<PAGE>
DELAWARE(SM)
INVESTMENTS
----------- Delaware American Government Bond Fund
Current Income
2000 annual report
(Current Income Artwork)
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary 6
Financial Statements
Statement of Net Assets 7
Statement of Operations 9
Statements of Changes in
Net Assets 10
Financial Highlights 11
Notes to Financial
Statements 13
Report of Independent
Auditors 16
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 15 years'
experience.
[ ] We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
[ ] We clearly articulate our investment policies and follow them consistently.
[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage
approximately $45 billion in assets as of June 30, 2000.
Comprehensive
[ ] We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C) Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
September 11, 2000
Recap of Events - The much anticipated and feared Year 2000 arrived with great
celebration and fanfare, but thankfully with no significant impact on global
computer systems and financial markets. However, the New Year ushered in vast
changes in the economic outlook. The Federal Reserve Board continued to raise
interest rates in the new year, resulting in a total of five rate hikes since
the start of the Fund's fiscal year on August 1, 1999. At the same time, two
forces combined to decrease the current supply and the issuance of new
government debt. The government announced that it will retire Treasury debt over
time and, in light of the U.S. budget surplus, will reduce the amount of debt
offered at future auctions. These trends helped invert the U.S. Treasury yield
curve significantly. For the first time since 1990, interest rates on
longer-term bonds, normally viewed as more volatile and riskier investments,
were lower than rates for shorter-term securities. The 30-year U.S. Treasury
bond yield decreased from 6.12% on July 31, 1999 to 5.78% on July 31, 2000.
However, two-year notes were at 6.28% on July 31, 2000 (Source: Bloomberg).
For most U.S. investors, the biggest story in 2000 was the volatile behavior and
decline of U.S. stock prices. Stocks plummeted in April, and though they
recaptured some of their losses over the next few months, the Dow Jones
Industrial Average is still off its January 14, 2000 peak and the Nasdaq
Composite has not climbed back to its March 10, 2000 high. Even after the
markets plunged in April, the Federal Reserve raised interest rates by 0.5% on
May 16, 2000. As of this writing, the federal funds target rate on overnight
loans between banks stands at 6.5%, its highest level since 1991. At the Federal
Reserve's June and August meetings, policy makers declined to raise rates
further, citing preliminary signs of slower economic growth. Federal Reserve
officials credit increasing worker productivity as the primary reason the
expanding economy has not accelerated the rate of inflation.
"AT THE FEDERAL RESERVE'S JUNE AND AUGUST MEETINGS, POLICY MAKERS DECLINED TO
RAISE RATES FURTHER, CITING PRELIMINARY SIGNS OF SLOWER ECONOMIC GROWTH."
Total Return
For Period Ended July 31, 2000 One Year
--------------------------------------------------------------------------------
Delaware American Government Bond Fund Class A +4.88%
--------------------------------------------------------------------------------
Lipper General U.S. Government Funds Average (183 funds) +4.97%
Lehman Brothers Government Bond Index +6.18%
U.S. Consumer Price Index +3.54%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of dividends and capital gains. Performance
information for all Fund classes can be found on page 6. The Lipper category
represents the average returns of all active U.S. government funds with similar
investment objectives tracked by Lipper (Source: Lipper). The Lehman Brothers
Government Bond Index is a composite of U.S. government bonds. The U.S. Consumer
Price Index is calculated by the U.S. Department of Labor and represents the
change in the price of goods and services for all urban consumers. You cannot
invest directly in an index. Past performance does not guarantee future results.
1
<PAGE>
Delaware American Government Bond Fund provided a total return of +4.88% (Class
A shares at net asset value with distributions reinvested) for the one-year
period ended July 31, 2000. This return was slightly lower than the +4.97% total
return of its peer group, the Lipper General U.S. Government Funds Average. Your
Fund also underperformed its benchmark, the Lehman Brothers Government Bond
Index, which returned +6.18% for the period. As of July 31, 2000, your Fund's
30-day current yield, measured by the Securities and Exchange Commission's (SEC)
guidelines, was +5.62% (for Class A shares).
Market Outlook - Economic signs now point to a slowing economy, which should
help curtail further interest rate hikes. Stock investments will probably fare
better than bonds if the Federal Reserve interest rate hikes manage to create a
healthy, non-inflationary U.S. economy with less robust growth. However, we
still believe bonds play a role in well-balanced portfolios. We believe that for
investors who seek both current income and preservation of principal, Delaware
American Government Bond Fund offers an attractive balance between the two.
On the pages that follow, Paul Grillo, Jr., your Fund's portfolio manager,
explains Delaware American Government Bond Fund's positioning during the
one-year period ended July 31, 2000 and provides an outlook for the first half
of the Fund's fiscal 2001.
We'd like to thank Delaware American Government Bond Fund's shareholders for
their continued confidence and commitment to Delaware Investments.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
------------------------------------ --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
"WE BELIEVE THAT FOR INVESTORS WHO SEEK BOTH CURRENT INCOME AND PRESERVATION OF
PRINCIPAL, DELAWARE AMERICAN GOVERNMENT BOND FUND OFFERS AN ATTRACTIVE BALANCE
BETWEEN THE TWO."
(Current Income Artwork)
2
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
---------------------------
Paul Grillo, Jr.
Senior Portfolio Manager
September 11, 2000
The Fund's Results
From August 1, 1999 until early 2000, a robust U.S. economy and a soaring stock
market heightened fears of inflation. Meanwhile, a recovering global economy
reduced demand for U.S. government debt, pushing U.S. bond prices lower and
yields significantly higher. In an effort to slow the unprecedented U.S.
economic expansion, the Federal Reserve raised the federal funds target rate --
an influential overnight bank lending rate -- three times. Although the federal
funds rate climbed to 5.75% by February 2, 2000, the higher rates seemingly had
little effect on the booming economy and U.S. stock market.
The second half of the fiscal year brought a dramatic turnaround for
fixed-income investors. Two more interest-rate hikes finally began to help slow
the economy and the stock market -- especially the once high-flying Internet
sector. In this environment, Delaware American Government Bond Fund delivered a
+4.88% return for the one-year period ended July 31, 2000 (Class A shares at net
asset value with distributions reinvested), compared to just a +0.14% return for
the first half of our fiscal year. Although the one-year return was below your
Fund's lifetime average of +6.73% (Class A shares at net asset value with
distributions reinvested), it was just slightly less than the return of its
peers, represented by the Lipper General U.S. Government Funds Average.
Portfolio Highlights
In managing your Fund, our goal is to provide a degree of stability for the
share price without giving up income potential. For that reason, we carefully
monitor the potential effects that changes in interest rates could have on both
income and share price. Your Fund invests primarily in securities issued or
guaranteed by the U.S. government, its agencies, instrumentalities or
government-sponsored enterprises. However, the Fund is also allowed to invest a
percentage of its assets in non-government securities, such as high-quality
corporate bonds and asset-backed securities, among others.
Through late 1999, we continued to increase our holdings in agency
mortgage-backed securities and non-government bonds because we anticipated a
limited Year 2000 impact. These securities continued to deliver comparable or
better income than Treasury securities through the first half of the Fund's
fiscal year. In fact, in September and October 1999, we increased the Fund's
holdings in high-quality corporate bonds to the maximum allowable 20% of total
assets. As investor fears about possible Y2K calamities eased in late 1999 and
early 2000, corporate bond prices began to rise and yields decreased.
"THE SECOND HALF OF THE FISCAL YEAR BROUGHT A DRAMATIC TURNAROUND FOR
FIXED-INCOME INVESTORS."
3
<PAGE>
Delaware American Government Bond Fund
Asset Mix
As of July 31, 2000
U.S. Government Agency Obligations 14.33%
Collateralized Mortgage Obligations 8.87%
Corporate Bonds 6.28%
Asset-Backed Securities 4.75%
Cash and Other Assets 1.99%
U.S. Treasury Obligations 32.56%
Government National Mortgage Association Obligations 14.91%
Agency Mortgage-Backed Securities 16.31%
Meanwhile, the climate for Treasury securities began to change dramatically.
The U.S. government enjoyed its first budget surplus in several decades and
fixed-income investors began preparing for a Federal debt buyback program.
In anticipation of a strong demand for longer-term U.S. Treasury securities,
we began to sell our holdings of corporate bonds and other non-government
securities to increase our position in U.S. Treasury Securities.
In the first quarter of 2000, yields on longer-term government bonds began to
fall as the Treasury scaled back its auctions in response to the federal budget
surplus. The Treasury also announced plans to repurchase $30 billion of its
outstanding, higher-yield bonds to cut financing costs. To benefit from these
events and capture greater income with Treasury securities, we gradually
increased the Fund's holdings of U.S. Treasuries. In June 2000, however, we
began to decrease our holdings in Treasuries as it appeared to us that Treasury
prices were likely to peak in the near future.
Although the Fund's performance for the year was competitive with its peers, as
measured by the Lipper General U.S. Government Funds Average, it underperformed
relative to its benchmark index, the Lehman Brothers Government Bond Index. The
Fund's performance was held back, in part, by our underweighting in 30-year
Treasuries, which performed well from February through the end of our fiscal
period.
As of July 31, 2000, your Fund's duration stood at 4.4 years. This positioning,
slightly lower than our natural mid-point, reflects our conservative outlook.
Duration is a measure of a bond's sensitivity to interest rates and indicates
the approximate percentage of change in a bond or bond fund's price given a 1%
change in interest rates. We consider a duration of 5.0 years to be the neutral
point for the Delaware American Government Bond Fund and that is where we would
tend to keep duration when we anticipate neither a significant rise nor a
significant decline in interest rates.
For the future, we may consider increasing the duration of our holdings to take
advantage of the slowing economy and reduced inflationary pressures.
(Current Income Artwork)
4
<PAGE>
Portfolio Characteristics
As of July 31, 2000
---------------------------------------
Average Effective Duration 4.4 years
---------------------------------------
Average Quality AAA
---------------------------------------
Current 30-Day SEC Yield* 5.62%
---------------------------------------
* For Class A shares measured according to Securities and Exchange Commission
guidelines. Current 30-day SEC yield as of 7/31/00 for Class B and Class C
shares was 5.20% The Institutional Class yield was 6.21%. Duration is a common
measure of a bond or bond fund's sensitivity to interest rates.
Outlook
Although the Federal Reserve has not yet announced such intentions, a growing
consensus among investors and analysts is that there will be no more interest
rate hikes this year. If the Federal Reserve's recent rate hikes successfully
induce a soft landing--slower economic growth without a recession--demand for
U.S. Treasuries should decline.
To maximize your Fund's income stream in a stable interest rate environment, we
may continue to reduce our holdings in U.S. Treasuries and focus on
mortgage-backed securities, including collateralized mortgage obligations. We
will apply quantitative analysis to help us identify mortgage-backed securities
that:
o Offer high income potential
o Are less likely to be prepaid
o Are not well-followed by other investment professionals
We think debt instruments with this combination of characteristics will be
effective investments for the portfolio, offering both income and relative
safety.
"...OUR GOAL IS TO PROVIDE A DEGREE OF STABILITY FOR THE SHARE PRICE WITHOUT
GIVING UP INCOME POTENTIAL."
5
<PAGE>
FUND BASICS
-----------
Fund Objective
The Fund seeks to provide high current income consistent with safety of
principal.
Total Fund Assets
$143.00 million
Number of Holdings
240
Fund Start Date
August 16, 1985
Your Fund Manager
Paul Grillo, Jr. joined Delaware Investments in 1993, after serving as a
mortgage strategist and trader at Dreyfus Corporation. He holds a bachelor's
degree from North Carolina State University and an M.B.A. from Pace University.
Mr. Grillo is a CFA charterholder.
Nasdaq Symbols
Class A DEGGX
Class B DEGBX
Class C DUGCX
DELAWARE AMERICAN GOVERNMENT BOND FUND PERFORMANCE
--------------------------------------------------
Growth of a $10,000 Investment
July 31, 1990 through July 31, 2000
Lehman Brothers Delaware American
Government Bond Index Government Bond Fund Class A
Jul-90 $10,000 9,523
Jul-91 $11,003 10,523
Jul-92 $12,681 11,889
Jul-93 $14,050 12,923
Jul-94 $14,032 12,470
Jul-95 $15,383 13,320
Jul-96 $16,177 13,865
Jul-97 $17,822 15,219
Jul-98 $19,310 16,183
Jul-99 $19,839 16,278
Jul-00 $21,064 17,072
Chart assumes $10,000 invested on July 31, 1990 and includes the effect of a
4.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on chart were as of the last day of each successive
month. You cannot invest directly in an index. Past performance does not
guarantee future results.
Average Annual Total Returns
Through July 31, 2000 Lifetime 10 Years Five Years One Year
--------------------------------------------------------------------------------
Class A (Est. 8/16/85)
Excluding Sales Charge +6.73% +6.03% +5.12% +4.88%
Including Sales Charge +6.38% +5.51% +4.11% -0.05%
--------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.40% +4.39% +4.15%
Including Sales Charge +4.40% +4.08% +0.22%
--------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +3.93% +4.15%
Including Sales Charge +3.93% +3.17%
--------------------------------------------------------------------------------
<PAGE>
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results excluding sales charges assume either that contingent deferred sales
charges did not apply or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
The average annual total returns for the lifetime, 10-year, five-year and
one-year periods ended July 31, 2000 for Delaware American Government Bond Fund
Institutional Class were +6.97%, +6.33%, +5.43% and +5.19%, respectively. The
Institutional Class was originally made available without sales charges only to
certain eligible institutional accounts on June 1, 1992. Institutional Class
performance prior to that date is based on Class A performance and was adjusted
to eliminate sales charges, but not the asset-based distribution charge of
Class A.
Nasdaq Symbol Institutional Class: DUGIX
6
<PAGE>
Statement of Net Assets
DELAWARE AMERICAN GOVERNMENT BOND FUND
--------------------------------------
Principal Market
July 31, 2000 Amount Value
--------------------------------------------------------------------------------
Agency Mortgage-Backed Securities - 16.31%
Federal Home Loan Mortgage Corporation
7.00% 1/1/29 ........................... $ 1,489,681 $ 1,439,870
8.00% 4/1/29 to 8/1/29 ................. 1,625,184 1,634,541
9.00% 12/1/05 .......................... 631,276 649,031
10.00% 1/1/19 .......................... 223,894 233,689
10.25% 4/1/08 .......................... 19,952 21,492
11.50% 9/1/00 to 3/1/16 ................ 903,290 1,005,721
Federal Home Loan Mortgage Corporation-Gold
12.00% 12/1/10 ......................... 11,029 12,429
Federal National Mortgage Association
7.00% 9/1/28 ........................... 27 26
7.50% 7/1/30 ........................... 8,000,001 7,897,501
8.00% 2/1/30 to 8/1/30 ................. 9,549,877 9,582,914
10.00% 7/1/20 to 5/1/22 ................ 741,913 779,193
10.75% 9/1/11 .......................... 50,014 54,563
11.25% 1/1/01 .......................... 8,234 8,751
-----------
Total Agency Mortgage-Backed Securities
(cost $23,493,915) ..................... 23,319,721
-----------
Asset-Backed Securities - 4.75%
Advanta Home Equity Loan Trust 1992-4 A1
7.20% 11/25/08 ......................... 718,740 705,803
Cook County, Illinois, Chicago Heights
School District, Taxable-Series B
13.15% 12/1/05 ......................... 1,055,000 1,327,939
Peco Energy 1999-A4 5.80% 3/1/07 .......... 5,000,000 4,760,850
-----------
Total Asset-Backed Securities
(cost $6,812,018) ...................... 6,794,592
-----------
Collateralized Mortgage Obligations - 8.87%
Collateralized Mortgage Securities
Corporation F-1 11.45% 11/1/15 ......... 119,139 119,386
Federal Home Loan Mortgage Corporation
Series 26F 9.50% 2/15/20 ............... 377,571 393,459
Federal National Mortgage Association
Series 35-2 12.00% 7/1/18 .............. 880,092 984,958
Series 88-15A 9.00% 6/25/18 ............ 14,992 15,401
Series C-2 12.00% 5/1/09 ............... 1,338,206 1,472,951
Series D-2 11.00% 4/1/09 ............... 1,129,870 1,219,597
Series F-2 11.50% 5/1/09 ............... 541,334 589,431
Series H-2 11.50% 5/1/09 ............... 1,039,518 1,132,010
Series J-1 7.00% 11/1/10 ............... 49,426 48,389
Series 1998-W3 6.50% 7/25/28 ........... 1,000,000 974,690
Investor GNMA Mortgage-Backed Securities
Trust Series 84-F5 10.875% 10/25/13 .... 962,805 991,109
Residential Mortgage Funding Security
Series 1999-S10 A1 6.25% 4/25/14 ....... 3,540,569 3,409,816
Travelers Mortgage Securities 1-Z2
12.00% 3/1/14 .......................... 1,249,832 1,341,291
-----------
Total Collateralized Mortgage Obligations
(cost $12,825,605) ..................... 12,692,488
-----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Security - 1.36%
First Union National Bank Commercial Mortgage
7.184% 9/15/08 ........................... $ 1,965,014 $ 1,950,513
-----------
Total Commercial Mortgage-Backed
Security (cost $1,953,961) ............... 1,950,513
-----------
Corporate Bonds - 6.28%
Commercial Credit 10.00% 5/15/09 ............ 1,500,000 1,701,335
Deutsche Telekom International Finance
8.00% 6/15/10 ............................ 2,600,000 2,619,126
Fidelity Investments 7.57% 6/15/29 .......... 2,000,000 1,936,112
Morgan Stanley Dean Witter
7.75% 6/15/05 ............................ 665,000 671,488
RBSG Capital 10.125% 3/1/04 ................. 1,908,000 2,052,853
-----------
Total Corporate Bonds (cost $9,320,468) ..... 8,980,914
-----------
Government National Mortgage Association Obligations - 14.91%
GNMA
6.50% 12/15/23 ........................... 385,589 369,924
8.00% 12/15/29 to 5/15/30 ................ 11,723,499 11,835,803
9.50% 9/15/17 to 3/15/23 ................. 1,090,714 1,136,787
10.00% 1/15/18 to 9/15/18 ................ 313,544 340,195
11.00% 12/15/09 to 9/15/15 ............... 1,005,816 1,125,862
11.50% 7/15/15 ........................... 58,439 65,379
12.00% 12/15/12 to 12/15/15 .............. 2,168,872 2,473,117
12.25% 3/15/14 ........................... 66,500 75,207
12.50% 5/15/10 to 1/15/16 ................ 381,328 434,594
GNMA GPM
11.50% 3/15/13 to 8/15/14 ................ 161,472 180,849
11.75% 8/15/13 ........................... 343,012 383,316
GNMA II
9.00% 10/20/01 to 10/20/05 ............... 325,734 337,972
10.00% 11/20/15 to 6/20/21 ............... 797,671 860,229
10.50% 3/20/16 to 7/20/21 ................ 335,803 370,014
11.00% 5/20/15 to 7/20/19 ................ 136,289 151,192
11.50% 10/20/14 to 10/20/15 .............. 119,774 133,797
12.00% 1/20/14 to 5/20/15 ................ 117,676 134,097
12.50% 10/20/13 to 7/20/15 ............... 601,389 684,682
GNMA II GPM
10.25% 3/20/18 to 5/20/19 ................ 28,296 30,276
10.75% 1/20/16 to 2/20/18 ................ 165,187 178,919
12.00% 11/20/13 .......................... 11,552 13,137
-----------
Total Government National Mortgage
Association Obligations
(cost $21,058,881) ....................... 21,315,348
-----------
7
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware American Government Bond Fund Amount Value
--------------------------------------------------------------------------------
U.S. Government Agency Obligations - 14.33%
FannieMae
6.00% 5/15/08 ........................... $ 4,500,000 $ 4,211,528
6.625% 9/15/09 .......................... 10,250,000 9,909,434
7.125% 2/15/05 .......................... 500,000 502,956
7.25% 5/15/30 ........................... 2,000,000 2,060,326
FreddieMac 7.375% 5/15/03 ................. 3,760,000 3,802,905
------------
Total U.S. Government Agency Obligations
(cost $20,522,128) ...................... 20,487,149
------------
U.S. Treasury Obligations - 32.56%
U.S. Treasury Bonds
8.875% 8/15/17 to 2/15/19 ............... 3,990,000 5,140,733
9.25% 2/15/16 ........................... 4,510,000 5,898,232
*10.375% 11/15/12 ........................ 20,445,000 25,128,184
10.75% 8/15/05 .......................... 8,730,000 10,394,156
------------
Total U.S. Treasury Obligations
(cost $48,375,016) ...................... 46,561,305
------------
Total Market Value of Securities - 99.37%
(cost $144,361,992) ..................... 142,102,030
Receivables and Other Assets Net
of Liabilities - 0.63% .................. 895,695
------------
Net Assets Applicable to 19,950,718
Shares Outstanding - 100.00% ............ $142,997,725
============
Net Asset Value - Delaware American
Government Bond Fund A Class
($92,100,060 / 12,849,593 shares) ....... $7.17
-----
Net Asset Value - Delaware American
Government Bond Fund B Class
($15,854,388 / 2,211,974 shares) ........ $7.17
-----
Net Asset Value - Delaware American
Government Bond Fund C Class
($2,434,377 / 339,638 shares) ........... $7.17
-----
Net Asset Value - Delaware American
Government Bond Fund Institutional Class
($32,608,900 / 4,549,513 shares) ........ $7.17
----------
GNMA - Government National Mortgage Association
GPM - Graduate Payment Mortgage
*Principal amount of $4,000,000 pledged as collateral for futures contracts.
<PAGE>
--------------------------------------------------------------------------------
Components of Net Assets at July 31, 2000:
Shares of beneficial interest (unlimited
authorization-no par) ..................... $189,500,993
Distributions in excess of net
investment income ......................... (50,682)
Accumulated net realized loss
on investments ............................ (44,340,319)
Net unrealized depreciation of investments ... (2,112,267)
------------
Total net assets ............................. $142,997,725
============
Net Asset Value and Offering Price per Share -
Delaware American Government Bond Fund
Net asset value A Class (A) .................. $7.17
Sales charge (4.75% of offering price
or 5.02% of amount invested
per share) (B) ............................ 0.36
-----
Offering price ............................... $7.53
-----
----------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes.
8
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations
Year Ended July 31, 2000 Delaware American Government Bond Fund
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest ............................................................. $12,224,414
-----------
Expenses:
Management fees ...................................................... $849,675
Distribution expense ................................................. 535,122
Dividend disbursing and transfer agent fees and expenses ............. 532,491
Accounting and administration fees ................................... 62,864
Registration fees .................................................... 44,888
Reports and statements to shareholders ............................... 44,000
Professional fees .................................................... 25,811
Custodian fees ....................................................... 13,656
Trustees' fees ....................................................... 8,818
Other expenses ....................................................... 27,727 2,145,052
--------
Less expenses paid indirectly ........................................ (3,562)
-----------
Total expenses ....................................................... 2,141,490
-----------
Net Investment Income ................................................ 10,082,924
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on:
Investments ....................................................... (5,313,012)
Futures contracts ................................................. 198,797
Options written ................................................... (253,213)
-----------
Net realized loss .................................................... (5,367,428)
Net change in unrealized appreciation/depreciation of investments .... 2,359,483
-----------
Net Realized and Unrealized Loss on Investments ...................... (3,007,945)
-----------
Net Increase in Net Assets Resulting from Operations ................. $ 7,074,979
===========
</TABLE>
See accompanying notes
9
<PAGE>
Statements of Changes in Net Assets
Delaware American Government Bond Fund
--------------------------------------------------------------------------------
Year Ended
7/31/00 7/31/99
Increase (Decrease) in Net Assets from Operations:
Net investment income .............................. $ 10,082,924 $ 11,076,360
Net realized loss on investments ................... (5,367,428) (4,062,003)
Net change in unrealized/depreciation of
investments ...................................... 2,359,483 (6,313,134)
--------------------------
Net increase in net assets resulting from
operations ....................................... 7,074,979 701,223
--------------------------
Distributions to Shareholders from:
Net investment income:
A Class ......................................... (6,776,565) (8,128,424)
B Class ......................................... (1,076,026) (1,119,015)
C Class ......................................... (201,433) (197,044)
Institutional Class ............................. (2,063,952) (1,648,132)
--------------------------
(10,117,976) (11,092,615)
--------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ......................................... 26,972,024 49,772,807
B Class ......................................... 6,590,192 17,213,764
C Class ......................................... 1,428,546 4,997,746
Institutional Class ............................. 13,945,121 29,439,801
Net asset value of shares issued upon reinvestment
of dividends from net investment income:
A Class ......................................... 4,172,582 4,966,969
B Class ......................................... 604,799 623,214
C Class ......................................... 180,173 169,744
Institutional Class ............................. 2,048,139 1,618,880
--------------------------
55,941,576 108,802,925
--------------------------
Cost of shares repurchased:
A Class ......................................... (50,956,656) (60,641,715)
B Class ......................................... (10,102,007) (11,031,865)
C Class ......................................... (3,167,519) (2,889,881)
Institutional Class ............................. (13,809,518) (16,269,146)
--------------------------
(78,035,700) (90,832,607)
--------------------------
Increase (decrease) in net assets derived from
capital share transactions ...................... (22,094,124) 17,970,318
--------------------------
Net Increase (Decrease) in Net Assets .............. (25,137,121) 7,578,926
Net Assets:
Beginning of period ................................ 168,134,846 160,555,920
--------------------------
End of period ...................................... $142,997,725 $168,134,846
==========================
See accompanying notes
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware American Government Bond Fund A Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
7/31/00 7/31/99 7/31/98 7/31/97 7/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $7.300 $7.720 $7.760 $7.590 $7.860
Income (loss) from investment operations:
Net investment income ...................................... 0.469 0.474 0.528 0.544 0.588
Net realized and unrealized gain (loss) on investments ..... (0.128) (0.420) (0.040) 0.170 (0.270)
--------------------------------------------------------
Total from investment operations ........................... 0.341 0.054 0.488 0.714 0.318
--------------------------------------------------------
Less dividends:
Dividends from net investment income ....................... (0.471) (0.474) (0.528) (0.544) (0.588)
--------------------------------------------------------
Total dividends ............................................ (0.471) (0.474) (0.528) (0.544) (0.588)
--------------------------------------------------------
Net asset value, end of period ............................... $7.170 $7.300 $7.720 $7.760 $7.590
========================================================
Total return(1) .............................................. 4.88% 0.59% 6.50% 9.77% 4.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ....................$92,100 $114,027 $127,001 $138,844 $164,156
Ratio of expenses to average net assets .................... 1.34% 1.25% 1.20% 1.16% 1.20%
Ratio of net investment income to average net assets ....... 6.55% 6.16% 6.80% 7.13% 7.55%
Portfolio turnover ......................................... 223% 142% 119% 63% 81%
Delaware American Government Bond Fund B Class
------------------------------------------------------------------------------------------------------------------------
Year Ended
7/31/00 7/31/99 7/31/98 7/31/97 7/31/96
Net asset value, beginning of period ......................... $7.300 $7.720 $7.760 $7.590 $7.860
Income (loss) from investment operations:
Net investment income ...................................... 0.419 0.421 0.474 0.490 0.533
Net realized and unrealized gain (loss) on investments ..... (0.128) (0.421) (0.040) 0.170 (0.270)
--------------------------------------------------------
Total from investment operations ........................... 0.291 -- 0.434 0.660 0.263
--------------------------------------------------------
Less dividends:
Dividends from net investment income ....................... (0.421) (0.420) (0.474) (0.490) (0.533)
--------------------------------------------------------
Total dividends ............................................ (0.421) (0.420) (0.474) (0.490) (0.533)
--------------------------------------------------------
Net asset value, end of period ............................... $7.170 $7.300 $7.720 $7.760 $7.590
========================================================
Total return(1) .............................................. 4.15% (0.11%) 5.76% 9.01% 3.36%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ....................$15,855 $19,147 $13,642 $10,695 $9,754
Ratio of expenses to average net assets .................... 2.04% 1.95% 1.90% 1.86% 1.90%
Ratio of net investment income to average net assets ....... 5.85% 5.46% 6.10% 6.43% 6.85%
Portfolio turnover ......................................... 223% 142% 119% 63% 81%
</TABLE>
--------------
(1) Total investment return is based on the change in net asset value of a share
for the period and assumes reinvestment of distributions at net asset value
and does not reflect the impact of a sales charge.
See accompanying notes
11
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware American Government Bond Fund C Class
-----------------------------------------------------------------------------------------------------------------------------------
Period
Year Ended 11/29/95(1) to
7/31/00 7/31/99 7/31/98 7/31/97 7/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ................................. $7.300 $7.720 $7.760 $7.590 $7.950
Income (loss) from investment operations:
Net investment income .............................................. 0.420 0.422 0.474 0.491 0.348
Net realized and unrealized gain (loss) on investments ............. (0.129) (0.422) (0.040) 0.170 (0.360)
--------------------------------------------------------
Total from investment operations ................................... 0.291 -- 0.434 0.661 (0.012)
--------------------------------------------------------
Less dividends:
Dividends from net investment income ............................... (0.421) (0.420) (0.474) (0.491) (0.348)
--------------------------------------------------------
Total dividends .................................................... (0.421) (0.420) (0.474) (0.491) (0.348)
--------------------------------------------------------
Net asset value, end of period ....................................... $7.170 $7.300 $7.720 $7.760 $7.590
========================================================
Total return(2) ...................................................... 4.15% (0.11%) 5.76% 9.01% (0.17%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............................ $2,434 $4,077 $2,047 $1,308 $1,029
Ratio of expenses to average net assets ............................ 2.04% 1.95% 1.90% 1.86% 1.90%
Ratio of net investment income to average net assets ............... 5.85% 5.46% 6.10% 6.43% 6.85%
Portfolio turnover ................................................. 223% 142% 119% 63% 81%
Delaware American Government Bond Fund Institutional Class
------------------------------------------------------------------------------------------------------------------------------------
Year Ended
7/31/00 7/31/99 7/31/98 7/31/97 7/31/96
Net asset value, beginning of period ................................. $7.300 $7.720 $7.760 $7.590 $7.860
Income (loss) from investment operations:
Net investment income .............................................. 0.492 0.495 0.550 0.567 0.611
Net realized and unrealized gain (loss) on investments ............. (0.130) (0.418) (0.040) 0.170 (0.270)
--------------------------------------------------------
Total from investment operations ................................... 0.362 0.077 0.510 0.737 0.341
--------------------------------------------------------
Less dividends:
Dividends from net investment income ............................... (0.492) (0.497) (0.550) (0.567) (0.611)
--------------------------------------------------------
Total dividends .................................................... (0.492) (0.497) (0.550) (0.567) (0.611)
--------------------------------------------------------
Net asset value, end of period ....................................... $7.170 $7.300 $7.720 $7.760 $7.590
========================================================
Total return(2) ...................................................... 5.19% 0.89% 6.80% 10.10% 4.39%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............................ $32,609 $30,883 $17,865 $12,053 $10,780
Ratio of expenses to average net assets ............................ 1.04% 0.95% 0.90% 0.86% 0.90%
Ratio of net investment income to average net assets ............... 6.85% 6.46% 7.10% 7.43% 7.85%
Portfolio turnover ................................................. 223% 142% 119% 63% 81%
</TABLE>
----------
(1) Date of public offering; ratios have been annualized and total return has
not been annualized.
(2) Total investment return is based on the change in net asset value of a share
for the period and assumes reinvestment of distributions at net asset value
and does not reflect the impact of a sales charge, if applicable.
See accompanying notes
12
<PAGE>
Notes to Financial Statements
July 31, 2000
--------------------------------------------------------------------------------
Delaware Group Government Fund (the "Company") is organized as a Delaware
business trust and offers one fund, the Delaware American Government Bond Fund
(the "Fund"). The Fund is a diversified open-end investment company under the
Investment Company Act of 1940, as amended. The fund offers four classes of
shares. The A Class carries a maximum front-end sales charge of 4.75%. The B
Class carries a back-end deferred sales charge. The C Class carries a level load
deferred sales charge and the Institutional Class has no sales charge.
The Fund seeks to provide high current income consistent with safety of
principal by investing primarily in debt obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Fund.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Fund's Board
of Trustees.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is 102% collateralized. However, in the event of default or
bankruptcy by the counterparty to the agreement, realization of the collateral
may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported
<PAGE>
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts are
accreted to interest income over the lives of the respective securities. The
Fund declares dividends daily from net investment income and pays such dividends
monthly and declares and pays distributions from net realized gain on
investments, if any, annually.
Certain expenses of the Fund are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $3,562 for the year ended July 31, 2000. In
addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. There were
no earnings credits for the year ended July 31, 2000. The expenses paid under
the above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.55% on the first $500
million of average daily net assets of the Fund, 0.50% on the next $500 million,
0.45% on the next $1.5 billion, and 0.425% on net assets over $2.5 billion. At
July 31, 2000, the Fund had a liability for investment management fees and other
expenses payable to DMC of $65,181.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate
of DMC, to provide dividend disbursing, transfer agent, accounting and
administrative services. The Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums. At July 31, 2000, the Fund had a liability for such fees
and other expenses payable to DSC of $37,481.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes.
During the year ended July 31, 2000, DDLP earned $12,874 for commissions on
sales of the Fund's A Class shares.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
13
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
3. Investments
For the year ended July 31, 2000, the Fund made purchases of $233,339,673 and
sales of $254,075,398 of investment securities other than U.S. government
securities and temporary cash investments.
At July 31, 2000, the aggregate cost of securities for federal income tax
purposes was $144,364,233.
At July 31, 2000, net unrealized depreciation for federal income tax purposes
aggregates $2,262,203 of which $815,805 related to unrealized appreciation of
securities and $3,078,008 related to unrealized depreciation of securities.
For federal income tax purposes, the Fund had accumulated capital losses of
$40,347,056 at July 31, 2000, which may be carried forward and applied against
future capital gains. The capital loss carry forwards expire as follows: 2001 -
$1,341,943, 2002 - $17,400,711, 2003 - $9,205,797, 2004 - $4,166,601, 2005 -
$2,371,574, 2007 - $528,833 and 2008 - $5,351,597.
4. Futures Contracts
The Fund invests in financial futures contracts for the purpose of hedging
its existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market interest rates. Upon entering into a futures
contract, the Fund deposits cash or pledges U.S. government securities to a
broker, equal to the minimum "initial margin" requirements of the exchange on
which the contract is traded. (In some cases, due to the form of the futures
agreement, initial margin is held in a segregated account with the Fund's
custodian, rather than directly with the broker). Subsequent payments are
received from the broker or paid to the broker (or added to the segregated
account) each day, based on the daily fluctuation in the market value of the
contract. These receipts or payments are known as "variation margin" and are
recorded daily by the fund as unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Fund records a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it is closed. Risk may arise
upon entering into futures contracts from potential imperfect correlation
between the futures contracts and the underlying securities and from the
possibility of an illiquid secondary market for these instruments.
<PAGE>
Financial futures contracts open at July 31, 2000 were as follows:
Contracts Notional Unrealized
to buy (sell) Cost Amount Expiration Date Gain (Loss)
------------ ----------- --------------- -----------
60 U.S. 10 Yr.
Treasury Note $5,946,983 September 2000 $(13,545)
(60) U.S. 10 Yr.
Treasury Note (5,945,625) September 2000 12,187
65 U.S. 20 Yr.
Treasury Note 6,300,469 September 2000 97,668
70 U.S. 5 Yr.
Treasury Note 6,931,584 September 2000 12,635
(195) U.S. 5 Yr.
Treasury Note (19,383,359) September 2000 38,750
----------
$147,695
----------
5. Options Written
During the year ended July 31, 2000, the Fund entered into options contracts in
accordance with its investment objectives. When the Fund writes an option, a
premium is received and a liability is recorded and adjusted on a daily basis to
reflect the current market value of the option written. Premiums received from
writing options that expire unexercised are treated by the Fund on the
expiration date as realized gains from investments. The difference between the
premium received and the amount paid on effecting a closing purchase
transaction, including brokerage commissions, is treated as a realized gain or
loss. If a call option is exercised, the premium is added to the proceeds from
the sale of the underlying security in determining whether the Fund has realized
a gain or loss. If a put option is exercised, the premium reduces the cost basis
of the securities purchased by the Fund. The Fund as writer of an option bears
the market risk of an unfavorable change in the price of the security underlying
the written option.
Transactions in options written during the year ended July 31, 2000, were as
follows:
Number of Premiums
Contracts Received
--------- --------
Options outstanding at July 31, 1999 -- --
Options written 754 $278,581
Options terminated in closing purchase
transactions (754) (278,581)
Options expired -- --
Options exercised -- --
----------------------
Options outstanding at July 31, 2000 -- --
----------------------
14
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
6. Capital Shares
Transactions in capital shares were as follows:
Year Ended
7/31/00 7/31/99
Shares sold:
A Class ........................................... 3,750,566 6,431,871
B Class ........................................... 915,748 2,215,523
C Class ........................................... 198,663 646,059
Institutional Class ............................... 1,958,465 3,835,531
Shares issued upon reinvestment of dividends
from net investment income:
A Class ........................................... 582,417 647,354
B Class ........................................... 84,439 81,329
C Class ........................................... 25,136 22,214
Institutional Class ............................... 285,927 212,315
---------- ----------
7,801,361 14,092,196
---------- ----------
Shares repurchased:
A Class ........................................... (7,105,459) (7,906,839)
B Class ........................................... (1,411,407) (1,440,634)
C Class ........................................... (442,780) (374,803)
Institutional Class ............................... (1,925,920) (2,130,765)
---------- ----------
(10,885,566) (11,853,041)
---------- ----------
Net increase (decrease) ............................. (3,084,205) 2,239,155
========== ==========
7. Credit and Market Risk
The Fund invests in fixed-income securities whose value is derived from an
underlying pool of mortgages or consumer loans. Investors receive principal and
interest payments as the underlying mortgages and consumer loans are paid back.
Prepayment of mortgages may shorten the stated maturity of the obligations and
can result in a loss of premium, if any has been paid.
The Fund may not invest more than 20% of net assets in high quality
non-government securities. Non-government securities include corporate bonds,
certificates of deposit, corporate commercial paper, asset-backed securities,
and mortgage-backed securities that are not directly guaranteed by the U.S.
government in any way.
<PAGE>
8. Lines of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $683,500,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. No
amount was outstanding at July 31, 2000, or at any time during the period.
9. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2001. Please
consult your tax advisor for proper treatment of this information.
For the fiscal year ended July 31, 2000, the Fund designates as long-term
capital gains and ordinary income distributions paid during the year as follows:
(A) (B)
Long-Term Ordinary (C)
Capital Gains Income Total (D)
Distributions Distributions Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------- ------------- ------------- ------------
-- 100% 100% --
(A) and (B) are based on a percentage of the Fund's total distributions. (D) is
based on a percentage of ordinary income of the Fund.
-------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
15
<PAGE>
Report of Independent Auditors
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group Government Fund - Delaware American Government Bond Fund
We have audited the accompanying statement of net assets of Delaware American
Government Bond Fund (the "Fund") as of July 31, 2000, and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of July 31, 2000, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware American Government Bond Fund at July 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods indicated therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
September 6, 2000
16
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
------------------------------------
More information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
BUILDING BLOCKS
OF A DIVERSIFIED PORTFOLIO
AGGRESSIVE GROWTH EQUITY FUNDS
GROWTH EQUITY FUNDS
MODERATE GROWTH
EQUITY FUNDS
TAXABLE
BOND
FUNDS
TAX-
EXEMPT
BOND
FUNDS
INTERNATIONAL
AND GLOBAL
FUNDS
ASSET
ALLOCATION
FUNDS
STABILITY OF PRINCIPAL
[ ] Growth of Capital
o Technology and Innovation
Fund
o Select Growth Fund
o Trend Fund
o Growth Opportunities Fund*
o Small Cap Value Fund
o U.S. Growth Fund
o Tax-Efficient Equity Fund
o Social Awareness Fund
[ ] Total Return
o Blue Chip Fund
o Devon Fund
o Growth and Income Fund
o Decatur Equity Income Fund
o REIT Fund
o Balanced Fund
[ ] International and Global
o Emerging Markets Fund
o New Pacific Fund
o Overseas Equity Fund
o International Equity Fund
o Global Equity Fund
o Global Bond Fund
[ ] Current Income
o Delchester Fund
o High-Yield
Opportunities Fund
o Strategic Income Fund
o Corporate Bond Fund
o Extended Duration
Bond Fund
o American Government
Bond Fund
o U.S. Government
Securities Fund
o Limited-Term
Government Fund
<PAGE>
[ ] Tax-Exempt Income
o National High-Yield
Municipal Bond Fund
o Tax-Free USA Fund
o Tax-Free Insured Fund
o Tax-Free USA
Intermediate Fund
o State Tax-Free Funds**
[ ] Stability of Principal
o Cash Reserve
o Tax-Free Money Fund
-- Asset Allocation
o Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Formerly known as DelCap Fund.
** Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
(C)Delaware Distributors, L.P.
<PAGE>
DELAWARE(SM)
INVESTMENT
---------------------
Philadelphia o London
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This annual report is for the information of Delaware American Government Bond
Fund shareholders, but it may be used with prospective investors when preceded
or accompanied by a current Prospectus for Delaware American Government Bond
Fund and the Delaware Investments Performance Update for the most recently
completed calendar quarter. The prospectus sets forth details about charges,
expenses, investment objectives and operating policies of the Fund. You should
read the prospectus carefully before you invest. The figures in this report
represent past results which are not a guarantee of future results. The return
and principal value of an investment in the Fund will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman National Distributor
Citadel Constructors, Inc. AFFILIATED OFFICERS Delaware Distributors, L.P.
King of Prussia, PA Philadelphia, PA
Charles E. Haldeman, Jr.
David K. Downes President and Chief Executive Officer Shareholder Servicing, Dividend
President and Chief Executive Officer Delaware Management Holdings, Inc. Disbursing and Transfer Agent
Delaware Investments Family of Funds Philadelphia, PA Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA
Richard J. Flannery
John H. Durham Executive Vice President 1818 Market Street
Private Investor and General Counsel Philadelphia, PA 19103-3682
Horsham, PA Delaware Investments Family of Funds
Philadelphia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates Bruce D. Barton
New York, NY President and Chief Executive Officer
Delaware Distributors, L.P.
Ann R. Leven Philadelphia, PA
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(3667) Printed in the USA
AR-023 [07/00] PPL 09/00 (J6278)
