or the Authorized Person for such
Account of rights issued, tender offers or any other discretionary rights with
respect to such Securities, in each case, of which the Bank has received notice
from the issuer of the Securities, or as to which notice is published in
publications routinely utilized by the Bank for this purpose.

<PAGE>

With respect to Securities other than the foregoing, proxy voting
services shall be provided in accordance with separate proxy voting agreement
annexed hereto a Appendix B.

The foregoing proxy voting services may be provided by Bank, in whole
or in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank), provided that the Bank shall be liable for the
performance of any such third parties to the same extent as the Bank would have
been if it performed such services itself.

c. Tax Reclaims. (i) Subject to the provisions hereof, the Bank will
apply for a reduction of withholding tax and any refund of any tax paid or tax
credits which apply in each applicable market in respect of income payments on
Securities for the benefit of the Customer which the Bank believes may be
available to such Customer. Where such reports are available, the Bank shall
periodically report to Customer concerning the making of applications for a
reduction of withholding tax and refund of any tax paid or tax credits which
apply in each applicable market in respect of income payments on Securities for
the benefit of the Customer.

(ii) The provision of tax reclaim services by the Bank is conditional
upon the Bank receiving from the beneficial owner of Securities (A) a
declaration of its identity and place of residence and (B) certain other
documentation (pro forma copies of which are available from the Bank). The Bank
shall use reasonable means to advise the Customer of the declarations,
documentation and information which the Customer is to provide to the Bank in
order for the Bank to provide the tax reclaim services described herein. The
Customer acknowledges that, if the Bank does not receive such declarations,
documentation and information, additional United Kingdom taxation will be
deducted from all income received in respect of Securities issued outside the
United Kingdom and that U.S. non-resident alien tax or U.S. backup withholding
tax will be deducted from U.S. source income. The Customer shall provide to the
Bank such documentation and information as it may require in connection with
taxation, and warrants that, when given, this information shall be true and
correct in every respect, not misleading in any way, and contain all material
information. The Customer undertakes to notify the Bank immediately if any such
information requires updating or amendment.

(iii) Subject to subsection (vii) hereof, the Bank shall not be liable
to the Customer or any third party for any tax, fines or penalties payable by
the Bank or the Customer, and shall be indemnified accordingly, whether these
result from the inaccurate completion of documents by the Customer or any third
party, or as a result of the provision to the Bank or any third party of
inaccurate or misleading information or the withholding of material information
by the Customer or any other third party, or as a result of any delay of any
revenue authority or any other matter beyond the control of the Bank.

(iv) The Customer confirms that the Bank is authorized to deduct from
any cash received or credited to the Cash Account any taxes or levies required
by any revenue or governmental authority for whatever reason in respect of the
Securities or Cash Accounts.

(v) The Bank shall perform tax reclaim services only with respect to

<PAGE>

taxation levied by the revenue authorities of the countries notified to the
Customer from time to time and the Bank may, by notification in writing, at its
absolute discretion, supplement or amend the markets in which the tax reclaim
services are offered. Other than as expressly provided in this subclause, the
Bank shall have no responsibility with regard to the Customer's tax position or
status in any jurisdiction. Except as provided in Section 8(c)(ii) and pursuant
to Instructions, the Bank shall take no action in the servicing of the
Customer's Securities which, in and of itself, creates a taxable nexus for the
Customer in any jurisdiction other than with respect to interest, dividends and
capital gains that may otherwise be subject to tax by such jurisdiction with
respect to a foreign investor not otherwise engaged in a trade or business in
such jurisdiction in a given taxable year. Bank shall not be liable for any tax
liability caused, directly or indirectly, by Customer's actions or status in any
jurisdiction.

(vi) In connection with obtaining tax relief, the Customer confirms
that the Bank is authorized to disclose any information requested by any revenue
authority or any governmental body in relation to the Customer or the Securities
and/or Cash held for the Customer. This provision does not authorize any other
voluntary disclosure to any revenue authority or any governmental body without
the prior written consent of Customer.

(vii) Tax reclaim services may be provided by the Bank or, in whole or
in part, by one or more third parties appointed by the Bank (which may be
affiliates of the Bank); provided that the Bank shall be liable for the
performance of any such third party to the same extent as the Bank would have
been if it performed such services itself.

9. Nominees.

Securities which are ordinarily held in registered form may be
registered in a nominee name of the Bank, Subcustodian or securities depository,
as the case may be. The Bank may without notice to the Customer cause any such
Securities to cease to be registered in the name of any such nominee and to be
registered in the name of the Customer. In the event that any Securities
registered in a nominee name are called for partial redemption by the issuer,
the Bank may allot the called portion to the respective beneficial holders of
such class of security in any manner the Bank deems to be fair and equitable.
The Customer agrees to hold the Bank, Subcustodians, and their respective
nominees harmless from any liability arising directly or indirectly from their
status as a mere record holder of Securities in the Custody Account.

10. Authorized Persons.

As used in this Agreement, the term "Authorized Person" means employees
or agents including investment managers as have been designated by written
notice from the Customer or its designated agent to act on behalf of the
Customer under this Agreement. Such persons shall continue to be Authorized
Persons until such time as the Bank receives Instructions from the Customer or
its designated agent that any such employee or agent is no longer an Authorized
Person.

<PAGE>

11. Instructions.

The term "Instructions" means instructions of any Authorized Person
received by the Bank, via telephone, telex, TWX, facsimile transmission, bank
wire or other teleprocess or electronic instruction or trade information system
acceptable to the Bank which the Bank reasonably believes in good faith to have
been given by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Unless otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. For purposes hereof,
reasonableness shall mean compliance with applicable procedures.

Any Instructions delivered to the Bank by telephone (including cash
transfer instructions as described below) shall promptly thereafter be confirmed
in writing by any two Authorized Persons (which confirmation may bear the
facsimile signature of such Persons), but the Customer will hold the Bank
harmless for the failure of such Authorized Persons to send such confirmation in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Bank's failure to produce such confirmation at any
subsequent time; provided that, where the Bank receives a telephone Instruction
from an Authorized Person requiring the transfer of cash, prior to executing
such Instruction the Bank will, to confirm such Instruction, call back any one
of the individuals on a list of persons authorized to confirm such oral transfer
Instructions (which Person shall be a person other than the initiator of the
transfer Instruction) and the Bank shall not execute the Instruction until it
has received such confirmation. Either party may electronically record any
Instructions given by telephone, and any other telephone discussions with
respect to the Custody Account. The Customer shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
the Bank shall make available to the Customer or its Authorized Persons.

12. Standard of Care; Liabilities.

(a) The Bank shall be responsible for the performance of only such
duties as are set forth in this Agreement or expressly contained in Instructions
which are consistent with the provisions of this Agreement as follows:

(i) The Bank will use reasonable care with respect to its obligations
under this Agreement and the safekeeping of Assets. The Bank shall be liable to
the Customer for any loss which shall occur as the result of the failure of a
Subcustodian to exercise reasonable care with respect to the safekeeping of such
Assets to the same extent that the Bank would be liable to the Customer if the
Bank were holding such Assets in New York. In the event that Securities are lost
by reason of the failure of the Bank or its Subcustodian to use reasonable care,
the Bank shall be liable to the Customer based on the market value of the
property which is the subject of the loss on the date it is replaced by the Bank
and without reference to any special conditions or circumstances, it being
understood that for purposes of measuring damages hereunder, the value of
Securities which are sold by the Customer prior to

<PAGE>

the replacement thereof shall be equal to the sale price thereof less
the expenses of such sale incurred by the Customer. The Bank shall act with
reasonable promptness in making such replacements. In no event shall the Bank be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Bank has
been advised of the likelihood of such loss or damage and regardless of the form
of action. Subject to the Bank's obligations pursuant to Section 4(e) hereof,
the Bank will not be responsible for the insolvency of any Subcustodian which is
not a branch or affiliate of Bank.

(ii) The Bank will not be responsible for any act, omission, default or
the solvency of any broker or agent which it or a Subcustodian appoints unless
such appointment was made negligently or in bad faith.

(iii) (a) The Bank shall be indemnified by, and without liability to
the Customer for any action taken or omitted by the Bank whether pursuant to
Instructions or otherwise pursuant to this Agreement if such act or omission was
in good faith, without negligence. In performing its obligations under this
Agreement, the Bank may rely on the genuineness of any Customer document which
it reasonably believes in good faith to have been validly executed. (b) The Bank
shall hold Customer harmless from, and shall indemnify Customer for, any loss,
liability, claim or expense incurred by Customer (including, but not limited to,
Customer's reasonable legal fees) to the extent that such loss, liability, claim
or expense arises from the negligence or willful misconduct on the part of the
Bank or a Subcustodian; provided that, in no event shall the Bank be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Bank has been advised
of the likelihood of such loss or damage and regardless of the form of action.
Subject to the Bank's obligations pursuant to ss.4(e) hereof, the Bank will not
be responsible for the insolvency of any Subcustodian which is not a branch or
affiliate of Bank.

(iv) The Customer agrees to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or assessment of any taxes or
other governmental charges, and any related expenses with respect to income from
or Assets in the Accounts.

(v) The Bank shall be entitled to rely, and may act, upon the advice of
counsel (who may be counsel for the Customer) on all matters and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice.

(vi) The Bank need not maintain any insurance for the benefit of the
Customer.

(vii) Without limiting the foregoing, the Bank shall not be liable for
any loss which results from: 1) the general risk of investing, or 2) investing
or holding Assets in a particular country including, but not limited to, losses
resulting from nationalization, expropriation or other governmental actions;
regulation of the banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of Assets.

<PAGE>

(viii) Neither party shall be liable to the other for any loss due to
forces beyond their control including, but not limited to strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God.

(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:

(i) question Instructions or make any suggestions to the Customer
or an Authorized Person regarding such Instructions;

(ii) supervise or make recommendations with respect to investments
or the retention of Securities;

(iii) advise the Customer or an Authorized Person regarding any default
in the payment of principal or income of any security other than a Security.

(iv) except as may be otherwise provided in any securities lending
agreement between the Customer and the Bank, evaluate or report to the Customer
or an Authorized Person regarding the financial condition of any broker, agent
or other party to which Securities are delivered or payments are made pursuant
to this Agreement;

(v) except for trades settled at DTC where the broker provides to the
Bank the trade confirmation and the Customer provides for the Bank to receive
the trade instruction, review or reconcile trade confirmations received from
brokers. The Customer or its Authorized Persons (as defined in Section 10)
issuing Instructions shall bear any responsibility to review such confirmations
against Instructions issued to and statements issued by the Bank.

(c) The Customer authorizes the Bank to act, hereunder, in its capacity
as a custodian notwithstanding that the Bank or any of its divisions or
affiliates may have a material interest in a transaction, or circumstances are
such that the Bank may have a potential conflict of duty or interest including
the fact that the Bank or any of its affiliates may provide brokerage services
to other customers, act as financial advisor to the issuer of Securities, act as
a lender to the issuer of Securities, act in the same transaction as agent for
more than one customer, have a material interest in the issue of Securities, or
earn profits from any of the activities listed herein.

13. Fees and Expenses.

The Customer agrees to pay the Bank for its services under this
Agreement such amount as may be agreed upon in writing ("Fee Schedule"),
together with the Bank's reasonable out-of-pocket or incidental expenses (as
further defined in the Fee Schedule), including, but not limited to, legal fees.
The Bank shall have a lien on and is authorized to charge any Accounts of the
Customer for any amount owing to the Bank under any provision of this Agreement.

<PAGE>

14. Miscellaneous.

(a) Foreign Exchange Transactions. To facilitate the administration of
the Customer's trading and investment activity, the Bank is authorized to enter
into spot or forward foreign exchange contracts with the Customer or an
Authorized Person for the Customer and may also provide foreign exchange through
its subsidiaries, affiliates or Subcustodians. Instructions, including standing
instructions, may be issued with respect to such contracts but the Bank may
establish rules or limitations concerning any foreign exchange facility made
available. In all cases where the Bank, its subsidiaries, affiliates or
Subcustodians enter into a foreign exchange contract related to Accounts, the
terms and conditions of the then current foreign exchange contract of the Bank,
its subsidiary, affiliate or Subcustodian and, to the extent not inconsistent,
this Agreement shall apply to such transaction.

(b) Certification of Residency, etc. The Customer certifies that it is
a resident of the United States and agrees to notify the Bank of any changes in
residency. The Bank may rely upon this certification or the certification of
such other facts as may be required to administer the Bank's obligations under
this Agreement. The Customer will indemnify the Bank against all losses,
liability, claims or demands arising directly or indirectly from any such
certifications.

(c) Access to Records. Applicable accounts, books and records of the
Bank shall be open to inspection and audit at all reasonable times during normal
business hours upon reasonable advance notice by Customer's independent public
accountants and by employees of Customer designated to the Bank. All such
materials shall, to the extent applicable, be maintained and preserved in
conformity with the Act and the rules and regulations thereunder, including
without limitation, SEC Rules 31a-1 and 31a-2. Subject to restrictions under
applicable law, the Bank shall also obtain an undertaking to permit the
Customer's independent public accountants reasonable access to the records of
any Subcustodian which has physical possession of any Assets as may be required
in connection with the examination of the Customer's books and records.

(d) Governing Law; Successors and Assigns. This Agreement shall be
governed by the laws of the State of New York and shall not be assignable by
either party, but shall bind the successors in interest of the Customer and the
Bank.

(e) Entire Agreement; Applicable Riders. Customer represents that the
Assets deposited in the Accounts are Mutual Fund assets subject to certain
Securities and Exchange Commission ("SEC") rules and regulations.

This Agreement consists exclusively of this document together with
Schedules A and B, Appendices 1 and 2, Exhibits I - _______ and the following
Rider(s) [Check applicable rider(s)]:

X MUTUAL FUND
-----

X SPECIAL TERMS AND CONDITIONS
-----

<PAGE>

There are no other provisions of this Agreement, and this Agreement
supersedes any other agreements, whether written or oral, between the parties.
Any amendment to this Agreement must be in writing, executed by both parties.

(f) Severability. In the event that one or more provisions of this
Agreement are held invalid, illegal or unenforceable in any respect on the basis
of any particular circumstances or in any jurisdiction, the validity, legality
and enforceability of such provision or provisions under other circumstances or
in other jurisdictions and of the remaining provisions will not in any way be
affected or impaired.

(g) Waiver. Except as otherwise provided in this Agreement, no failure
or delay on the part of either party in exercising any power or right under this
Agreement operates as a waiver, nor does any single or partial exercise of any
power or right preclude any other or further exercise, or the exercise of any
other power or right. No waiver by a party of any provision of this Agreement,
or waiver of any breach or default, is effective unless in writing and signed by
the party against whom the waiver is to be enforced.

(h) Notices. All notices under this Agreement shall be effective when
actually received. Any notices or other communications which may be required
under this Agreement are to be sent to the parties at the following addresses or
such other addresses as may subsequently be given to the other party in writing:

Bank: The Chase Manhattan Bank, N.A.
4 Chase MetroTech Center
Brooklyn, NY 11245
Attention: Global Custody Division

or telex:
-------------------------------------

Customer: Delaware Group of Funds
1818 Market St.
Philadelphia, PA 19103
att: Messrs. Bishof and O'Conner
or telex:
--------------------------------------

(i) Termination. This Agreement may be terminated by the Customer or
the Bank by giving sixty (60) days written notice to the other, provided that
such notice to the Bank shall specify the names of the persons to whom the Bank
shall deliver the Assets in the Accounts. If notice of termination is given by
the Bank, the Customer shall, within sixty (60) days following receipt of the
notice, deliver to the Bank Instructions specifying the names of the persons to
whom the Bank shall deliver the Assets. In either case the Bank will deliver the
Assets to the persons so specified, after deducting any amounts which the Bank
determines in good faith to be owed to it under

<PAGE>

Section 13. If within sixty (60) days following receipt of a notice of
termination by the Bank, the Bank does not receive Instructions from the
Customer specifying the names of the persons to whom the Bank shall deliver the
Assets, the Bank, at its election, may deliver the Assets to a bank or trust
company doing business in the State of New York to be held and disposed of
pursuant to the provisions of this Agreement, or to Authorized Persons, or may
continue to hold the Assets until Instructions are provided to the Bank;
provided that, where the Bank is the terminating party and the Bank had not
notified the Customer that termination was for breach of this Agreement by the
Customer, such 60 day period shall be extended for an additional period as
requested by Customer of up to 120 days.

Termination as to One or More Series. This Agreement may be terminated
as to one or more Series (but less than all the Series) by delivery of an
amended Schedule A deleting such Series, in which case termination as to the
deleted Series shall take effect sixty (60) days after the date of such
delivery. The execution and delivery of an amended Schedule A which deletes one
or more Series, shall constitute a termination hereof only with respect to such
deleted Series, shall be governed by the preceding provisions of Section 14 as
to the identification of a successor custodian and the delivery of the Assets of
the Series so deleted to such successor custodian, and shall not affect the
obligations of the Bank and the Customer hereunder with respect to the other
Series set forth in Schedule A, as amended from time to time.

(j) Several Obligations of the Series. With respect to any obligations
of the Customer on behalf of the Series and their related Accounts arising
hereunder, the Custodian shall look for payment or satisfaction of any such
obligation solely to the assets and property of the Series and such Accounts to
which such obligation relates as though the Customer had separately contracted
with the Custodian by separate written instrument with respect to each Series
and its Accounts.

CUSTOMER

By:
---------------------
Title Vice President and Treasurer

THE CHASE MANHATTAN BANK, N.A.

By:
-----------------------
Title Vice President

<PAGE>

STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )

On this ________ day of May, 1996, before me personally came Rosemary Stidmon,
to me known, who being by me duly sworn, did depose and say that he/she resides
in New Providence, NJ at 31 Sagamore Drive; that he/she is Vice President of
THE CHASE MANHATTAN BANK, the entity described in and which executed the
foregoing instrument; that she knows the seal of said entity, that the seal
affixed to said instrument is such seal, that it was so affixed by order of said
entity, and that she signed his/her name thereto by like order.

Sworn to before me this __________ day of May, 1996.

- --------------
Laiyee Ng
Notary

STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )

On this day of ,19 ,
before me personally came , to me known, who being by
me duly sworn, did depose and say that he/she resides in
at
; that he/she is a Vice
President of THE CHASE MANHATTAN BANK, (National Association), the corporation
described in and which executed the foregoing instrument; that he/she knows the
seal of said corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of Directors of
said corporation, and that he/she signed his/her name thereto by like order.

Sworn to before me this ____________________
day of ________________, 19________.

- ---------------------------------------------
Notary

<PAGE>

Schedule A

Delaware Pooled Trust, Inc. - Global Fixed Income Portfolio
Delaware Pooled Trust, Inc. - International Equity Portfolio
Delaware Pooled Trust, Inc. - Labor Select International Equity Portfolio
Delaware Pooled Trust, Inc. - Real Estate Investment Trust Portfolio
Delaware Pooled Trust, Inc. - High Yield Portfolio
Delaware Pooled Trust, Inc. - International Fixed Income Portfolio
Delaware Pooled Trust, Inc. - Defensive Equity Utility Portfolio
Delaware Group Global & International Funds, Inc. - International Equity Fund
Delaware Group Global & International Funds, Inc. - Global Assets Fund
Delaware Group Global & International Funds, Inc. - Global Bond Fund
Delaware Group Global & International Funds, Inc. - Emerging Markets Fund
Delaware Group Premium Fund, Inc. - International Equity Series
Delaware Group Premium Fund, Inc. - Equity Income Series
Delaware Group Premium Fund, Inc. - High Yield Series
Delaware Group Premium Fund, Inc. - Capital Reserves Series
Delaware Group Premium Fund, Inc. - Money Market Series
Delaware Group Premium Fund, Inc. - Growth Series
Delaware Group Premium Fund, Inc. - Multiple Strategy Series
Delaware Group Premium Fund, Inc. - Value Series
Delaware Group Premium Fund, Inc. - Emerging Growth Series
Delaware Group Premium Fund, Inc. - Global Bond Series
Delaware Group Income Funds, Inc. - Delchester Fund
Delaware Group Income Funds, Inc. - High-Yield Opportunitites Fund
Delaware Group Delaware Fund, Inc. - Delaware Fund
Delaware Group Delaware Fund, Inc. - Devon Fund
Delaware Group Value Fund, Inc.
Delaware Group DelCap Fund, Inc.
Delaware Group Dividend & Income Fund, Inc.
Delaware Group Advisor Funds, Inc. - Enterprise Fund
Delaware Group Advisor Funds, Inc. - U.S. Growth Fund
Delaware Group Advisor Funds, Inc. - World Growth Fund
Delaware Group Advisor Funds, Inc. - New Pacific Fund
Delaware Group Advisor Funds, Inc. - Federal Bond Fund
Delaware Group Advisor Funds, Inc. - Corporate Income Fund

<PAGE>

March, 1996 Schedule B

SUB-CUSTODIANS EMPLOYED BY

THE CHASE MANHATTAN BANK, N.A. LONDON, GLOBAL CUSTODY
<TABLE>
<CAPTION>
<S> <C> <C>
COUNTRY SUB-CUSTODIAN CORRESPONDENT BANK

ARGENTINA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Arenales 707, 5th Floor Buenos Aires
De Mayo 130/140
1061Buenos Aires
ARGENTINA

AUSTRALIA The Chase Manhattan Bank The Chase Manhattan Bank
Australia Limited Australia Limited
36th Floor Sydney
World Trade Centre
Jamison Street
Sydney
New South Wales 2000
AUSTRALIA

AUSTRIA Creditanstalt - Bankverein Credit Lyonnais
Schottengasse 6 Vienna
A - 1011, Vienna
AUSTRIA

BANGLADESH Standard Chartered Bank Standard Chartered Bank
18-20 Motijheel C.A. Dhaka
Box 536,
Dhaka-1000
BANGLADESH

BELGIUM Generale Bank Credit Lyonnais Bank
3 Montagne Du Parc Brussels
1000 Bruxelles
BELGIUM

BOTSWANA Barclays Bank of Botswana Limited Barclays Bank of Botswana
Barclays House Gaborone
Khama Crescent
Gaborone
BOTSWANA

BRAZIL Banco Chase Manhattan, S.A. Banco Chase Manhattan S.A.
Chase Manhattan Center Sao Paulo
Rua Verbo Divino, 1400
Sao Paulo, SP 04719-002
BRAZIL

CANADA The Royal Bank of Canada Royal Bank of Canada
Royal Bank Plaza Toronto
Toronto
Ontario M5J 2J5
CANADA

Canada Trust Royal Bank of Canada
Canada Trust Tower Toronto
BCE Place
161 Bay at Front
Toronto
Ontario M5J 2T2
CANADA

CHILE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Agustinas 1235 Santiago
Casilla 9192
Santiago
CHILE

<PAGE>

COLOMBIA Cititrust Colombia S.A. Cititrust Colombia S.A.
Sociedad Fiduciaria Sociedad Fiduciaria
Carrera 9a No 99-02 Santafe de Bogota
Santafe de Bogota, DC
COLOMBIA

CZECH REPUBLIC Ceskoslovenska Obchodni Banka, A.S. Komercni Banka, A.S.,
Na Prikope 14 Praha
115 20 Praha 1
CZECH REPUBLIC

DENMARK Den Danske Bank Den Danske Bank
2 Holmens Kanala DK 1091 Copenhagen
Copenhagen
DENMARK

EGYPT National Bank of Egypt National Bank of Egypt
24 Sherif Street Cairo
Cairo
EGYPT

EUROBONDS Cedel S.A. ECU:Lloyds Bank PLC
67 Boulevard Grande Duchesse Charlotte International Banking Division
LUXEMBOURG London
A/c The Chase Manhattan Bank, N.A. For all other currencies: see
London relevant country
A/c No. 17817

EURO CDS First Chicago Clearing Centre ECU:Lloyds Bank PLC
27 Leadenhall Street Banking Division London
London EC3A 1AA For all other currencies: see
UNITED KINGDOM relevant country

FINLAND Merita Bank KOP Merita Bank KOP
Aleksis Kiven 3-5 Helsinki
00500 Helsinki
FINLAND

FRANCE Banque Paribas Societe Generale
Ref 256 Paris
BP 141
3, Rue D'Antin
75078 Paris
Cedex 02
FRANCE

GERMANY Chase Bank A.G. Chase Bank A.G.
Alexanderstrasse 59 Frankfurt
Postfach 90 01 09
60441 Frankfurt/Main
GERMANY

GHANA Barclays Bank of Ghana Barclays Bank
Barclays House Accra
High Street
Accra
GHANA

GREECE Barclays Bank Plc National Bank of Greece S.A.
1 Kolokotroni Street Athens
10562 Athens A/c Chase Manhattan Bank, N.A.,
GREECE London
A/c No. 040/7/921578-68

HONG KONG The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
40/F One Exchange Square Hong Kong
8, Connaught Place
Central, Hong Kong
HONG KONG

<PAGE>

HUNGARY Citibank Budapest Rt. Citibank Budapest Rt.
Vaci Utca 19-21 Budapest
1052 Budapest V
HUNGARY

INDIA The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
52/60 Mahatma Gandhi Road Bombay
Bombay 400 001
INDIA

Deutsche Bank AG, Bombay Branch Deutsche Bank
Securities & Custody Services Bombay
Kodak House
222 D.N. Road, Fort
Bombay 400 001
INDIA

INDONESIA The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
Banking Corporation Limited Jakarta
World Trade Center
J1. Jend Sudirman Kav. 29-31
Jakarta 10023
INDONESIA

IRELAND Bank of Ireland Allied Irish Bank
International Financial Services Centre Dublin
1 Harbourmaster Place
Dublin 1
IRELAND

ISRAEL Bank Leumi Le-Israel B.M. Bank Leumi Le-Israel B.M.
19 Herzl Street Tel Aviv
61000 Tel Aviv
ISRAEL

ITALY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Piazza Meda 1 Milan
20121 Milan
ITALY
JAPAN The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1-3 Marunouchi 1-Chome Tokyo
Chiyoda-Ku
Tokyo 100
JAPAN

JORDAN Arab Bank Limited Arab Bank Limited
P O Box 950544-5 Amman
Amman
Shmeisani
JORDAN

KENYA Barclays Bank of Kenya Barclays Bank of Kenya
Third Floor Nairobi
Queensway House
Nairobi
Kenya

LUXEMBOURG Banque Generale du Luxembourg S.A. Banque Generale du Luxembourg
50 Avenue J.F. Kennedy S.A.
L-2951 LUXEMBOURG Luxembourg

MALAYSIA The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Pernas International Kuala Lumpur
Jalan Sultan Ismail
50250, Kuala Lumpur
MALAYSIA

MAURITIUS Hongkong and Shanghai Banking The Hongkong and Shanghai Banking
Corporation Ltd Corporation Ltd.
Curepipe Road Curepipe
Curepipe
MAURITIUS

<PAGE>

MEXICO The Chase Manhattan Bank, S.A. No correspondent Bank
(Equities) Montes Urales no. 470, 4th Floor
Col. Lomas de Chapultepec
11000 Mexico D.F.

(Government Banco Nacional de Mexico, No correspondent Bank
Bonds) Avenida Juarez No. 104 - 11 Piso
06040 Mexico D.F.
MEXICO

MOROCCO Banque Commerciale du Maroc Banque Commerciale du Maroc
2 Boulevard Moulay Youssef Casablanca
Casablanca 20000
MOROCCO

NETHERLANDS ABN AMRO N.V. Generale Bank
Securities Centre Nederland N.V.
P O Box 3200 Rotterdam
4800 De Breda
NETHERLANDS

NEW ZEALAND National Nominees Limited National Bank of New Zealand
Level 2 BNZ Tower Wellington
125 Queen Street
Auckland
NEW ZEALAND

NORWAY Den Norske Bank Den Norske Bank
Kirkegaten 21 Oslo
Oslo 1
NORWAY

PAKISTAN Citibank N.A. Citibank N.A.
I.I. Chundrigar Road Karachi
AWT Plaza
Karachi
PAKISTAN

Deutsche Bank Deutsche Bank
Unitowers Karachi
I.I. Chundrigar Road
Karachi
PAKISTAN

PERU Citibank, N.A. Citibank N.A.
Camino Real 457 Lima
CC Torre Real - 5th Floor
San Isidro, Lima 27
PERU

PHILIPPINES The Hongkong and Shanghai The Hongkong and Shanghai
Banking Corporation Limited Banking Corporation Limited
Hong Kong Bank Centre 3/F Manila
San Miguel Avenue
Ortigas Commercial Centre
Pasig Metro Manila
PHILIPPINES

POLAND Bank Polska Kasa Opieki S.A. Bank Polska Kasa Opieki S.A.
Curtis Plaza Warsaw
Woloska 18
02-675 Warsaw
POLAND

<PAGE>

For Mutual Funds:
Bank Handlowy W. Warsawie. S.A. Bank Polska Kasa Opieki S.A.
Custody Dept. Warsaw
Capital Markets Centre
Ul, Nowy Swiat 6/12
00-920 Warsaw
POLAND

PORTUGAL Banco Espirito Santo & Comercial de Lisboa Banco Nacional Ultra Marino
Servico de Gestaode Titulos Lisbon
R. Mouzinho da Silveira, 36 r/c
1200 Lisbon
PORTUGAL

SHANGHAI The Hongkong and Shanghai Citibank
(CHINA) Banking Corporation Limited New York
Shanghai Branch
Corporate Banking Centre
Unit 504, 5/F Shanghai Centre
1376 Nanjing Xi Lu
Shanghai
THE PEOPLE'S REPUBLIC OF CHINA

SHENZHEN The Hongkong and Shanghai The Chase Manhattan Bank, N.A.
(CHINA) Banking Corporation Limited Hong Kong
1st Floor
Central Plaza Hotel
No.1 Chun Feng Lu
Shenzhen
THE PEOPLE'S REPUBLIC OF CHINA

SINGAPORE The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Shell Tower Singapore
50 Raffles Place
Singapore 0104
SINGAPORE

SLOVAK REPUBLIC Ceskoslovenska Obchodni Banka, A.S. Ceskoslovenska Obchodni Banka
Michalska 18 Slovak Republic
815 63 Bratislava
SLOVAK REPUBLIC

SOUTH AFRICA Standard Bank of South Africa Standard Bank of South Africa
Standard Bank Chambers South Africa
46 Marshall Street
Johannesburg 2001
SOUTH AFRICA

<PAGE>

SOUTH KOREA The Hongkong & Shanghai The Hongkong & Shanghai
Banking Corporation Limited Banking Corporation Limited
6/F Kyobo Building Seoul
#1 Chongro, 1-ka Chongro-Ku,
Seoul
SOUTH KOREA

SPAIN The Chase Manhattan Bank, N.A. Banco Bilbao Vizcaya,
Calle Peonias 2 Madrid
7th Floor
La Piovera
28042 Madrid
SPAIN

SRI LANKA The Hongkong & Shanghai The Hongkong & Shangai
Banking Corporation Limited Banking Corporation Limited
Unit #02-02 West Block, Colombo
World Trade Center
Colombo 1,
SRI LANKA

SWEDEN Skandinaviska Enskilda Banken Svenska Handelsbanken
Kungstradgardsgatan 8 Stockholm
Stockholm S-106 40
SWEDEN

SWITZERLAND Union Bank of Switzerland Union Bank of Switzerland
45 Bahnhofstrasse Zurich
8021 Zurich
SWITZERLAND

TAIWAN The Chase Manhattan Bank, N.A. No correspondent Bank
115 Min Sheng East Road - Sec 3,
9th Floor
Taipei
TAIWAN
Republic of China

THAILAND The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Bubhajit Building Bangkok
20 North Sathorn Road
Silom, Bangrak
Bangkok 10500
THAILAND

TUNISIA Banque Internationale Arabe de Tunisie Banque Internationale Arabe de
70-72 Avenue Habib Bourguiba Tunisie, Tunisia
P.O. Box 520
1080 Tunis Cedex
Tunisia

<PAGE>

TURKEY The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Emirhan Cad. No: 145 Istanbul
Atakule, A Blok Kat:11
80700-Dikilitas/Besiktas
Istanbul
Turkey

U.K. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
Woolgate House London
Coleman Street
London EC2P 2HD
UNITED KINGDOM

URUGUAY The First National Bank of Boston The First National Bank of Boston
Zabala 1463 Montevideo
Montevideo
URUGUAY

U.S.A. The Chase Manhattan Bank, N.A. The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza New York
New York
NY 10081
U.S.A.

VENEZUELA Citibank N.A. Citibank N.A.
Carmelitas a Altagracia Caracas
Edificio Citibank
Caracas 1010
VENEZUELA

ZAMBIA Barclays Bank of Zambia Barclays Bank of Zambia
Kafue House Lusaka
Cairo Road
P.O.Box 31936
Lusaka
ZAMBIA

ZIMBABWE Barclays Bank of Zimbabwe Barclays Bank of Zimbabwe
Ground Floor Harare
Tanganyika House
Corner of 3rd Street & Union Avenue
Harare
ZIMBABWE
</TABLE>

<PAGE>

SECURITIES LENDING AGREEMENT ("Lending Agreement"), dated as of
______________ , 1996 between _____________________________ ("Lender"), having
its principal place of business at ______________________ , and The Chase
Manhattan Bank, N.A. ("Chase"), having its principal place of business at One
Chase Manhattan Plaza, New York, New York 10081.

It is hereby agreed as follows:

Section 1 - Definitions

Unless the context clearly requires otherwise, the following words
shall have the meanings set forth below when used herein:

a. "Account" shall mean the securities account established and
maintained by Chase on behalf of Lender pursuant to, as the case may be, a
separate custody agreement or a separate directed trust agreement ("Agreement")
between Chase and Lender, which Agreement provides, inter alia, for the
safekeeping of Securities received by Chase from time to time on behalf of
Lender.

b. "Agreement" shall have the meaning assigned thereto in Section 1(a)
hereof.

c. "Authorized Investment" shall mean any type of instrument, security,
participation or other property in which Cash Collateral may be invested or
reinvested, as described in Section 5(f) hereof and Appendix 4 hereto (and as
such Appendix may be amended from time to time by written agreement of the
parties).

d. "Authorized Person" shall mean, except to the extent that Chase is
advised to the contrary by Proper Instruction, any person who is authorized to
give instructions to Chase pursuant to the Agreement and any mandates given to
Chase in connection with such Agreement. An Authorized Person shall continue to
be so until such time as Chase receives Proper Instructions that nay such person
is no longer an Authorized Person.

e. "Borrower" shall mean an entity listed on Appendix 1 hereto, other
than an entity which Chase shall have been instructed to delete from list
pursuant to Written Instructions and as such Appendix may be amended in
accordance with Section 4(b) hereof.

f. "Business Day" shall have the meaning assigned thereto in the
applicable MSLA.

g. "Buy-in" shall have the meaning assigned thereto in Section 7(c)
hereof.

<PAGE>

h. "Cash Collateral" shall mean fed funds, New York Clearing House
Association funds and such non-U.S. currencies as may be pledged by a Borrower
in connection with a particular Loan.

i. "Collateral" shall have the meaning assigned thereto in the
applicable MSLA, together with Cash Collateral.

j. "Collateral Account" shall mean, as the case may be, an account
maintained by Chase with itself, with any Depository or with any Triparty
Institution and designated as a Collateral Account for the purpose of holding
any one or more of Collateral, Authorized Investments, and Proceeds in
connection with Loans hereunder.

k. "Collateral Amount" shall have the meaning assigned thereto in
Section 5(c) hereof.

l. "Collateral Criterion" shall have the meaning assigned thereto in
Section 5(c) hereof.

m. "Depository" shall mean: (1) the Depository Trust Company, the
Participants' Trust Company and any other securities depository or clearing
agency (and each of their respective successors and nominees) registered with
the U.S. Securities and Exchange Commission or registered with or regulated by
the applicable foreign equivalent thereof or otherwise able to act as a
securities depository or clearing agency, (ii) any transnational depository,
(iii) the Federal Reserve book-entry system for the receiving and delivering of
U.S. Government Securities, and (iv) any other national system for the receiving
and delivering of that country's government securities.

n. "Difference" shall have the meaning assigned thereto in Section 7(c)
hereof.

o. "Distributions" shall have the meaning assigned thereto in Section
3(b)(v) hereof.

p. "Dollars" shall have the meaning assigned thereto in Section 7(b)
hereof.

q. "Due Date" shall have the meaning assigned thereto in Section 7(b)
hereof.

r. "Insolvency Event" shall have the meaning assigned thereto in
Section 7(b) hereof.

s. "Letter of Credit" shall have the meaning assigned thereto in the
applicable MSLA and be issued by a bank listed on Appendix 2 hereto (as such
list may be amended by Chase from time to time on notice to Lender), other than
a bank deleted from such list pursuant to Written Instruction.

<PAGE>

t. "Loan" shall mean a loan of Securities hereunder and under the
applicable MSLA.

u. "Loan Fee" shall mean the amount payable by a Borrower to Chase
pursuant to the applicable MSLA in connection with Loans collateralized other
than by Cash Collateral.

v. "Market Value" shall have the meaning assigned thereto in the
applicable MSLA.

w. "MSLA" shall mean a master securities lending agreement between
Chase and a Borrower, pursuant to which Chase as agent lends securities on
behalf of its customers (including Lender) from time to time. A copy of Chase's
standard form of MSLA, including the international addendum thereto, is annexed
as Appendix 3.

x. "Net Assets" shall have the meaning assigned thereto in Section 8
hereof.

y. "Net Realized Income" shall have the meaning thereto in Section 8
hereof.

z. "Oral Instructions" shall have the meaning assigned thereto in
Section 10 hereof.

aa. "Proceeds" shall mean interest, dividends and other payments and
Distributions received by Chase in connection with Authorized Investments.

bb. "Proper Instructions" shall mean Oral Instructions and Written
Instructions.

cc. "Rebate" shall mean the amount payable by Chase on behalf of Lender
to a Borrower in connection with Loans collateralized by Cash Collateral.

dd. "Return Date" shall have the meaning assigned thereto in Section
7(c) hereof.

ee. "Securities" shall mean government securities (including U.S.
Government Securities), equity securities, bonds, debentures, other corporate
debt securities, notes, mortgages or other obligations, and any certificates,
warrants or other instruments representing rights to receive, purchase, or
subscribe for the same, or evidencing or representing any other rights or
interests therein and held pursuant to the Agreement.

ff. "Term Loan" shall have the meaning assigned thereto in Section 5(i)
hereof.

<PAGE>

gg. "Triparty Institution" shall mean a financial institution with
which Chase shall have previously entered a triparty agreement among itself,
such Triparty Institution and a particular Borrower providing, among other
things, for the holding of Collateral in a Collateral Account at such Triparty
Institution in Chase's name on behalf of Chase's lending customers and for the
substitution of Collateral; provided, however, that any substituted Collateral
shall meet the then standards for acceptable Collateral set by Chase.

hh. "U.S. Government Security" shall mean book-entry securities issued
by the U.S. Treasury defined in Subpart 0 of Treasury Department Circular No.
300 and any successor provisions) and any other securities issued or fully
guaranteed by the United States government or any agency, instrumentality or
establishment of the U.S. government, including, without limitation, securities
commonly known as "Ginnie Maes," Sally Maes," "Fannie Maes" and "Freddie Maes".

ii. "Written Instructions" shall have the meaning assigned thereto in
Section 10 hereof.

Section 2 - Appointment, Authority

(a) Appointment. Lender hereby appoints Chase as its agent to lend
Securities in the Account on Lender's behalf on a fully disclosed basis to
Borrowers from time to time in accordance with the terms hereof and on such
terms and conditions and at such times as Chase shall determine and Chase may
exercise all rights and powers provided under any MSLA as may be incidental
thereto, and Chase hereby accepts appointment as such agent and agrees to so
act.

(b) Authority. Lender hereby authorizes and empowers Chase to execute
in Lender's name on its behalf and at its risk all agreements and documents as
may be necessary to carry out any of the powers herein granted to Chase. Lender
grants Chase the authority set forth herein notwithstanding its awareness that
Chase, in its individual capacity or acting in a fiduciary capacity for other
accounts, may have transactions with the same institutions to which Chase may be
lending Securities hereunder, which transactions may give rise to actual or
potential conflict of interest situations. Chase shall not be bound to: (i)
account to Lender for any sum received or profit made by Chase for its own
account or the account of any other person or (ii) disclose or refuse to
disclose any information or take any other action if the same would or might in
Chase's judgment, made in good faith, constitute a breach of any law or
regulation or be otherwise actionable with respect to Chase; provided that, in
circumstances mentioned in (ii) above, Chase shall promptly inform Lender of the
relevant facts (except where doing so would, or might in Chase's judgment, made
in good faith, constitute a breach of any law or regulation or be otherwise
actionable as aforesaid).

<PAGE>

Section 3 - Representation and Warranties

(a) Representations of each party. Each party hereto represents and
warrants to the other that: (i) it has the power to execute and deliver this
Lending Agreement, to enter into the transactions contemplated hereby, and to
perform its obligations hereunder; (ii) it has taken all necessary action to
authorize such execution, delivery, and performance; (iii) this Lending
Agreement constitutes a legal, valid, and binding obligation enforceable against
it; and (iv) the execution, delivery, and performance by it of this Lending
Agreement shall at all times comply with all applicable laws and regulations.

(b) Representations of Lender. Lender represents and warrants to Chase
that: (i) this Lending Agreement is, and each Loan shall be, legally and validly
entered into, and does not and shall not violate any statute, regulation, rule,
order or judgment binding on Lender, or any provision of Lender's charter or
by-laws, or any agreement binding on Lender or affecting its property, and is
enforceable against Lender in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or similar laws, or by equitable
principles relating to or limiting creditors' rights generally; (ii) the person
executing this Lending Agreement and all Authorized Persons acting on behalf of
Lender has and have been duly and properly authorized to do so; (iii) it is
lending Securities as principal and shall not transfer, assign or encumber its
interest in, or rights with respect to, any Securities available for Loan
hereunder; (iv) it is the beneficial owner of all Securities or otherwise has
the right to lend Securities; and (v) it is entitled to receive all interest,
dividends and other distributions ("Distributions") made by the issuer with
respect thereto. Lender shall promptly identify to Chase by notice, which notice
may be oral, any Securities that are no longer subject to the representations
contained in (b).

Section 4 - Borrowers

(a) MSLA. Lender hereby acknowledges receipt of the form of MSLA and
authorizes Chase to lend Securities in the Account to Borrowers thereunder
pursuant to an agreement substantially in the form thereof.

(b) Borrowers. Securities may be lent to any Borrower selected by Chase
in Chase's sole discretion, in accordance with the terms hereof. In that
connection, Appendix 1 may be amended from time to time by Chase on notice to
Lender.

<PAGE>

Section 5 - Loans

(a) Securities to be lent, Lending opportunities, Loan initiation. All
Securities of Lender held by Chase that are issued, settled or traded in the
markets that have been approved by Chase from time to time for purposes of
Chase's discretionary securities lending program shall be subject to the terms
hereof. Chase shall seek to assure that Lender receives a fair allocation of
lending opportunities vis-a-vis other lenders, taking into account the demand
for and availability of Securities, types of Collateral, eligibility of
Borrowers, limitations on investments of Cash Collateral, tax treatment, and
similar commercial factors. From time to time, Chase may lend to Borrowers
Securities held in the Account (except Securities that are no longer subject to
the representations set forth in Section 3) and shall deliver such Securities
against receipt of Collateral in accordance with the applicable MSLA. Chase
shall have the right to decline to make any Loans to any Borrower and to
discontinue lending to any Borrower in its sole discretion and without notice to
Lender.

(b) Receipt of Collateral, Collateral substitution. For each Loan,
Chase shall receive and hold Letters of Credit received as Collateral and Chase
or a Triparty Institution shall receive and hold all other Collateral required
by the applicable MSLA in a Collateral Account, and Chase is hereby authorized
and directed, without obtaining any further approval from Lender, to invest and
reinvest all or substantially all Cash Collateral. Chase shall credit, or where
applicable shall have a Triparty Institution credit, all Collateral, Authorized
Investments and Proceeds to a Collateral Account and Chase shall not mark its
books and records to identify Lender's interest therein, it being understood,
however, that all monies credited to a Collateral Account may for purposes of
investment be commingled with cash collateral held for other lenders of
securities on whose behalf Chase may act. Chase may, in its sole discretion,
liquidate any Authorized Investment and credit the net proceeds in a Collateral
Account. Chase shall accept substitutions of Collateral in accordance with the
applicable MSLA and shall credit, or where applicable shall have a Triparty
Institution credit, all such substitutions to a Collateral Account.

(c) Mark to market procedures. (i) Chase shall require initial
Collateral for a Loan in an amount determined by applying the then applicable
"Collateral Criterion" (as defined below) to the Market Value of the Security
that is the subject of the Loan. The Collateral Criterion with respect to a
given Security shall be an amount equal to the then applicable percentage
(currently 102% for securities issued in the U.S. and 105% for securities issued
outside of the U.S.) of the Market Value of the Security (plus accrued interest,
if any, with respect to debt securities) which is the subject of a Loan as
determined as of the close of trading on the preceding Business Day. (ii) Each
Business Day Chase shall determine if the Market Value of all Collateral
received by Chase from a given Borrower in connection with all loans to such
Borrower from all lenders is at least equal to the aggregate amount ("Collateral
Amount") determined by applying the applicable Collateral Criterion to each
security on loan to such Borrower from all lenders. (iii) In accordance with
general market practice, the Market Value of certain securities (including,
without limitation, U.S. Government Securities) whether on Loan or received as
Collateral, may be determined on a same day basis by reference to recognized
pricing services.

<PAGE>

(d) Demand for additional Collateral. If the determination made in
Section 5(c)(ii) above demonstrates that the Market Value of all Collateral
received from a given Borrower is not at least equal to the Collateral Amount,
Chase shall demand additional Collateral from such Borrower in accordance with
the applicable MSLA so as to meet the Collateral Amount by making specific
Loans; provided that, Chase may from time to time establish de minimis
guidelines pursuant to which a mark would not be made even where the aggregate
Collateral Amount has not been met.

(e) Changes in procedures applicable to Collateral. The Collateral
procedures set forth in Sections 5(b)-(d) above reflect Chase's current practice
and may be changed by Chase from time to time based on general market conditions
(including volatility of Securities on Loan and of securities Collateral), the
Market Value of Securities on Loan to a given Borrower, and in accordance with
general market practice and regulatory requirements. Chase shall notify Lender
of material revisions to the foregoing procedures.

(f) Investment of Cash Collateral. (i) Chase is hereby authorized to
invest and reinvest cash Collateral in accordance with the investment guidelines
(and the interpretations, procedures and definitions included therewith) annexed
hereto as Appendix 4. (ii) Authorized Investments are made for the account of,
and at the sole risk of, Lender. In that connection, Lender shall pay to Chase
on demand in cash an amount equal to any deficiency in the amount of Collateral
available for return to a Borrower pursuant to an applicable MSLA.

(g) Lender's rights with respect to Securities on Loan; Distribution
and voting rights. (i) An amount equal to the amount of all Distributions paid
with respect to Securities on Loan that Lender would have received had such
Securities not been on Loan shall be credited to Lender's account on the date
such Distributions are delivered by Borrower to Chase. Any non-cash Distribution
on Securities on Loan which is in the nature of a stock split or a stock
dividend, shall be added to the Loan (and shall be considered to constitute
Securities on Loan) as of the date such non-cash Distribution is received by the
Borrower and shall be subject to the provisions of this Lending Agreement;
provided that the Lender may, by giving chase ten (10) Business Days' notice
prior to the date of such non-cash Distribution (or such different amount of
time as Chase may from time to time require on advice to Lender), direct Chase
to request that the Borrower deliver such non-cash Distribution to Chase
pursuant to the applicable MSLA, in which case Chase shall credit such non-cash
Distribution to Lender's account on the date it is delivered to Chase. Without
regard to the reference to "delivered" in the foregoing, the "AutoCredit"
provisions of the Agreement shall apply where a Borrower fails to make a
Distribution payment to Chase, the effect of which would be for Chase to credit
Lender's account with Distributions on the payable date. (ii) During the term of
any Loan, Chase will permit the Securities on Loan to be transferred into the
name of and be voted by the Borrower or others. Lender shall not be entitled to
participate in any dividend reinvestment program or to vote proxies with respect
to Securities that are eligible for Loan (whether or not actually on Loan) as of
the applicable record date for such Securities.

(h) Advances, overdrafts and indebtedness, Security Interest. Chase
may, in its sole discretion, advance funds on behalf of Lender in order to pay
to Borrowers any Rebates or to

<PAGE>

return to Borrowers Cash Collateral to which they are entitled pursuant to the
applicable MSLA. Lender shall repay Chase on demand the amount of any advance or
any other amount owned by Lender hereunder plus accrued interest at a rate per
annum not to exceed the rate customarily charged by Chase for such loans at the
time such loan is made and shall otherwise be on such terms and conditions as
Chase customarily makes such loans available. In order to secure repayment of
any advance or other indebtedness of Lender to Chase arising hereunder, Chase
shall have a continuing lien and security interest in and to all assets now or
hereafter held in the Account and any Collateral Account (to which Lender is
entitled hereunder) and any other property at any time held by it for the
benefit of Lender or in which Lender may have an interest which is then in
Chase's possession or control or in the possession or control of any third party
acting on Chase's behalf. In this regard, Chase shall be entitled to all the
rights and remedies of a pledgee under common law and a secured party under the
New York Uniform Commercial Code and/or any other applicable laws and/or
regulations as then in effect.

(i) Termination of a Loan. (i) Loans shall generally be terminable on
demand. With the prior approval of Lender, however, Loans may be made on the
basis of a reasonably anticipated termination date ("Term Loan") and without
providing for the right of substitution of equivalent Securities. Termination of
a Term Loan prior to its anticipated termination date by either Lender or
Borrower may result in the terminating party having to pay non- terminating
party damages based on the cost of obtaining a replacement loan. (ii) Chase
shall terminate any Loan of Securities to a Borrower as soon as practicable
after (a) receipt by Chase of a notice of termination of the respective MSLA;
(b) receipt by Chase of Written Instructions directing it to terminate a Loan;
(c) receipt by Chase of Written Instructions instructing it to delete from
Appendix 2 the Borrower to whom such Loans was made; (d) receipt by Chase of
Written Instructions advising that the Security subject to a Loan is no longer
subject to the representation contained in Section 3 hereof; (e) receipt by
Chase of notice advising that an Event of Default (as defined in the applicable
MSLA) has occurred and is continuing beyond any applicable grace period; (f)
whenever Chase, in its sole discretion, elects to terminate such Loan other than
a Term Loan; or (g) termination of this Lending Agreement. (iii) If Securities
which are the subject of a Loan being terminated are to be sold by Lender,
Written Instructions shall in no event be given to Chase later than the trade
date established by Lender for such sale or such earlier date of which Chase may
advise Lender from time to time with respect to particular markets. Chase shall
not be liable for any failure of a Borrower to return Securities on Loans in a
time fashion.

(j) Recordkeeping and Reports. Chase shall establish and maintain such
records as are reasonably necessary to account for Loans that are made and the
income derived therefrom. Chase shall provide Lender with a monthly statement
describing the Loans made during the preceding month, and the income derived
from Loans, during the period covered by such statement. A party shall comply
with the reasonable requests of the other party for information necessary to the
requester's performance of its duties hereunder.

<PAGE>

Section 6 - Default by Borrower

(1) Chase may assume (unless it has actual knowledge to the contrary)
that any representations made by a Borrower in connection with any Loan are
true, that no event which is or may become an Event of Default (as defined in
the applicable MSLA) has occurred and that a Borrower has complied with its
obligations under the applicable MSLA. Subject to Sections 7(b)-(d), Chase shall
have no responsibility for the accuracy or completeness of any information
supplied, or for any breach of any obligation, by any Borrower under or in
connection with any MSLA or Loan. Chase shall not be liable as a result of
taking or omitting to take any action provided that Chase shall have carried out
its responsibilities hereunder in good faith. (ii) If any Borrower with respect
to any Loan affected pursuant hereto and pursuant to the applicable MSLA fails
to return any loaned Securities when due thereunder for reasons other than
relating to the solvency of the Borrower, Chase shall then take whatever action
its deems appropriate in accordance with general market practice and Chase's
reasonable judgment, including, but no necessarily limited to, claiming
compensation from such Borrower on behalf of Lender in the event a trade
executed by Lender fails on account of such Borrower's failure timely to have
returned Securities on Loan or, where Chase deems it necessary, such other
action as may be permitted by the applicable MSLA, including collecting any
applicable MSLA fails to return any Securities on Loan when due thereunder for
reasons relating to the solvency of the Borrower, Chase shall take such action
as its deems appropriate in accordance with Chase's reasonable judgment under
the applicable MSLA.

Section 7 - Standard of Care, Liabilities, Indemnification

(a) Standard of care, Liabilities. Except as provided in paragraphs (b)
and (c) hereof, Chase shall be liable for any costs, expenses, damages,
liabilities or claims (including attorneys' and accountants' fees) incurred by
Lender, except those costs, expenses, damages, liabilities and claims arising
out of the negligence, bad faith or willful misconduct of Chase. Chase shall
have no obligation hereunder for: (i) costs, expenses, damages, liabilities or
claims (including attorneys' and accountants' fees), which are sustained or
incurred by Lender by reason of any action or inaction by any pricing service,
any Depository or a Triparty Institution or their respective successors or
nominees; and (ii) any failure to perform any obligation due to any matters
beyond the control of Chase. In no event shall Chase be liable for indirect or
consequential damages or lost profits or loss of business,

<PAGE>

arising hereunder or in connection herewith, even if previously informed of the
possibility of such damages and regardless of the form of action.

Except for any costs or expenses incurred by Chase in performing its
obligations pursuant to paragraphs (b) and (c) hereof any ordinary operating
expenses incurred by Chase in providing services hereunder, Lender shall
indemnify Chase and hold it harmless from and against any and all costs,
expenses, damages, liabilities or claims, including reasonable fees and expenses
of counsel, which Chase may sustain or incur or which may be asserted against
Chase by reason of or as a result of any action taken or omitted by Chase in
connection with operating under this Lending Agreement or enforcing Lender's
rights under the applicable MSLA, other than those costs, expenses, damages,
liabilities or claims arising out of the negligence, bad faith or willful
misconduct of Chase. The foregoing indemnity shall be a continuing obligation of
the Lender, its successors and assigns, notwithstanding the termination of any
Loans hereunder or of this Lending Agreement. Chase may charge any amounts to
which it is entitled hereunder against the Account, and Lender shall be entitled
to an accounting of all amounts so charged. Actions taken or omitted in reliance
upon Proper Instructions, or upon any information, order, indenture, stock
certificate, power of attorney, assignment, affidavit or other instrument
reasonably believed by Chase, in good faith, to be genuine or bearing the
signature of a person or persons believed, in good faith, to be authorized to
sign, countersign or execute the same, shall be conclusively presumed to have
been taken or omitted in good faith.

(b) Indemnification of Lender in respect to Distributions. If the
Borrower in respect of any Loan effected pursuant hereto and pursuant to the
applicable MSLA fails, as a result of its bankruptcy, insolvency,
reorganization, liquidation, receivership or similar event (each an "Insolvency
Event"), to remit to Chase for Lender's account any Distributions on or with
respect to Securities on Loan when due (the "Due Date") in accordance with such
MSLA and such Due Date occurs at least one day prior to an Insolvency Event then
Chase shall at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Due Date, undertake the following: (i) with respect to
Distributions in the form of cash, Chase shall credit Lender's account with the
full amount of such Distributions and (ii) with respect to Distributions in the
form of securities, Chase shall, at its option, either purchase replacement
securities (of an equal amount of the same issue, class, type or series as the
Distributions) on

<PAGE>

the principal market in which such securities are traded or credit Lender's
account with the market value in United States dollars ("Dollars") of such
Distributions on the Due Date as determined by Chase in good faith. Market value
shall be determined by Chase in accordance with the applicable MSLA, including
the computation of Dollar equivalents where Securities on Loan and/or Collateral
(and Proceeds) are denominated in a currency other than Dollars.

(c) Indemnification of Lender in respect of Securities. If the Borrower
in respect of any Loan effected pursuant hereto and pursuant to the applicable
MSLA fails to return any Securities on Loan to Chase for Lender's account when
due thereunder (the "Return Date") which is the date of default, then Chase
shall, at its expense (subject to paragraph (d) hereof) and within one (1)
Business Day of the Return Date, credit Lender's account in Dollars with the
difference ("Difference") (where a positive number), if any, between (x) the
market value of such lent Securities on the Return Date (including, in the case
of debt Securities, accrued but unpaid interest), and (y) in the case of Loans
collateralized by (i) Cash Collateral, the greater of (A) the Market Value of
the Cash Collateral on the date of initial pledge as adjusted for any subsequent
marks-to-market through the Return Date and (B) the Market Value of Cash
Collateral investments on the Return Date, (ii) non-Cash Collateral comprising
securities Collateral, the greater of the Market Value of such Collateral on the
(A) Business Day immediately preceding the Return Date and (B) Return Date, or
(iii) non-Cash Collateral comprising Letter of Credit Collateral, the Market
Value of the Letter of Credit Collateral on the date of initial pledge as
adjusted for any subsequent marks-to-market through the Return Date. Market
Value shall be determined by Chase in accordance with the applicable MSLA,
including the computation of Dollar equivalents where Securities on Loan and/or
Collateral (and Proceeds) are denominated in a currency other than Dollars.
Where Cash Collateral and non-Cash Collateral have each been allocated to a Loan
as of the Return Date, the Difference payable by Chase shall be computed in
accordance with the foregoing as if there had been two Loans in effect on the
Return Date, one collateralized by Cash Collateral and the other collateralized
by non-Cash Collateral. In lieu of paying Lender the Difference, Chase may, at
its sole option and expense, purchase for Lender's account ("Buy-in")
replacement securities of the same issue, type, class, and series as that of the
Securities on Loan.

(d) Subrogation. If Chase makes a payment or a purchase pursuant to
Section 7(b) or effects a Buy-in pursuant to Section 7(c), or if Chase effects a
Difference payment pursuant to Section

<PAGE>

7(c) on account of a failure to return Securities on Loan not arising from an
Insolvency Event, Chase shall, to the extent of such payment, purchase,
Difference payment or Buy-in, be subrogated to, and Lender shall assign and be
deemed to have assigned to Chase, all of its rights in, to and against the
Borrower (and any guarantor thereof) in respect of such Loan, any Collateral
pledged by the Borrower in respect of such Loan, and all proceeds of such
Collateral. In the event that Lender receives or is credited with any payment,
benefit or value from or on behalf of the Borrower in respect of rights to which
Chase is subrogated as provided herein, Lender shall promptly remit or pay to
Chase the same (or its Dollar equivalent) but only to the extent that Lender has
been paid all amounts owed to it by Borrower.

Section 8 - Chase Compensation

(a) In connection with each Loan hereunder, Lender shall pay to Chase a
fee equal to ___% of (i) earnings (less any Rebate paid by Chase to a Borrower)
derived from Authorized Investments in connection with Loans collateralized by
cash, and (ii) any Securities Loan Fee paid or payable by the Borrower on Loans
not collateralized by cash. (b) The fee payable to Chase for services performed
pursuant to Section 5(f) hereof shall be equal to one tenth of the one percent
(0.1%) of the Fund's average daily Assets (with "Fund" being as defined in
Appendix 4 hereto). All securities in the Fund shall be valued based on their
amortized cost. Fees shall be accrued and charged daily against the Fund's yield
or assets, as appropriate, and shall be payable monthly in arrears on the first
business day of the month following the month in which earned. (c) Chase is
authorized, on a monthly basis, to charge all the foregoing fees (together with
reasonable expenses incurred by Chase hereunder) and any other amounts owed by
Lender hereunder against the Account and/or a Collateral Account.

Section 9 - Taxes

Lender shall be responsible for all filings, tax returns and reports on
any Loans undertaken by Chase on Lender's behalf which are to be made to any
authority whether governmental or otherwise and for the payment of all unpaid
calls, taxes (including, without limitations, any value added tax), imposts,
levies or duties due on any principal or interest, or any other liability or
payments arising out of or in connection with any Securities or any Collateral,
and in so far as Chase is under obligation (whether of a governmental nature or
otherwise) to pay the same on Lender's

<PAGE>

behalf Chase may do so out of any monies or assets held by it pursuant to the
terms of the Agreement or hereunder.

Section 10 - Instructions

(a)(i) Written Instructions. "Written Instructions" shall mean written
communications actually received by Chase from an Authorized Person or from a
person reasonably believed by Chase to be an Authorized Person by letter,
memorandum, telegram, cable, telex, telecopy facsimile, computer, video (CRT)
terminal or other on-line system, or any other method reasonably acceptable to
Chase and whereby Chase is able to verify with a reasonable degree of certainty
the identity of the sender of such communications or with communications are
transmitted with proper testing or authentication pursuant to terms and
conditions which Chase may specify. (ii) Oral Instructions. "Oral Instructions"
shall mean oral communications actually received by Chase from an Authorized
Person or from a person reasonably believed by Chase to be an Authorized Person.
Oral Instructions shall promptly thereafter be confirmed in writing by an
Authorized Person (which confirmation may bear the facsimile signature of such
Person), but Lender will hold Chase harmless for the failure of an Authorized
Person to send such confirmation in writing, the failure of such confirmation to
conform to the Oral Instructions received, or Chase's failure to produce such
confirmation at any subsequent time. Lender shall be responsible for
safeguarding any testkeys, identification codes or other security devices which
Chase may make available to Lender or its Authorized Persons.

(b) Unless otherwise expressly provided, all Proper Instructions shall
continue in full force and effect until canceled or superseded.

Section 11 - Pricing Services

Chase may use any pricing service referred to in an applicable MSLA and
any other recognized pricing service (including itself and any of its
affiliates) in order to perform its valuation responsibilities with respect to
Securities, Collateral and Authorized Investments, and Lender shall hold Chase
harmless from and against any loss or damage suffered or incurred as a result of
errors or omissions of any such pricing service.

<PAGE>
Section 12 - Termination

This Lending Agreement may be terminated at any time by either party
upon delivery to the other party of notice specifying the date of such
termination, which shall be not less than 30 days after the date of receipt of
such notice. Notwithstanding any such notice, this Lending Agreement shall
continue in full force and effect with respect to all Loans outstanding on the
termination date, which Loans shall, however, be terminated as soon as
reasonably practicable.

Section 13 - Miscellaneous

(a) Legal proceedings. Chase may refrain from bringing any legal action
or proceeding arising out of or in connection with any Loan until it shall have
received such security as it may require for all costs, expenses (including
legal fees) and liabilities which it will or may expend or incur in relation
thereto.

(b) Integration, Lending Agreement to Govern. This Lending Agreement
and the Agreement contain the complete agreement of the parties with respect to
the subject matter hereof and supersede and replace any previously made
proposals, representations, warranties or agreements with respect thereto by the
parties. In the event of any conflict between this Lending Agreement, and the
Agreement, this Lending Agreement shall govern.

(c) Notice. Unless expressly provided herein to the contrary, notices
hereunder shall be in writing, and delivered by telecopier, overnight express
mail, first-class postage prepaid, delivered personally or by receipt courier
service. All such notices which are mailed shall be deemed delivered upon
receipt. Notices shall be addresses as follows (or to such other address as a
party may from time to time designate on notice duly given in accordance with
this paragraph): notices to Chase shall be addressed to it at 2 Chase Manhattan
Plaza, 19th Floor, New York, New York 10081, Attention: Securities Lending
Division; notices to be given to Lender shall be addressed to it at its offices
at Attention: .

(d) Amendments, Waiver. This Lending Agreement may be modified only by
a written amendment signed by both parties, and no waiver of any provisions
hereof shall be effective unless expressed in a writing signed by the party to
be charged.

(e) Government Law, Consent to Jurisdiction, Waiver of Immunity. This
Lending Agreement shall be construed in accordance with laws of the State of New
York, without regard to the conflict of laws principles thereof. Chase and
Lender each hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and Lender hereby waives any claim of forum non conveniens to the
extent that it may lawfully do so. To the extent that in any jurisdiction Lender
may now or hereafter be entitled to claim, for itself or its assets, immunity
from suit, execution, attachment (before or after judgment) or other legal
process, Lender irrevocably shall not claim, and it hereby waives, such
immunity.

<PAGE>

(f) Counterparts, Headings. This Lending Agreement may be executed in
several counterparts, each one of which shall constitute an original, and all
collectively shall constitute but one instrument. The headings of the sections
hereof are included for convenience of reference only and do not form part of
this Lending Agreement.

(g) Severability. Any provisions of this Lending Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition, or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceably in any jurisdiction
shall not invalidate or render unenforceable such provisions in any other
jurisdiction.

IN WITNESS WHEREOF, the parties have executed this Lending Agreement as
of the date first above-written.

[Insert name of LENDER] THE CHASE MANHATTAN BANK, N.A.

By: By:

Title: Title:

<PAGE>

DELAWARE GROUP INCOME FUNDS, INC.

DELCHESTER FUND SERIES
STRATEGIC INCOME FUND SERIES

FIRST AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT

THIS AGREEMENT, made as of the 30th day of September, 1996 by and
between DELAWARE GROUP INCOME FUNDS, INC. ("Fund"), a Maryland corporation, for
the DELCHESTER FUND series and the STRATEGIC INCOME FUND series (together, the
"Series"), and DELAWARE SERVICE COMPANY, INC. ("DSC"), a Delaware corporation.

W I T N E S S E T H:

WHEREAS, the Investment Management Agreements between the Fund on
behalf of the Series and Delaware Management Company, Inc. provide that the Fund
shall conduct its own business affairs and shall bear the expenses and salaries
necessary and incidental thereto including, but not in limitation of the
foregoing, the costs incurred in: the maintenance of its corporate existence;
the maintenance of its own books, records and procedures; dealing with its own
shareholders; the payment of dividends; transfers of stock, including issuance,
redemption and repurchase of shares; preparation of share certificates; reports
and notices to stockholders; calling and holding of stockholders' meetings;
miscellaneous office expenses; brokerage commissions; custodian fees; legal and
accounting fees; taxes; and federal and state registration fees; and

<PAGE>

WHEREAS, the FUND and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
and

WHEREAS, the Fund and DSC previously entered into a Shareholders
Services Agreement dated as of June 29, 1988, providing for the provision of
services to the Delchester Fund series; and

WHEREAS, the Fund and DSC wish to amend the Shareholders Services
Agreement dated as of June 29, 1988, to add the Strategic Income Fund series;

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:

I. APPOINTMENT AS AGENT

1.1 The Fund hereby appoints DSC Shareholder Services Agent for the
Series to provide as agent for the Fund services as Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent and DSC hereby accepts such
appointment and agrees to provide the Fund, as its agent, the services described
herein.

1.2 The Fund shall pay DSC and DSC shall accept, for the services
provided hereunder, the compensation provided for in Section VIII hereof. The
Fund also shall reimburse DSC for expenses incurred or advanced by it for the
Fund in connection with its services hereunder.

-2-

<PAGE>

II. DOCUMENTATION

2.1 The Fund represents that it has provided or made available to DSC
(or has given DSC an opportunity to examine) copies of, and DSC represents that
it has received from the Fund (or is otherwise familiar with), the following
documents:

(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto;

(b) The By-Laws of the Fund;

(c) Any resolution or other action of the Fund or the Board of
Directors of the Fund establishing or affecting the rights, privileges or other
status of each class or series of shares of the Fund, including those relating
to the Series, or altering or abolishing such class or series;

(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;

(e) The forms of share certificates for the Series in the form
approved by the Board of Directors of the Fund;

(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;

(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;

(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including

-3-

<PAGE>

periodic payment or withdrawal plans, reinvestment plans or retirement plans,
if any;

(i) Any opinion of counsel to the Fund relating to the
authorization and validity of the shares of the Series issued or proposed to be
issued under the law of the State of the Fund's organization, including the
status thereof under any applicable securities laws;

(j) A certified copy of any resolution of the Board of
Directors of the Fund authorizing any person to give instructions to DSC under
this Agreement (with a specimen signature of such person if not already
provided), setting forth the scope of such authority; and

(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.

2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.

2.3 The Fund shall provide or make available to DSC a certified copy of
any resolution of the stockholders or the Board of Directors of the Fund
providing for a dividend, capital gains distribution, distribution of capital,
stock dividend, stock split or other similar action affecting the authorization
or issuance of shares of the Series or the payment of dividends.

2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or

-4-

<PAGE>

the books recording the same, the Fund shall deliver or make
available to DSC:

(a) A certified copy of any document authorizing or effecting
such change;

(b) Written instructions from an authorized officer
implementing such change; and

2.5 The Fund warrants the following:

(a) The Fund is, or will be, a properly registered investment
company under the Investment Company Act of 1940 and any and all Series shares
which it issues will be properly registered and lawfully issued under applicable
federal and state laws.

(b) The provisions of this Agreement do not violate the terms
of any instrument by which the Fund is bound; nor do they violate any law or
regulation of any body having jurisdiction over the Fund or its property.

2.6 DSC warrants the following:

(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.

(b) The provisions of this Agreement do not violate the terms
of any instrument by which DSC is bound; nor do they violate any law or
regulation of any body having jurisdiction over DSC or its property.

-5-

<PAGE>

III. STOCK CERTIFICATES

3.1 The Fund shall furnish or authorize DSC to obtain, at the Fund's
expense, a sufficient supply of blank stock certificates for the Series, and
from time to time will replenish such supply upon the request of DSC. The Fund
agrees to indemnify and exonerate, save and hold DSC harmless, from and against
any and claims or demands that may be asserted against DSC concerning the
genuineness of any stock certificate supplied to DSC pursuant to this Section.

3.2 DSC shall safeguard, and shall account to the Fund, upon its demand
for, all such stock certificates: (a) as issued, showing to whom issued, or (b)
as unissued, establishing the safekeeping, cancellation or destruction thereof.

3.3 The Fund shall promptly inform DSC in writing of any change in the
officers authorized to sign stock certificates or in the form thereof. If an
officer whose manual or facsimile signature is affixed to any blank share
certificate shall die, resign or be removed prior to the issuance of such
certificate, DSC may nevertheless issue such certificate notwithstanding such
death, resignation or removal, and the Fund shall with respect thereto promptly
provide to DSC any approval, adoption or ratification as may be required by DSC.

IV. TRANSFER AGENT

4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:

-6-

<PAGE>

(a) Upon receipt of authority to issue shares, determine the
total shares to be issued and issue such shares by crediting shares to accounts
created and maintained in the registration forms provided; as applicable,
prepare, issue and deliver stock certificates.

(b) Upon proper transfer authorization, transfer shares by
debiting transferor-stockholder accounts and crediting such shares to accounts
created and/or maintained for transferee- stockholders; if applicable, issue
and/or cancel stock certificates.

(c) Upon proper redemption authorization, determine the total
shares redeemed and to be redeemed; determine the total redemption payments made
and to be made; redeem shares by debiting stockholder accounts; as applicable,
receive and cancel stock certificates for shares redeemed; and remit or cause to
be remitted the redemption proceeds to stockholders.

(d) Create and maintain accounts; reconcile and control cash
due and paid, shares issued and to be issued, cash remitted and to be remitted
and shares debited and credited to accounts; provide such notices, instructions
or authorizations as the Fund may require.

4.2 DSC shall not be required to issue, transfer or redeem Series
shares upon receipt of DSC from the Fund, or from any federal or state
regulatory agency or authority, written notice that the issuance, transfer or
redemption of Series shares has been suspended or discontinued.

-7-

<PAGE>

V. DIVIDEND DISBURSING AGENT

5.1 As Dividend Disbursing Agent for the Fund, DSC shall disburse and
cause to be disbursed to stockholders of each Series dividends, capital gains
distributions or any payments from other sources as directed by the Fund. In
connection therewith, but not in limitation thereof, DSC shall:

(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.

(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.

(c) Calculate the total disbursement for each stockholder of
each Series, as aforesaid, for which shares are to be issued and authorized and
instruct the issuance of such shares in accordance with Section IV hereof.

(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.

(e) Create and maintain records, reconcile and control
disbursements to be made and made, both as to cash and shares, as aforesaid;
provide such notices, instruction or authorization as the Fund may require.

5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state

-8-

<PAGE>

agency or authority, written notice that such disbursement shall not be made.

VI. SHAREHOLDER SERVICING AGENT

6.1 As Shareholder Servicing Agent for the Fund, DSC shall provide
those services ancillary to but in implementation of the services provided under
Sections I through V hereof, and those generally defined and accepted as
shareholder services. In connection therewith, but not in limitation thereof,
DSC shall:

(a) Except where instructed in writing by the Fund not to do
so, and where in compliance with applicable law, accept orders on behalf of the
Fund; receive and process investments and applications; remit to the Fund or its
custodian payments for shares acquired and to be issued; and direct the issuance
of shares in accordance with Section IV hereof.

(b) Receive, record and respond to communications of
stockholders and their agents.

(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.

(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.

(e) Administer investment plans offered by the Fund to
investors and stockholders of each Series, including retirement plans, including
activities not otherwise provided in Sections I through V of this Agreement

-9-

<PAGE>

VII. PERFORMANCE OF DUTIES

7.1 The parties hereto intend that Series stockholders and their
stockholdings shall be confidential, and any information relating thereto shall
be released by DSC only to those persons or authorities who DSC has reason to
believe are authorized to receive such information; or, as instructed by the
Fund.

7.2 DSC may, in performing this Agreement, require the Fund or the
Fund's distributor to provide it with an adequate number of copies of
prospectuses, reports or other documents required to be furnished to investors
or stockholders.

7.3 DSC may request or receive instructions from the Fund and may, at
the Fund's expense, consult with counsel for the Fund or its own counsel with
respect to any matter arising in connection with the performance of its duties
hereunder, and shall not be liable for any action taken or omitted by it in good
faith in accordance with such instructions or opinions of counsel.

7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.

7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.

7.6 Personnel and facilities of DSC used to perform services hereunder
may be used to perform similar services to other funds of the Delaware Group and
to others, and may be used to perform other services for the Fund, the other
funds of the Delaware Group and others.

-10-

<PAGE>

7.7 DSC shall provide its services as transfer agent hereunder in
accordance with Section 17 of the Securities Exchange Act of 1934, and the rules
and regulations thereunder. Further, the parties intend that the processes,
procedures, safeguard and controls employed should be those generally applied
and accepted for the type services provided hereunder by other institutions
providing the same or similar services, and, those which should provide
efficient, safe and economical services so as to promote promptness and accuracy
and to maintain the integrity of the Fund's records.

7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.

VIII. COMPENSATION

8.1 The Fund and DSC acknowledge that because DSC has common ownership
and close management ties with the Fund's investment advisor and the Fund's
distributor and serves the other funds of the Delaware Group (DSC having been
originally established to provide the services hereunder for the funds of the
Delaware Group), advantages and benefits to the Fund in the employment of DSC
hereunder can be available which may not generally be available to it from
others providing similar services.

8.2 The Fund and DSC further acknowledge that the compensation by the
Fund to DSC is intended to induce DSC to provide services under this Agreement
of a nature and quality which the Board of Directors of the Fund, including a
majority who are

-11-

<PAGE>

not parties to this Agreement or interested persons of the parties hereto, has
determined after due consideration to be necessary for the conduct of the
business of the Fund, in the best interests of the Fund, the Series and their
stockholders.

8.3 Compensation by the Fund to DSC hereunder shall be determined in
accordance with Schedule A hereto as it shall be amended from time to time as
provided for herein and which is incorporated herein as a part hereof.

8.4 Compensation as provided in Schedule A shall be reviewed and
approved in the manner set forth in Section 10.1 hereof by the Board of
Directors of the Fund at least annually and may be reviewed and approved more
frequently at the request of either party. The Board may request, and DSC shall
provide, such information as the Board may reasonably require to evaluate the
basis of and approve the compensation.

IX. STANDARD OF CARE

9.1 The Fund acknowledges that DSC shall not be liable for, and in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of the performance of its duties under this Agreement, agrees to
indemnify DSC against, any claim or deficiency arising from the performance of
DSC's duties hereunder, including DSC's costs, counsel fees and expenses
incurred in investigating or defending any such claim or any administrative or
other proceeding, and acknowledges that any risk of loss or damage arising from
the conduct of the Fund's affairs in accordance

-12-

<PAGE>

herewith or in accordance with Guidelines or instructions given hereunder, shall
be borne by the Fund.

X. CONTRACTUAL STATUS

10.1 This Agreement shall be executed and become effective on the date
first written above if approved by a vote of the Board of Directors of the Fund,
including an affirmative vote of a majority of the non-interested members of the
Board, cast in person at a meeting called for the purpose of voting on such
approval. It shall continue in effect for an indeterminate period, and is
subject to termination on sixty (60) days notice by either party unless earlier
terminated or amended by agreement among the parties. Compensation under this
Agreement shall require approval by a majority vote of the Board of Directors of
the Fund, including an affirmative vote of the majority of the non-interested
members of the Board cast in person at a meeting called for the purpose of
voting on such approval.

10.2 This Agreement may not be assigned without the approval of the
Fund.

-13-

<PAGE>

10.3 This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.

DELAWARE SERVICE COMPANY, INC.

Attest: /s/ Eric E. Miller By: /s/ David K. Downes
---------------------------- -------------------------
Name: Eric E. Miller Name: David K. Downes
Title: Assistant Secretary Title: Senior Vice President/
Chief Administrative
Officer/Chief
Financial Officer

DELAWARE GROUP INCOME FUNDS, INC.
for the DELCHESTER FUND series and
the STRATEGIC INCOME FUND series

Attest: /s/ Richelle S. Maestro By:/s/ Wayne A. Stork
---------------------------- -------------------------
Name: Richelle S. Maestro Name: Wayne A. Stork
Title: Assistant Secretary Title: Chairman/President/
Chief Executive Officer

-14-

<PAGE>

SCHEDULE A

DELAWARE GROUP INCOME FUNDS, INC.

FIRST AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT

COMPENSATION SCHEDULE

1. Delaware Service Company, Inc. ("DSC") will determine and
report to the Fund, at least annually, the compensation
for services to be provided to the Fund for DSC's
forthcoming fiscal year or period.

2. In determining such compensation, DSC will fix and report a
fee to be charged per account and/or transaction, as may be
applicable, for services provided. DSC will bill, and the Fund
will pay, such compensation monthly.

3. For the period commencing on September 30, 1996, the charge
will consist of two charges for each Series of the Fund, an
annual charge and a per transaction charge for each account on
DSC's records and each account on an automated retirement
processing system. These charges are as follows:

A. ANNUAL CHARGE

Daily Dividend Funds $11.00 Per Annum
Non-Daily Dividend Funds $ 5.50 Per Annum

Merrill Lynch - Omnibus Accounts:

Regular Accounts $11.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $14.00 Per Annum

Networked Accounts $3.00-$6.00 Per Annum

-15-

<PAGE>

SCHEDULE A

DELAWARE GROUP INCOME FUNDS, INC.

FIRST AMENDED AND RESTATED
SHAREHOLDERS SERVICES AGREEMENT

COMPENSATION SCHEDULE
PAGE 2

B. TRANSACTION CHARGE

Transaction Charge
----------- ------

1. Dividend Payment $ 0.25

2. New Account $ 6.00

3. Purchase:

a. Wire $ 8.00
b. Automated $ 1.50
c. Other $ 2.60

4. Transfer $ 8.00

5. Certificate Issuance $ 4.00

6. Liquidations

a. Wires $12.25
b. Drafts $ 0.75
c. Money Market Regular $ 4.50
d. Other Regular $ 4.50

7. Exchanges

a. Dividend Exchanges $ 3.00
b. Other $10.00

-16-

<PAGE>

PROPOSED AGREEMENT
SUBJECT TO BOARD APPROVAL

[Name of Investment Company]

[Names of Portfolio(s)]

SHAREHOLDERS SERVICES AGREEMENT

THIS AGREEMENT, made as of the ____ day of _________, 199_ by and
between [Name of Investment Company] ("Fund"), a Maryland corporation, for the
[Names of Portfolio(s)] series (together, the "Series"), and DELAWARE SERVICE
COMPANY, INC. ("DSC"), a Delaware corporation.

W I T N E S S E T H:

<PAGE>

WHEREAS, the FUND and DSC desire to have a written agreement concerning
the performance of the foregoing services and providing compensation therefor;
and

NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and intending legally to be bound, it is agreed:

I. APPOINTMENT AS AGENT

-2-

<PAGE>

II. DOCUMENTATION

(a) The Articles of Incorporation or other documents
evidencing the Fund's form of organization and any current amendments or
supplements thereto;

(b) The By-Laws of the Fund;

(d) A certified copy of a resolution of the Board of Directors
of the Fund appointing DSC as Shareholder Services Agent for the Series and
authorizing the execution of this Agreement;

(e) The forms of share certificates for the Series in the form
approved by the Board of Directors of the Fund;

(f) A copy of the Fund's currently effective Prospectuses and
Statement of Additional Information under the Securities Act of 1933, if
effective;

(g) Copies of all account application forms and other
documents relating to stockholder accounts in the Series;

(h) Copies of documents relating to Plans of the Fund for the
purchase, sale or repurchase of its shares, including

-3-

<PAGE>

periodic payment or withdrawal plans, reinvestment plans or retirement plans, if
any;

(k) Any amendment, revocation or other documents altering,
adding, qualifying or repealing any document or authority called for under this
Section 2.1.

2.2 The Fund and DSC may consult as to forms or documents that may be
required in performing services hereunder.

2.4 In the case of any recapitalization or other capital adjustment
requiring a change in the form of stock certificates or

-4-

<PAGE>

the books recording the same, the Fund shall deliver or make available to DSC:

(a) A certified copy of any document authorizing or effecting
such change;

(b) Written instructions from an authorized officer
implementing such change; and

2.5 The Fund warrants the following:

2.6 DSC warrants the following:

(a) DSC is and will be properly registered as a transfer agent
under the Securities Exchange Act of 1934 and is duly authorized to serve, and
may lawfully serve as such.

-5-

<PAGE>

III. STOCK CERTIFICATES

IV. TRANSFER AGENT

4.1 As Transfer Agent for the Fund, DSC shall issue, redeem and
transfer shares of the Series, and, in connection therewith but not in
limitation thereof, it shall:

-6-

<PAGE>

-7-

<PAGE>

V. DIVIDEND DISBURSING AGENT

(a) Calculate the total disbursement due and payable and the
disbursement to each stockholder as to shares owned, in accordance with the
Fund's authorization.

(b) Calculate the total disbursements for each stockholder, as
aforesaid, to be disbursed in cash; prepare and mail checks therefor.

(d) Prepare and mail or deliver such forms and notices
pertaining to disbursements as required by federal or state authority.

5.2 DSC shall not be required to make any disbursement upon the receipt
of DSC from the Fund, or from any federal or state

-8-

<PAGE>

agency or authority, written notice that such disbursement shall not be made.

VI. SHAREHOLDER SERVICING AGENT

(b) Receive, record and respond to communications of
stockholders and their agents.

(c) As instructed by the Fund, prepare and mail stockholder
account information, mail Series stockholder reports and Series prospectuses.

(d) Prepare and mail proxies and material for Fund stockholder
meetings, receive and process proxies from stockholders, and deliver such
proxies as directed by the Fund.

-9-

<PAGE>

VII. PERFORMANCE OF DUTIES

7.4 DSC shall maintain reasonable insurance coverage for errors and
omissions and reasonable bond coverage for fraud.

7.5 Upon notice thereof to the Fund, DSC may employ others to provide
services to DSC in its performance of this Agreement.

-10-

<PAGE>

7.8 The Fund and DSC may, from time to time, set forth in writing
Guidelines For Selective Procedures to be applicable to the services hereunder.

VIII. COMPENSATION

-11-

<PAGE>

IX. STANDARD OF CARE

-12-

<PAGE>

herewith or in accordance with Guidelines or instructions given hereunder, shall
be borne by the Fund.

X. CONTRACTUAL STATUS

10.2 This Agreement may not be assigned without the approval of the
Fund.

-13-

<PAGE>

10.3 This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.

DELAWARE SERVICE COMPANY, INC.

Attest: By:
------------------- --------------------------
Name: Name:
Title: Title:

[Name of Investment Company]
for the [Name(s) of Portfolio(s)]
series

Attest: By:
------------------- --------------------------
Name: Name:
Title: Title:

-14-

<PAGE>

SCHEDULE A

[Name of Investment Company]

SHAREHOLDERS SERVICES AGREEMENT

COMPENSATION SCHEDULE

3. For the period commencing on _________ __, 199_, the charge
will consist of two charges, an annual charge and a per
transaction charge for each account on DSC's records and each
account on an automated retirement processing system. These
charges are as follows:

A. ANNUAL CHARGE

Daily Dividend Funds $11.00 Per Annum
Non-Daily Dividend Funds $ 5.50 Per Annum

Merrill Lynch - Omnibus Accounts:

Regular Accounts $11.00 Per Annum
Accounts with a Contingent
Deferred Sales Charge $14.00 Per Annum

Networked Accounts $3.00-$6.00 Per Annum

<PAGE>

SCHEDULE A

[Name of Investment Company]

SHAREHOLDERS SERVICES AGREEMENT

COMPENSATION SCHEDULE
PAGE 2

B. TRANSACTION CHARGE

Transaction Charge

1. Dividend Payment $ 0.25

2. New Account $ 6.00

3. Purchase:

a. Wire $ 8.00
b. Automated $ 1.50
c. Other $ 2.60

4. Transfer $ 8.00

5. Certificate Issuance $ 4.00

6. Liquidations

a. Wires $12.25
b. Drafts $ 0.75
c. Money Market Regular $ 4.50
d. Other Regular $ 4.50

7. Exchanges

a. Dividend Exchanges $ 3.00
b. Other $10.00

<PAGE>

AMENDMENT NO. 1 TO
SCHEDULE A
TO DELAWARE GROUP OF FUNDS*
FUND ACCOUNTING AGREEMENT

Delaware Group Cash Reserve, Inc.

Delaware Group Decatur Fund, Inc.

Decatur Income Fund
Decatur Total Return Fund

Delaware Group Delaware Fund, Inc.

Delaware Fund
Devon Fund

Delaware Group Tax-Free Money Fund, Inc.

Delaware Group Tax-Free Fund, Inc.

Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund

Delaware Group Limited-Term Government Funds, Inc.

Limited-Term Government Fund
U.S. Government Money Fund

Delaware Group Trend Fund, Inc.

Delaware Group Income Funds, Inc.
Delchester Fund
Strategic Income Fund (New)

*Except as otherwise noted, all Portfolios included on this Schedule A
are Existing Portfolios for purposes of the compensation described on Schedule B
to that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of August 19, 1996 ("Agreement"). All
portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.

<PAGE>

DMC Tax-Free Income Trust - Pennsylvania

Delaware Group Value Fund, Inc.

Delaware Group Global & International Funds, Inc.

International Equity Fund
Global Bond Fund
Global Assets Fund
Emerging Markets Fund (New)

Delaware Group DelCap Fund, Inc.

Delaware Pooled Trust, Inc.

The Defensive Equity Portfolio
The Aggressive Growth Portfolio
The International Equity Portfolio
The Defensive Equity Small/Mid-Cap Portfolio (New)
The Defensive Equity Utility Portfolio (New)
The Labor Select International Equity Portfolio
The Real Estate Investment Trust Portfolio
The Fixed Income Portfolio
The Limited-Term Maturity Portfolio (New)
The Global Fixed Income Portfolio
The International Fixed Income Portfolio (New)
The High-Yield Bond Portfolio (New)

Delaware Group Premium Fund, Inc.

Equity/Income Series
High Yield Series
Capital Reserves Series
Money Market Series
Growth Series
Multiple Strategy Series
International Equity Series
Value Series
Emerging Growth Series
Global Bond Series (New)

Delaware Group Government Fund, Inc.

<PAGE>

Delaware Group Adviser Funds, Inc.

Enterprise Fund
U.S. Growth Fund
World Growth Fund
New Pacific Fund
Federal Bond Fund
Corporate Income Fund

Dated as of: September 30, 1996

DELAWARE SERVICE COMPANY, INC.

By:/s/ David K. Downes
---------------------------------------
David K. Downes
Senior Vice President/Chief
Administrative Officer/Chief
Financial Officer
DELAWARE GROUP CASH RESERVE, INC.
DELAWARE GROUP DECATUR FUND, INC.
DELAWARE GROUP DELAWARE FUND, INC.
DELAWARE GROUP TAX-FREE FUND, INC.
DELAWARE GROUP TAX-FREE MONEY FUND,INC.
DELAWARE GROUP LIMITED-TERM GOVERNMENT
FUNDS, INC.
DELAWARE GROUP TREND FUND, INC.
DELAWARE GROUP INCOME FUNDS, INC.
DMC TAX-FREE INCOME TRUST - PENNSYLVANIA
DELAWARE GROUP VALUE FUND, INC.
DELAWARE GROUP GLOBAL & INTERNATIONAL
FUNDS, INC.
DELAWARE GROUP DELCAP FUND, INC.
DELAWARE GROUP PREMIUM FUND, INC.
DELAWARE GROUP GOVERNMENT FUND, INC.
DELAWARE GROUP ADVISER FUNDS, INC.

By:/s/ Wayne A. Stork
----------------------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer

DELAWARE POOLED TRUST, INC.

By:/s/ Wayne A. Stork
----------------------------------------
Wayne A. Stork
Chairman

<PAGE>

SCHEDULE A

COMPANIES AND PORTFOLIOS COMPRISING THE DELAWARE GROUP*

[NAME OF INVESTMENT COMPANIES]

- --------
* Except as otherwise noted, all Portfolios included on this Schedule A are
Existing Portfolios for purposes of the compensation described on Schedule B to
that Fund Accounting Agreement between Delaware Service Company, Inc. and the
Delaware Group of Funds dated as of _________ __, 199_ ("Agreement"). All
Portfolios added to this Schedule A by amendment executed by a Company on behalf
of such Portfolio hereof shall be a New Portfolio for purposes of Schedule B to
the Agreement.

Dated as of: __________ __, 199_

<PAGE>

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses of Delaware Group Income Funds, Inc. for the
Delchester Fund A Class, B Class and C Class, and for the Institutional Class
and "Financial Statements" in the Statement of Additional Information of
Delaware Group Income Funds, Inc. and to the incorporation by reference in this
Post-Effective Amendment No. 55 to the Registration Statement (Form N-1A No.
2-37707) of Delaware Group Income Funds, Inc. of our report dated September 6,
1996, included in the 1996 Annual Report to Shareholders of the Delaware Group
Delchester High-Yield Bond Fund, Inc.

/s/ Ernst & Young LLP
-------------------------------
Ernst & Young LLP

Philadelphia, Pennsylvania
October 15, 1996

<PAGE>

EXHIBIT A

DISTRIBUTION PLAN

DELAWARE GROUP INCOME FUNDS, INC.

STRATEGIC INCOME FUND

STRATEGIC INCOME FUND A CLASS

The Fund is a corporation organized under the laws of the
State of Maryland, is authorized to issue different series and

<PAGE>

classes of securities and is an open-end management investment company
registered under the Act. Delaware Management Company, Inc. serves as the
Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Fund on behalf of the Series
("Distribution Agreement").

The Plan provides that:

(b) The Service Providers shall use the monies paid
respectively to them to reimburse themselves for the actual costs

<PAGE>

they have incurred in confirming that their customers have received the
Prospectus and Statement of Additional Information, if applicable, and as a fee
for (l) assisting such customers in maintaining proper records with the Fund,
(2) answering questions relating to their respective accounts, and (3) aiding in
maintaining the investment of their respective customers in the Class.

<PAGE>

approved at least annually by a vote of the Board of Directors of the Fund, and
of the non-interested Directors, cast in person at a meeting called for the
purpose of voting on such Plan.

6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Directors or by vote of a majority of the
outstanding voting securities of the Class.

(b) The Plan may not be amended to increase
materially the amount to be spent for distribution pursuant to paragraph l
thereof without approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by
the non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Directors shall be committed to the
discretion of such non-interested Directors.

This Plan shall take effect on the Commencement Date, as
previously defined.

September 30, 1996

<PAGE>

EXHIBIT B
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
STRATEGIC INCOME FUND
STRATEGIC INCOME FUND B CLASS

The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment

<PAGE>

company registered under the Act. Delaware Management Company, Inc. serves as
the Series' investment adviser and manager pursuant to an Investment Management
Agreement. Delaware Service Company, Inc. serves as the Series' shareholder
servicing, dividend disbursing and transfer agent. Delaware Distributors, L.P.
(the "Distributor") is the principal underwriter and national distributor for
the Series' shares, including shares of the Class, pursuant to the Distribution
Agreement between the Distributor and the Fund on behalf of the Series
("Distribution Agreement").

The Plan provides that:

<PAGE>

promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

<PAGE>

6. (a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors. 9. The definitions contained in Sections 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "interested person(s)" and "vote
of a majority of the outstanding voting securities," respectively, for the
purposes of this Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

September 30, 1996

<PAGE>

EXHIBIT C
DISTRIBUTION PLAN
DELAWARE GROUP INCOME FUNDS, INC.
STRATEGIC INCOME FUND
STRATEGIC INCOME FUND C CLASS

The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by Delaware
Group Income Funds, Inc. (the "Fund"), for the Strategic Income Fund series (the
"Series) on behalf of the Strategic Income Fund C Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.

The Fund is a corporation organized under the laws of the

<PAGE>

State of Maryland, is authorized to issue different series and classes
of securities and is an open-end management investment company registered under
the Act. Delaware Management Company, Inc. serves as the Series' investment
adviser and manager pursuant to an Investment Management Agreement. Delaware
Service Company, Inc. serves as the Series' shareholder servicing, dividend
disbursing and transfer agent. Delaware Distributors, L.P. (the "Distributor")
is the principal underwriter and national distributor for the Series' shares,
including shares of the Class, pursuant to the Distribution Agreement between
the Distributor and the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Series' average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.

2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor

<PAGE>

under the Plan may be used for, among other things, preparation and distribution
of advertisements, sales literature and prospectuses and reports used for sales
purposes, as well as compensation related to sales and marketing personnel, and
holding special promotions. In addition, such fees may be used to pay for
advancing the commission costs to dealers with respect to the sale of Class
shares.

(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

<PAGE>

to make an informed determination of the amount of the Fund's payments and
whether the Plan should be continued.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.

(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Directors shall be

<PAGE>

committed to the discretion of such non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and
2(a)(42) of the Act shall govern the meaning of "interested person(s)" and "vote
of a majority of the outstanding voting securities," respectively, for the
purposes of this Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

September 30, 1996

<PAGE>

EXHIBIT A

DISTRIBUTION PLAN

[Name of Investment Company]

[Name of Portfolio]

[Name of Portfolio] A CLASS

The following Distribution Plan (the "Plan") has been adopted
pursuant to Rule l2b-l under the Investment Company Act of l940 (the "Act") by
[Name of Investment Company] (the "Fund"), for the [Name of Portfolio]
series (the "Series") on behalf of the [Name of Portfolio] A Class ("Class"),
which Fund, Series and Class may do business under these or such other names as
the Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a majority of the outstanding voting securities of the Class, as
defined in the Act.

<PAGE>

The Fund is a corporation organized under the laws of the
State of Maryland, is authorized to issue different series and classes of
securities and is an open-end management investment company registered under the
Act. Delaware Management Company, Inc. serves as the Series' investment adviser
and manager pursuant to an Investment Management Agreement. Delaware Service
Company, Inc. serves as the Series' shareholder servicing, dividend disbursing
and transfer agent. Delaware Distributors, L.P. (the "Distributor") is the
principal underwriter and national distributor for the Series' shares, including
shares of the Class, pursuant to the Distribution Agreement between the
Distributor and the Fund on behalf of the Series ("Distribution Agreement").

The Plan provides that:

<PAGE>

6. (a) The Plan may be terminated at any time by vote of a
majority of the non-interested Directors or by vote of a majority of the
outstanding voting securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph l thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by
the non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and
nomination of the Fund's non-interested Directors shall be committed to the
discretion of such non-interested Directors.

This Plan shall take effect on the Commencement Date, as
previously defined.

_________ __, 199_

<PAGE>

EXHIBIT B

DISTRIBUTION PLAN

[Name of Investment Company]

[Name of Portfolio]

[Name of Portfolio] B CLASS

<PAGE>
The Fund is a corporation organized under the laws of the State of
Maryland, is authorized to issue different series and classes of securities and
is an open-end management investment company registered under the Act. Delaware
Management Company, Inc. serves as the Fund's investment adviser and manager
pursuant to an Investment Management Agreement. Delaware Service Company,
Inc. serves as the Fund's shareholder servicing, dividend disbursing and
transfer agent. Delaware Distributors, L.P. (the "Distributor") is the principal
underwriter and national distributor for the Fund's shares, including shares of
the Class, pursuant to the Distribution Agreement between the Distributor and
the Fund ("Distribution Agreement").

The Plan provides that:

1.(a) The Fund shall pay to the Distributor a monthly fee not to exceed
0.75% (3/4 of 1%) per annum of the Fund's average daily net assets represented
by shares of the Class as may be determined by the Fund's Board of Directors
from time to time.

(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Fund's average daily net assets represented by shares of the Class, as a service
fee pursuant to dealer or servicing agreements.

2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.

<PAGE>

(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

<PAGE>

6. (a) The Plan may be terminated at any time by vote of a majority
of the non-interested Directors or by vote of a majority of the outstanding
voting securities of the Class.

(b) The Plan may not be amended to increase materially the
amount to be spent for distribution pursuant to paragraph 1 thereof without
approval by the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

_________ __, 199_

<PAGE>

EXHIBIT C

DISTRIBUTION PLAN

[Name of Investment Company]

[Name of Portfolio]

[Name of Portfolio] C CLASS

The following Distribution Plan (the "Plan") has been adopted pursuant
to Rule 12b-1 under the Investment Company Act of 1940 (the "Act") by [Name of
Investment Company] (the "Fund"), for the [Name of Portfolio] series (the
"Series") on behalf of the [Name of Portfolio] C Class (the "Class"), which
Fund, Series and Class may do business under these or such other names as the
Board of Directors of the Fund may designate from time to time. The Plan has
been approved by a majority of the Board of Directors, including a majority of
the Directors who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan or in any agreements
related thereto ("non-interested Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Such approval by the Directors included
a determination that in the exercise of reasonable business judgment and in
light of their fiduciary duties, there is a reasonable likelihood that the Plan
will benefit the Series and shareholders of the Class. The Plan has been
approved by a vote of the holders of a majority of the outstanding voting
securities of the Class, as defined in the Act.

The Plan provides that:

(b) In addition to the amounts described in paragraph 1(a) above, the
Fund shall pay: (i) to the Distributor for payment to dealers or others or (ii)
directly to others, an amount not to exceed 0.25% (1/4 of 1%) per annum of the
Fund's average daily net assets represented by shares of the Class, as a service
fee pursuant to dealer or servicing agreements.

2.(a) The Distributor shall use the monies paid to it pursuant to
paragraph 1(a) above to assist in the distribution and promotion of shares of
the Class. Payments made to the Distributor under the Plan may be used for,
among other things, preparation and distribution of advertisements, sales
literature and prospectuses and reports used for sales purposes, as well as
compensation related to sales and marketing personnel, and holding special
promotions. In addition, such fees may be used to pay for advancing the
commission costs to dealers with respect to the sale of Class shares.

<PAGE>

(b) The monies to be paid pursuant to paragraph 1(b) above shall be
used to pay dealers or others for, among other things, furnishing personal
services and maintaining shareholder accounts, which services include confirming
that customers have received the Prospectus and Statement of Additional
Information, if applicable; assisting such customers in maintaining proper
records with the Fund; answering questions relating to their respective
accounts; and aiding in maintaining the investment of their respective customers
in the Class.

4. The officers of the Fund shall furnish to the Board of Directors of
the Fund, for their review, on a quarterly basis, a written report of the
amounts expended under the Plan and the purposes for which such expenditures
were made.

<PAGE>

6.(a) The Plan may be terminated at any time by vote of a majority of
the non-interested Directors or by vote of a majority of the outstanding voting
securities of the Class.

(b) The Plan may not be amended to increase materially the amount to
be spent for distribution pursuant to paragraph 1 thereof without approval by
the shareholders of the Class.

7. All material amendments to this Plan shall be approved by the
non-interested Directors in the manner described in paragraph 5 above.

8. So long as the Plan is in effect, the selection and nomination of
the Fund's non-interested Directors shall be committed to the discretion of such
non-interested Directors.

9. The definitions contained in Sections 2(a)(19) and 2(a)(42) of the
Act shall govern the meaning of "interested person(s)" and "vote of a majority
of the outstanding voting securities," respectively, for the purposes of this
Plan.

This Plan shall take effect on the Commencement Date, as previously
defined.

_________ __, 199_

<PAGE>

The Delaware Group of Funds

Multiple Class Plan Pursuant to Rule 18f-3

This Multiple Class Plan (the "Plan") has been adopted by a
majority of the Board of Directors of each of the investment companies listed on
Appendix A as may be amended from time to time (each individually a "Fund," and
collectively, the "Funds"), including a majority of the Directors who are not
interested persons of each Fund, pursuant to Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Act"). The Board of each Fund has
determined that the Plan, including the allocation of expenses, is in the best
interests of the Fund as a whole, each series of shares offered by such Fund
(individually and collectively the "Series") where the Fund offers its shares in
multiple series, and each class of shares offered by the Fund or Series, as
relevant. The Plan sets forth the provisions relating to the establishment of
multiple classes of shares for each Fund and, if relevant, its Series. To the
extent that a subject matter set forth in this Plan is covered by a Fund's
Articles of Incorporation or By-Laws, such Articles of Incorporation or By-Laws
will control in the event of any inconsistencies with descriptions contained in
this Plan.

The term "Portfolio," when used in this Plan in the context of
a Fund that offers only a single series of shares, shall be a reference to the
Fund, and when used in the context of a Fund that offers multiple series of
shares, shall be a reference to each series of such Fund.

CLASSES

1. Appendix A to this Plan describes the classes to be issued
by each Portfolio and identifies the names of such classes.

FRONT-END SALES CHARGE

2. Class A shares carry a front-end sales charge as described
in the Funds' relevant prospectuses; and Class B, Class C and Institutional
Class shares are sold without a front-end sales charge.

CONTINGENT DEFERRED SALES CHARGE

3. Class A shares are not subject to a contingent deferred
sales charge ("CDSC"), except in the following limited circumstances. On

<PAGE>

investments of $1 million or more for which a dealer's commission is paid by the
Fund's principal underwriter, a CDSC of 1.00% of the lesser of (i) the net asset
value at the time of redemption, or (ii) the original net asset value at the
time of purchase applies to redemptions of those investments within the
contingency period of 12 months from the month of purchase.

4. Class B shares redeemed within six years of their purchase
shall be assessed a CDSC at the following rate: (i) 4.00% if shares are redeemed
within two years of purchase; (ii) 3.00% if shares are redeemed during the third
or fourth year following purchase; (iii) 2.00% if shares are redeemed during the
fifth year following purchase; (iv) 1.00% if shares are redeemed during the
sixth year following purchase; and (vi) 0% thereafter.

5. Class C shares redeemed within twelve months of their
purchase shall be assessed a CDSC at the rate of 1.00% of the lesser of (i) the
net asset value at the time of redemption, or (ii) the original net asset value
at the time of purchase.

6. The CDSC for each class is waived in certain circumstances,
as described in the Funds' relevant prospectuses. Shares that are subject to a
CDSC age one month at the end of the month in which the shares were purchased,
regardless of the specific date during the month that the shares were purchased.

7. Institutional Class shares are not subject to a CDSC.

RULE 12b-1 PLANS

8. In accordance with the Rule 12b-1 Plan for the Class A
shares of each Portfolio, the Fund shall pay to Delaware Distributors, L.P. (the
"Distributor") a monthly fee not to exceed 0.30% per annum of such Portfolio's
average daily net assets represented by Class A shares as may be determined by
the Fund's Board of Directors from time to time. The monthly fee shall be
reduced by the aggregate sums paid by or on behalf of such Portfolio to persons
other than broker-dealers (the "Service Providers") pursuant to servicing
agreements.

9. In accordance with the Rule 12b-1 Plan for the Class B
shares of each Portfolio, the Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% per annum of such Portfolio's average daily net assets
represented by Class B shares as may be determined by the Fund's Board of
Directors from time to time. In addition to these amounts, the Fund shall pay
(i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class B shares, as a service fee pursuant to
dealer or servicing agreements.

-2-
<PAGE>

10. In accordance with the Rule 12b-1 Plan for the Class C
shares of each Portfolio, the Fund shall pay to the Distributor a monthly fee
not to exceed 0.75% per annum of such Portfolio's average daily net assets
represented by Class C shares as may be determined by the Fund's Board of
Directors from time to time. In addition to these amounts, the Fund shall pay
(i) to the Distributor for payment to dealers or others, or (ii) directly to
others, an amount not to exceed 0.25% per annum of such Portfolio's average
daily net assets represented by Class C shares, as a service fee pursuant to
dealer or servicing agreements.

11. A Rule 12b-1 Plan has not been adopted for the
Institutional Class shares of any Portfolio.

ALLOCATION OF EXPENSES

12. The Fund shall allocate to each class of shares of a
Portfolio any fees and expenses incurred by the Fund in connection with the
distribution or servicing of such class of shares under a Rule 12b-1 Plan, if
any, adopted for such class. In addition, the Fund reserves the right, subject
to approval by the Fund's Board of Directors, to allocate fees and expenses of
the following nature to a particular class of shares of a Portfolio (to the
extent that such fees and expenses actually vary among each class of shares or
vary by types of services provided to each class of shares of the Portfolio):

(i) transfer agency and other recordkeeping costs;

(ii) Securities and Exchange Commission and blue sky
registration or qualification fees;

(iii) printing and postage expenses related to printing and
distributing class specific materials, such as
shareholder reports, prospectuses and proxies to
current shareholders of a particular class or to
regulatory authorities with respect to such class of
shares;

(iv) audit or accounting fees or expenses relating
solely to such class;

(v) the expenses of administrative personnel and
services as required to support the shareholders
of such class;

(vi) litigation or other legal expenses relating solely
to such class of shares;

-3-
<PAGE>

(vii) Directors' fees and expenses incurred as a result
of issues relating solely to such class of shares;
and

(viii) other expenses subsequently identified and
determined to be properly allocated to such class
of shares.

13. Except for any expenses that are allocated to a particular
class as described in paragraph 11 above, all expenses incurred by a Portfolio
will be allocated to each class of shares of such Portfolio on the basis of the
net asset value of each such class in relation to the net asset value of the
Portfolio.

ALLOCATION OF INCOME AND GAINS

14. Income and realized and unrealized capital gains and
losses of a Portfolio will be allocated to each class of shares of such
Portfolio on the basis of the net asset value of each such class in relation to
the net asset value of the Portfolio.

CONVERSIONS

15. (a) Except for shares acquired through a reinvestment of
dividends or distributions, Class B shares held for eight years after purchase
are eligible for automatic conversion into Class A shares of the same Portfolio
in accordance with the terms described in the relevant prospectus. Class B
shares acquired through a reinvestment of dividends or distributions will
convert into Class A shares of the same Portfolio pro rata with the Class B
shares that were not acquired through the reinvestment of dividends and
distributions.

(b) The automatic conversion feature of Class B
shares shall be suspended at any time that the Board of Directors of the Fund
determines that there is not available a reasonably satisfactory opinion of
counsel to the effect that (i) the assessment of the higher fee under the Fund's
Rule 12b-1 Plan for Class B does not result in the Fund's dividends or
distributions constituting a preferential dividend under the Internal Revenue
Code of 1986, as amended, and (ii) the conversion of Class B shares into Class A
shares does not constitute a taxable event under federal income tax law. In
addition, the Board of Directors of a Fund may suspend the automatic conversion
feature by determining that any other condition to conversion set forth in the
relevant prospectus, as amended from time to time, is not satisfied.

(c) The Board of Directors of a Fund may also suspend the
automatic conversion of Class B shares if it determines that suspension is

-4-
<PAGE>

appropriate to comply with the requirements of the Act, or any rule or
regulation issued thereunder, relating to voting by Class B shareholders on the
Fund's Rule 12b-1 Plan for Class A or, in the alternative, the Board of
Directors may provide Class B shareholders with alternative conversion or
exchange rights.

16. Class A, Class C and Institutional Class shares do not
have a conversion feature.

EXCHANGES

17. Exchanges are permitted between Class A Shares and
Institutional Class Shares of a Portfolio or of any other Portfolio in the
Delaware Group funds; Class B shares of a Portfolio may only be exchanged for
Class B shares of any other Portfolio in the Delaware Group; Class C shares of a
Portfolio may only be exchanged for Class C shares of any other Portfolio in the
Delaware Group. All exchanges are subject to the eligibility and minimum
purchase requirements set forth in the Funds' prospectuses. Exchanges cannot be
made between open-end and closed-end funds within the Delaware Group.

18. Each class will vote separately with respect to the Rule
12b-1 Plan related to that class; provided, however, that Class B shares of a
Portfolio may vote on any proposal to materially increase the fees to be paid by
the Fund under the Rule 12b-1 Plan for the Class A shares of the same Portfolio.

19. On an ongoing basis, the Directors, pursuant to their
fiduciary responsibilities under the Act and otherwise, will monitor the
Portfolio for the existence of any material conflicts between the interests of
all the classes of shares offered by such Portfolio. The Directors, including a
majority of the Directors who are not interested persons of the Fund, shall take
such action as is reasonably necessary to eliminate any such conflict that may
develop. The Manager and the Distributor shall be responsible for alerting the
Board to any material conflicts that arise.

20. As described more fully in the Funds' relevant
prospectuses, broker-dealers that sell shares of a Portfolio will be compensated
differently depending on which class of shares the investor selects.

21. Each Fund reserves the right to increase, decrease or
waive the CDSC imposed on any existing or future class of shares of a Portfolio
within the ranges permissible under applicable rules and regulations of the
Securities and Exchange Commission (the "SEC") and the rules of the National
Association of Securities Dealers, Inc. (the "NASD"), as such rules may be
amended or adopted from time to time. Each Fund may in the future alter the
terms of the existing classes of such Portfolio or create new classes in
compliance with applicable rules and regulations of the SEC and the NASD.

-5-
<PAGE>

22. All material amendments to this Plan must be approved by a
majority of the Directors of each Fund affected by such amendments, including a
majority of the Directors who are not interested persons of the Fund.

Effective as of November 29, 1995

-6-

<PAGE>

APPENDIX A

List of Funds and Their Classes

1. Delaware Group Delaware Fund, Inc.

Delaware Fund

Delaware Fund A Class
Delaware Fund B Class
Delaware Fund C Class
Delaware Fund Institutional Class

Devon Fund

Devon Fund A Class
Devon Fund B Class
Devon Fund C Class
Devon Fund Institutional Class

2. Delaware Group Trend Fund, Inc.

Trend Fund A Class
Trend Fund B Class
Trend Fund C Class
Trend Fund Institutional Class

3. Delaware Group Value Fund, Inc.

Value Fund A Class
Value Fund B Class
Value Fund C Class
Value Fund Institutional Class

4. Delaware Group DelCap Fund, Inc.

DelCap Fund A Class
DelCap Fund B Class
DelCap Fund C Class
DelCap Fund Institutional Class

5. Delaware Group Decatur Fund, Inc.

Decatur Income Fund

Decatur Income Fund A Class
Decatur Income Fund B Class
Decatur Income Fund C Class

<PAGE>

Decatur Income Fund Institutional Class

Decatur Total Return Fund

Decatur Total Return Fund A Class
Decatur Total Return Fund B Class
Decatur Total Return Fund C Class
Decatur Total Return Fund Institutional Class

6. Delaware Group Global & International Funds, Inc.

International Equity Series

International Equity Fund A Class
International Equity Fund B Class
International Equity Fund C Class
International Equity Fund Institutional Class

Global Bond Series

Global Bond Fund A Class
Global Bond Fund B Class
Global Bond Fund C Class
Global Bond Fund Institutional Class

Global Assets Series

Global Assets Fund A Class
Global Assets Fund B Class
Global Assets Fund C Class
Global Assets Fund Institutional Class

-2-

<PAGE>

Emerging Markets Series (Added May 1, 1996)

Emerging Markets Fund A Class
Emerging Markets Fund B Class
Emerging Markets Fund C Class
Emerging Markets Fund Institutional Class

7. Delaware Group Income Funds, Inc.

Strategic Income Fund (Added September 30, 1996)

Strategic Income Fund A Class
Strategic Income Fund B Class
Strategic Income Fund C Class
Strategic Income Fund Institutional Class

-3-