DELAWARE GROUP FOUNDATION FUNDS, N-30D, 2000-11-27

DELAWARE GROUP FOUNDATION FUNDS
N-30D, 2000-11-27

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<PAGE>

DELAWARE
INVESTMENTS
-----------

DELAWARE FOUNDATION FUNDS
Delaware Growth Portfolio
Delaware Balanced Portfolio
Delaware Income Portfolio

Asset Allocation

2000 ANNUAL REPORT

<PAGE>

A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------

TABLE OF CONTENTS
-----------------

Letter to Shareholders 1

Portfolio Management
Review 3

Performance Summary 7

Financial Statements

Statements of Net Assets 10

Statements of Operations 13

Statements of Changes in
Net Assets 14

Financial Highlights 15

Notes to Financial
Statements 21

Report of Independent
Auditors 24

A Commitment To Our Investors

Experienced

o Our seasoned investment professionals average more than 11 years' experience.

o 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

o We follow strict investment policies and clear buy/sell guidelines.

o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.

Consistent

o We clearly articulate our investment policies and follow them consistently.

o Our commitment to consistency has earned us the confidence of discriminating
institutional and individual investors to manage more than $44 billion in
assets as of September 30, 2000.

Comprehensive

o 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

o 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

"EXTREME LEVELS OF
VOLATILITY BECAME
COMMONPLACE IN THE
MARKETS DURING THE
12 MONTHS ENDED
SEPTEMBER 30, 2000."

November 6, 2000

Recap of Events - Extreme levels of volatility became commonplace in the markets
during the 12 months ended September 30, 2000. Periods of decline were followed
by periods of recovery and vice versa. The resulting sideways movement of the
markets produced returns more in line with historical averages -- a development
we anticipated heading into the new millennium.

For the 12 months ended September 30, 2000, the large-company Standard & Poor's
500 Index returned 13.28%, less than half of its 27.81% return for the same
period a year earlier. Rising interest rates, inflation worries and, recently,
negative earnings warnings by prominent companies, topped the year's list of
obstacles for the U.S. stock market.

Most major U.S. stock market indexes advanced through December 1999 led by gains
in the technology sector. Technology stocks continued to propel the tech-heavy
Nasdaq Composite Index to a record close above 5,000 on March 10, 2000.
Subsequent interest rate increases in March and May rekindled fears about
inflation. At the same time, elevated stock prices created uneasiness that
prompted investors to begin selling expensive technology stocks in favor of
stocks of traditional "old economy" companies.

Technology stocks regained popularity over the summer, supported by positive
earnings reports, signs that the economy might achieve the "soft landing"
desired by the Fed and optimism that the Fed was finished raising rates. Despite
a more stable interest rate environment, technology stocks fell sharply in
September 2000 as a handful of companies, including Intel and Microsoft, posted
earnings warnings.

Total Return

For the Period Ended September 30, 2000 One Year
--------------------------------------------------------------------------------
Delaware Foundation Funds
Delaware Growth Portfolio Class A Shares +10.99%
Delaware Balanced Portfolio Class A Shares +9.49%
Delaware Income Portfolio Class A Shares +7.66%
--------------------------------------------------------------------------------
Unmanaged Equity Indexes
Standard & Poor's 500 Index +13.28%
MSCI EAFE Index +3.43%
Russell 2000 Index +23.23%
MSCI Emerging Markets Free Index +0.41%
--------------------------------------------------------------------------------
Unmanaged Fixed Income Indexes
Lehman Brothers Aggregate Bond Index +6.99%
Salomon Smith Barney High-Yield Cash Pay Index +1.23%
--------------------------------------------------------------------------------
All performance shown above is at net asset value and assumes reinvestment of
all distributions. Performance information for all Fund classes can be found on
pages 7 through 9. The S&P 500 Index is an index of 500, mostly
large-capitalization stocks. The Russell 2000 Index is a measure of those
Russell 2000 companies with lower price-to-book ratios and lower forecasted
growth values. The MSCI EAFE index is a measure of international stocks in
established markets. The MSCI Emerging Markets Free Index is a measure of
international stocks in emerging markets. The Lehman Brothers Aggregate Bond
Index is a measure of investment grade domestic bonds. The Salomon Smith Barney
High-Yield Cash Pay Index is a measure of lower-rated domestic corporate bonds.
All indexes are unmanaged. (Sources: Bloomberg and Lipper Inc.) You cannot
invest directly in an index. Past performance does not guarantee future results.

1
<PAGE>

"...WE THINK A
DIVERSIFIED APPROACH,
LIKE THAT OF DELAWARE
FOUNDATION FUNDS, CAN
PROVIDE AN EXCELLENT
WAY TO PARTICIPATE IN
THE MARKET'S REWARD
POTENTIAL WHILE
POTENTIALLY LOWERING
THE RISK OF EXTREME
LEVELS OF VOLATILITY."

(Illustrations Omitted)

The U.S. bond market experienced similar bouts of price volatility during the
period. Bond yields, which move in the opposite direction from bond prices, rose
in response to strength in the U.S. stock market. By spring, volatility in the
equity markets sparked renewed interest in bonds, and yields began to fall as
bond prices rebounded. Bond prices had generally begun to decline again at the
close of our reporting period as rising oil prices re-ignited inflation fears.

Global equity markets, which displayed remarkable strength in the first half of
our fiscal period, were flat to negative for the balance of the period. Japan's
stock market lost momentum during the summer and fall as slowing demand for
personal computers and computer chips hurt share prices. In Europe, continued
weakness in the euro, the continent's currency, combined with rising global oil
prices contributed to a less optimistic outlook for growth. For the 12-month
period ended September 30, 2000, the developed markets' Morgan Stanley Capital
International (MSCI) Europe, Australia and Far East (EAFE) Index returned
+3.43%. The Morgan Stanley Capital International (MSCI) Emerging Markets Free
Index returned +0.41%.

Delaware Foundation Funds' returns for the 12-month period ended
September 30, 2000, were consistent with our goal to deliver strong
risk-adjusted returns. The Portfolio Management Review beginning on page 3
covers each Portfolio's performance in more detail.

For the 12 months ended September 30, 2000:

Delaware Growth Portfolio returned +10.99% (Class A shares at net asset value
with distributions reinvested).

Delaware Balanced Portfolio returned +9.49% (Class A shares at net asset value
with distributions reinvested).

Delaware Income Portfolio returned +7.66% (Class A shares at net asset value
with distributions reinvested).

Market Outlook - One year ago, our outlook for the U.S. stock market was for a
return to normalcy -- that is, stock returns closer to historical averages of
about 10% annually. We believe the events of the past 12 months have set this
trend in motion. We also believe that market volatility will continue. With this
in mind, we think a diversified approach, like that of Delaware Foundation
Funds, can provide an excellent way to participate in the market's reward
potential while potentially lowering the risk of extreme levels of volatility.

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

<PAGE>

PORTFOLIO MANAGEMENT REVIEW
---------------------------

J. Paul Dokas
Senior Portfolio Manager

November 6, 2000

The Funds' Results

Each of the Delaware Foundation Funds is managed with specific investment goals,
time horizons and risk preferences in mind. Common to all three Delaware
Foundation Funds portfolios is the disciplined approach that guides our asset
allocation decisions. We begin by evaluating three key factors:

o the expected return of specific asset classes (i.e., stocks and bonds);

o the expected volatility or degree to which returns of each asset class have
varied over different time periods;

o the correlation of various asset classes -- that is, the degree to which two
asset classes move up and down together.

We use this information to determine how much to invest in each asset class.
Then, we select from Delaware Investments' mutual funds in allocating the
Portfolios' assets. Our goal is to secure attractive risk-adjusted returns. This
was a particularly challenging task for each of the Portfolios over the past 12
months.

Delaware Foundation Funds

Delaware Growth Portfolio
We began our fiscal year on October 1, 1999 with a significant allocation to
both U.S. and foreign equities. At the time, we believed that declining stock
prices presented an attractive opportunity to begin increasing those positions.
Of the nearly 83% of net assets then allocated to equities, roughly one-third
was in non-U.S. equity funds, including Delaware International Equity Fund and
Delaware Emerging Markets Fund.

Our positive outlook for international markets led us to hold Delaware Growth
Portfolio's foreign equity position steady through the winter and spring of
2000. We trimmed our exposure to U.S. stock funds in December 1999 and January
2000 as stock prices rebounded, thus lowering return expectations. We
simultaneously increased our exposure to bond funds as bonds generally began
offering more attractive returns.

In March and April 2000, we reversed this position as we believed that the sharp
decline in stock prices signaled another buying opportunity. We increased
Delaware Growth Portfolio's equity position to a high of 92% of net assets as of
April 30. We added to existing positions in Delaware Diversified Growth Fund,
which invests in large-cap growth stocks, and Delaware Diversified Value Fund,
which invests in large-cap value stocks.

3
<PAGE>

"AS U.S. STOCKS RALLIED
OVER THE SUMMER,
WE TOOK ADVANTAGE
OF RISING STOCK
PRICES TO LOCK IN
SHORT-TERM GAINS."

(Illustrations Omitted)

As U.S. stocks rallied over the summer, we took advantage of rising stock prices
to lock in short-term gains. This helped to compensate us for losses that
resulted from holdings in Delaware Research Fund and Delaware Delchester Fund,
which were affected by volatile technology stocks and poor performing high-yield
bonds during the period. We also reallocated a small percentage of assets back
to fixed-income funds and cash. Given the poor relative return potential for
high-yield bonds, we eliminated Delaware Delchester Fund from the portfolio.
From that point forward, Delaware American Government Bond Fund was our only
fixed-income holding.

In September, equity investors went on a selling spree, as many investors sought
to secure profits. This widespread selling pushed stock prices lower. Once
again, we used the price correction to add to our equity position. We added
Delaware Blue Chip Fund, which invests in stocks of large "blue chip" companies.
By the end of our fiscal period, Delaware Growth Portfolio had an approximate
90% position in equities, and a 10% position in bonds.

Delaware Balanced Portfolio
Delaware Balanced Portfolio began the fiscal year with a 61% allocation to
U.S. and foreign equities, a 38% position in bonds and 1% in cash. Similar to
the Delaware Growth Portfolio, we reallocated some of our equity holdings to
fixed-income funds in December 1999 and January 2000. At the time, rising stock
prices lowered our future return expectations for the U.S. equities market,
while rising bond yields made the fixed-income markets more appealing. By
January 31, 2000, our equity position reached a low of 54% of net assets and our
fixed-income allocation rose to 41%.

In February 2000, our concerns over the health of the high-yield bond market
prompted us to begin reducing the Portfolio's holdings of Delaware Delchester
Fund -- although not before the Portfolio incurred some losses. Weak investor
demand and rising default rates weighed down high-yield bond prices. As a result
of reducing our high-yield exposure, the Portfolio's fixed-income allocation
fell below 35%.

We began to shift the Portfolio back into equities in late March 2000, as
investors feared that stock valuations had gotten too rich and began selling. As
U.S. stock prices plummeted, we saw a buying opportunity and shifted assets out
of our fixed-income and international equity holdings to increase our positions
in Delaware Diversified Growth Fund and Delaware Diversified Value Fund.

4
<PAGE>

"...WE EXPECT
DIVERSIFICATION TO PLAY
AN INCREASINGLY
IMPORTANT ROLE IN
HELPING INVESTORS TO
SMOOTH OUT THE
UNEVENNESS OF THE
MARKETS' PERFORMANCE."

Delaware Balanced Portfolio's equity position peaked at 73% of net assets as of
April 30, 2000. We dropped it back to 65% in late May after we took some of our
profits and shifted money back into Delaware American Government Bond Fund and
Delaware International Equity Fund. We also increased our cash position again,
which, over the course of the summer, helped the portfolio weather market
volatility. As of September 30, 2000, our equity position remained at 67%, while
fixed income was 32%.

Delaware Income Portfolio
Delaware Income Portfolio is the most conservative of the three Delaware
Foundation Funds Portfolios. As such, our asset allocation policy targets a
40-60 split between equities and fixed-income securities. As we began our fiscal
period on October 1, 1999, the Portfolio held a position of almost 36% in U.S.
equities.

By January 31, 2000, U.S. stock funds accounted for only 26% of the Portfolio.
This reflected our more favorable view of the fixed-income markets. With
long-bonds yielding close to 7%, we reduced our equity holdings in favor of
adding to our fixed-income assets. The Portfolio's combined holdings in Delaware
American Government Bond Fund and Delaware Delchester Fund stood at 65% at the
end of January.

As in the Delaware Growth and Delaware Balanced Portfolios, we began to reduce
Delaware Income Portfolio's exposure to Delaware Delchester Fund in early spring
from 10% to roughly 5% of the Portfolio. We felt that prolonged weakness in the
high-yield bond market warranted a more cautious approach. As we cut our
holdings in Delaware Delchester Fund, we also sought to cut our losses up to
that point.

In April 2000, lower U.S. stock prices contributed to our higher long-term
return expectations for domestic equities. As a result, we increased our
exposure to U.S. equities, reaching a high of 46% of the Portfolio as of April
30, 2000. We trimmed our holdings to 37% in May as we moved assets back into
international equities and fixed-income funds. As of September 30, Delaware
Income Portfolio held approximately 44% in equity funds, 53% in fixed-income
funds and 3% in cash.

5
<PAGE>

Outlook

As we write this report, concerns seem to be running high about the risk of
inflation from rising oil and natural gas prices. We believe that in the
short-term, higher energy prices may, at the very most, restrain growth in the
U.S. economy. We do not feel that increased energy prices would create enough
inflationary pressure to lead the U.S. into a recession.

Our outlook for the securities markets is for more of the same. We expect stock
returns to remain favorable, but not spectacular. We expect continued market
volatility. And, finally, we expect diversification to play an increasingly
important role in helping investors to smooth out the unevenness of the markets'
performance. Delaware Foundation Funds remain committed to building and
preserving investors' assets, and we will continue to seek returns that are
consistent with each of the Portfolios' risk objectives.

Portfolio Allocations
September 30, 2000
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Growth Balanced Income
Fund Type/Style Portfolio Portfolio Portfolio
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Delaware Diversified Value Fund Large-Cap Value Stocks 22.9% 19.0% 13.6%
---------------------------------------------------------------------------------------------------------
Delaware Research Fund Multi-Cap Growth
& Value Stocks 9.2% 4.7% 3.0%
---------------------------------------------------------------------------------------------------------
Delaware Diversified Growth
Fund Large-Cap Growth Stocks 22.4% 17.9% 13.2%
---------------------------------------------------------------------------------------------------------
Delaware Small Cap Value Fund Small-Cap Value Stocks 4.9% 4.2% 1.6%
---------------------------------------------------------------------------------------------------------
Delaware REIT Fund Real Estate Stocks 2.4%
---------------------------------------------------------------------------------------------------------
Delaware International
Equity Fund Non-U.S. Stocks 14.8% 9.7% 5.0%
---------------------------------------------------------------------------------------------------------
Delaware Emerging Markets Fund Developing Countries Stocks 3.6% 2.7%
---------------------------------------------------------------------------------------------------------
Delaware Select Growth Fund Multi-Cap Growth Stocks 9.5% 9.1% 5.6%
---------------------------------------------------------------------------------------------------------
Delaware American
Government Bond Fund Mortgages & Treasuries 9.8% 31.6% 47.2%
---------------------------------------------------------------------------------------------------------
Delaware Blue Chip Fund Multi-Cap Core Stocks 2.7%
---------------------------------------------------------------------------------------------------------
Delaware Delchester Fund High-Yield Corporate Bonds 5.5%
---------------------------------------------------------------------------------------------------------
Cash 0.2% 1.1% 2.9%
---------------------------------------------------------------------------------------------------------
</TABLE>

All portfolio holdings are in Institutional Class shares of each Fund.

<PAGE>

FUND BASICS
-----------

Fund Objective
The Fund seeks long-term capital growth.

Total Fund Assets
As of September 30, 2000
$15.82 million

Number of Holdings
9

Fund Start Date
December 31, 1997

Your Fund Manager
J. Paul Dokas joined Delaware
Investments in 1997. He was
previously director of Trust
Investment Management at Bell
Atlantic Corporation. He earned a
bachelor's degree at Loyola College
in Baltimore and an MBA at the
University of Maryland. He is also
a CFA charterholder.

Nasdaq Symbols
Class A DFGAX
Class B N/A
Class C N/A

DELAWARE FOUNDATION FUNDS
-------------------------
DELAWARE GROWTH PORTFOLIO PERFORMANCE
-------------------------------------

Performance of a $10,000 Investment
December 31, 1997 through September 30, 2000

S&P 500 Index
Delaware Growth Portfolio Class A Shares

S&P 500 Delaware Growth
Index Portfolio Class A

12/31/97 $10,000 $9,424
3/31/98 $11,395 $10,399
9/30/98 $10,600 $9,058
3/31/99 $13,500 $10,493
9/30/99 $13,548 $10,627
3/31/00 $15,921 $12,127
9/30/00 $15,348 $11,795

Chart assumes $10,000 invested on December 31, 1997 and includes the effect of a
5.75% maximum front-end sales charge and the reinvestment of all distributions.
Performance of other classes of the Portfolio will vary due to differing charges
and expenses. Returns plotted on the chart were as of last day of each
successive month. Past performance does not guarantee future results.

Average Annual Total Returns
Through September 30, 2000 Lifetime One Year
--------------------------------------------------------------------------
Class A Shares (Est. 12/31/97)
Excluding Sales Charge +8.50% +10.99%
Including Sales Charge +6.19% +4.59%
--------------------------------------------------------------------------
Class B Shares (Est. 12/31/97)
Excluding Sales Charge +7.75% +10.14%
Including Sales Charge +6.78% +5.14%
--------------------------------------------------------------------------
Class C Shares (Est. 12/31/97)
Excluding Sales Charge +7.79% +10.13%
Including Sales Charge +7.79% +9.13%
--------------------------------------------------------------------------

Returns reflect the reinvestment of distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Class B and C
share results, excluding sales charge, assumes either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.

<PAGE>

Class A shares have a 5.75% 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 5% 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 lifetime and one-year periods ended
September 30, 2000 for Delaware Growth Portfolio's Institutional Class shares
were +8.73%, and +11.13%, respectively. The Institutional Class (established
December 31, 1997) is available without sales charges only to certain eligible
institutional accounts.

An expense limitation was in effect for all classes of Delaware Growth Portfolio
during the periods shown. Performance would have been lower if the expense
limitation was not in effect.

7
<PAGE>

FUND BASICS
-----------

Fund Objective
The Fund seeks capital appreciation
with current income as a secondary
objective.

Total Fund Assets

As of September 30, 2000
$30.73 million

Number of Holdings
8

Fund Start Date
December 31, 1997

Your Fund Manager
J. Paul Dokas

Nasdaq Symbols
Class A DFBAX
Class B N/A
Class C N/A

DELAWARE FOUNDATION FUNDS
-------------------------
DELAWARE BALANCED PORTFOLIO PERFORMANCE
---------------------------------------
Performance of a $10,000 Investment
December 31, 1997 through September 30, 2000

Lehman Delaware
S&P 500 Brothers Aggregate Balanced Portfolio
Index Bond Index Class A Shares
12/31/97 $10,000 $10,000 $9,424
3/31/98 $11,395 $10,115 $10,144
9/30/98 $10,600 $10,832 $9,077
3/31/99 $13,500 $10,813 $10,193
9/30/99 $13,548 $10,791 $10,214
3/31/00 $15,921 $11,016 $11,243
9/30/00 $15,348 $11,545 $11,184

Average Annual Total Returns
Through September 30, 2000 Lifetime One Year
--------------------------------------------------------------------------------
Class A Shares (Est. 12/31/97)
Excluding Sales Charge +6.42% +9.49%
Including Sales Charge +4.15% +3.24%
--------------------------------------------------------------------------------
Class B Shares (Est. 12/31/97)
Excluding Sales Charge +5.73% +8.75%
Including Sales Charge +4.73% +3.75%
--------------------------------------------------------------------------------
Class C Shares (Est. 12/31/97)
Excluding Sales Charge +5.81% +8.74%
Including Sales Charge +5.81% +7.74%
--------------------------------------------------------------------------------

<PAGE>

Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.

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 lifetime and one-year periods ended
September 30, 2000 for Delaware Balanced Portfolio's Institutional Class shares
were +6.70%, and +9.85%, respectively. The Institutional Class (established
December 31, 1997) is available without sales charges only to certain eligible
institutional accounts.

An expense limitation was in effect for all classes of Delaware Balanced
Portfolio during the periods shown. Performance would have been lower if the
expense limitation was not in effect.

<PAGE>

FUND BASICS
-----------

Fund Objective
The Fund seeks a combination of
current income and preservation of
capital with capital appreciation.

Total Fund Assets
As of September 30, 2000
$17.72 million

Number of Holdings
9

Fund Start Date
December 31, 1997

Your Fund Manager
J. Paul Dokas

Nasdaq Symbols
Class A DFIAX
Class B N/A
Class C N/A

DELAWARE FOUNDATION FUNDS
-------------------------
DELAWARE INCOME PORTFOLIO PERFORMANCE
-------------------------------------

Performance of a $10,000 Investment
December 31, 1997 through September 30, 2000

Lehman Delaware
Brothers Aggregate Income Portfolio
Bond Index Class A
12/31/97 $10,000 $9,424
3/31/98 $10,115 $9,978
9/30/98 $10,832 $9,309
3/31/99 $10,813 $10,028
9/30/99 $10,791 $9,946
3/31/00 $11,016 $10,560
9/30/00 $11,545 $10,708

Average Annual Total Returns
Through September 30, 2000 Lifetime One Year
--------------------------------------------------------------------------------
Class A Shares (Est. 12/31/97)
Excluding Sales Charge +4.76% +7.66%
Including Sales Charge +2.52% +1.48%
--------------------------------------------------------------------------------
Class B Shares (Est. 12/31/97)
Excluding Sales Charge +4.15% +6.99%
Including Sales Charge +3.13% +1.99%
--------------------------------------------------------------------------------
Class C Shares (Est. 12/31/97)
Excluding Sales Charge +4.07% +6.88%
Including Sales Charge +4.07% +5.88%
--------------------------------------------------------------------------------

<PAGE>

Class A shares have a 5.75% maximum front-end sales charge and a 12b-1 fee.

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 lifetime and one-year periods ended
September 30, 2000 for Delaware Income Portfolio's Institutional Class shares
were +5.00%, and +7.90%, respectively. The Institutional Class (established
December 31, 1997) is available without sales charges only to certain eligible
institutional accounts.

An expense limitation was in effect for all classes of Delaware Income Portfolio
during the periods shown. Performance would have been lower if the expense
limitation was not in effect.

9
<PAGE>

Statement of Net Assets

DELAWARE GROWTH PORTFOLIO
-------------------------

Number of Market
September 30, 2000 Shares Value
-------------------------------------------------------------------------------
Investment Companies - 99.77%
Equity Funds - 89.99%
+ Delaware Group Equity Funds II -
Delaware Blue Chip Fund .......................... 32,871 $ 433,565
Delaware Group Equity Funds II -
Delaware Diversified Value Fund .................. 346,410 3,619,986
Delaware Group Equity Funds III -
Delaware Research Fund ........................... 187,526 1,455,205
Delaware Group Equity Funds IV -
Delaware Diversified Growth Fund ................. 286,589 3,539,379
Delaware Group Equity Funds V -
Delaware Small Cap Value Fund .................... 28,674 774,478
Delaware Group Global & International Funds -
Delaware Emerging Markets Fund ................... 75,996 574,528
Delaware Group Global & International Funds -
Delaware International Equity Fund ............... 151,268 2,340,119
Voyageur Mutual Funds III -
Delaware Select Growth Fund ...................... 35,662 1,499,235
-----------
14,236,495
-----------
Fixed Income Funds - 9.78%
Delaware Group Government Funds -
Delaware American Government Bond Fund ........... 213,353 1,546,813
-----------
1,546,813
-----------
Total Investment Companies
(cost $14,694,721) ............................... 15,783,308
-----------

Principal
Amount
Repurchase Agreements - 0.37%
With Chase Manhattan 6.40% 10/2/00
(dated 9/29/00, collateralized by $23,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $22,247) ............................ $21,700 21,700
With J.P. Morgan Securities 6.40% 10/2/00
(dated 9/29/00, collateralized by $9,000
U.S.Treasury Notes 6.625% due 4/30/02,
market value $9,186) ............................. 9,000 9,000
With PaineWebber 6.50% 10/2/00
(dated 9/29/00, collateralized by $100
U.S. Treasury Notes 5.75% due 10/31/00,
market value $105 and $4,000 U.S.Treasury
Notes 4.625% due 12/31/00, market value
$4,527 and $4,000 U.S. Treasury Notes 6.25%
due 1/31/02, market value $4,547)................. 9,000 9,000
With Prudential Securities 6.50% 10/2/00
(dated 9/29/00, collateralized by $16,000
U.S. Treasury Notes 12.375% due 5/15/04,
market value $19,737) ............................ 19,300 19,300
-----------
Total Repurchase Agreements
(cost $59,000) ................................... 59,000
-----------

<PAGE>

-------------------------------------------------------------------------------
Total Market Value of Securities - 100.14%
(cost $14,753,721) ..................................... $15,842,308
Liabilities Net of Receivables and
Other Assets - (0.14%) ................................. (22,287)
-----------
Net Assets Applicable to 1,588,446 Shares
Outstanding - 100.00% .................................. $15,820,021
-----------
Net Asset Value - Delaware Growth Portfolio
A Class ($12,341,874 / 1,238,313 shares) ............... $9.97
------
Net Asset Value - Delaware Growth Portfolio
B Class ($2,295,305 / 231,241 shares) .................. $9.93
------
Net Asset Value - Delaware Growth Portfolio
C Class ($961,698 / 96,740 shares) ..................... $9.94
------
Net Asset Value - Delaware Growth Portfolio
Institutional Class
($221,144 / 22,152 shares) ............................. $9.98
------
----------------------
+ Non-income producing fund for the period ended September 30, 2000.

Components of Net Assets at September 30, 2000:
Shares of beneficial interest (unlimited
authorization-no par) .................................. $14,771,443
Undistributed net investment income ....................... 45,268
Accumulated net realized loss on investments .............. (85,277)
Net unrealized appreciation of investments ................ 1,088,587
-----------
Total net assets .......................................... $15,820,021
===========
Net Asset Value and Offering Price per Share -
Delaware Growth Portfolio
Net asset value A Class (A) ............................... $9.97
Sales charge (5.75% of offering price or 6.12%
of the amount invested per share)(B) ................... 0.61
------
Offering price ............................................ $10.58
======
----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.

See accompanying notes

<PAGE>

Statement of Net Assets (continued)

DELAWARE BALANCED PORTFOLIO
---------------------------

Number of Market
September 30, 2000 Shares Value
--------------------------------------------------------------------------------
Investment Companies - 98.91%
Equity Funds - 67.33%
Delaware Group Equity Funds II -
Delaware Diversified Value Fund ................... 559,803 $ 5,849,937
Delaware Group Equity Funds III -
Delaware Research Fund ............................ 187,443 1,454,554
Delaware Group Equity Funds IV -
Delaware Diversified Growth Fund .................. 444,663 5,491,584
Delaware Group Equity Funds V -
Delaware Small Cap Value Fund ..................... 48,003 1,296,552
Delaware Group Global & International Funds -
Delaware Emerging Markets Fund .................... 108,772 822,319
Delaware Group Global & International Funds -
Delaware International Equity Fund ................ 192,543 2,978,635
Voyageur Mutual Funds III -
Delaware Select Growth Fund ....................... 66,515 2,796,289
-----------
20,689,870
-----------
Fixed Income Funds - 31.58%
Delaware Group Government Fund -
Delaware American Government Bond Fund ............ 1,338,638 9,705,124
-----------
9,705,124
-----------
Total Investment Companies
(cost $29,084,919) ................................ 30,394,994
-----------

Principal
Amount
Repurchase Agreements - 1.07%
With Chase Manhattan 6.40% 10/2/00
(dated 9/29/00, collateralized by $128,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $124,431) ............................ $121,900 121,900
With J.P. Morgan Securities 6.40% 10/2/00
(dated 9/29/00, collateralized by $50,000
U.S. Treasury Notes 6.625% due 4/30/02,
market value $51,377) ............................. 50,000 50,000
With PaineWebber 6.50% 10/2/00
(dated 9/29/00, collateralized by $1,000
U.S. Treasury Notes 5.75% due 10/31/00,
market value $589 and $25,000 U.S. Treasury
Notes 4.625% due 12/31/00, market value
$25,320 and $25,000 U.S. Treasury Notes
6.25% due 1/31/02, market value $25,430) .......... 50,000 50,000
With Prudential Securities 6.50% 10/2/00
(dated 9/29/00, collateralized by $88,000
U.S. Treasury Notes 12.375% due 5/15/04,
market value $110,391) ............................ 108,100 108,100
-----------
Total Repurchase Agreements
(cost $330,000) ................................... 330,000
-----------

<PAGE>

-------------------------------------------------------------------------------
Total Market Value of Securities - 99.98%
(cost $29,414,919) ..................................... $30,724,994
Receivables Net of Assets
and Liabilities - 0.02% ................................ 6,225
-----------
Net Assets Applicable to 3,317,402 Shares
Outstanding - 100.00% .................................. $30,731,219
-----------
Net Asset Value - Delaware Balanced Portfolio
A Class ($28,343,719 / 3,059,766 shares) ............... $9.26
-----
Net Asset Value - Delaware Balanced Portfolio
B Class ($1,213,310 / 131,047 shares) .................. $9.26
-----
Net Asset Value - Delaware Balanced Portfolio
C Class ($904,037 / 97,440 shares) ..................... $9.28
-----
Net Asset Value - Delaware Balanced Portfolio
Institutional Class
($270,153 / 29,149 shares) ............................. $9.27
-----
Components of Net Assets at September 30, 2000:
Shares of beneficial interest (unlimited
authorization-no par) .................................. $29,782,074
Undistributed net investment income ...................... 40,499
Accumulated net realized loss on investments ............. (401,429)
Net unrealized appreciation of investments ............... 1,310,075
-----------
Total net assets ......................................... $30,731,219
===========
Net Asset Value and Offering Price per
Share - Delaware Balanced Portfolio
Net asset value A Class (A) .............................. $9.26
Sales charge (5.75% of offering price or 6.05% of
the amount invested per share)(B) ...................... 0.56
-----
Offering price ........................................... $9.82
=====

----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.

See accompanying notes

<PAGE>

Statement of Net Assets (continued)

DELAWARE INCOME PORTFOLIO
-------------------------

Number of Market
September 30, 2000 Shares Value
-------------------------------------------------------------------------------
Investment Companies - 97.07%
Equity Funds - 44.36%
Delaware Group Equity Funds II -
Delaware Diversified Value Fund .................... 230,892 $ 2,412,823
Delaware Group Equity Funds III -
Delaware Research Fund ............................. 68,006 527,724
Delaware Group Equity Funds IV -
Delaware Diversified Growth Fund ................... 189,082 2,335,157
Delaware Group Equity Funds V -
Delaware Small Cap Value Fund ...................... 10,358 279,773
Delaware Group Global & International Funds -
Delaware International Equity Fund ................. 57,243 885,551
Delaware Pooled Trust - The Real Estate
Investment Trust Portfolio ......................... 30,586 425,456
Voyageur Mutual Funds III - Delaware Select
Growth Fund ........................................ 23,596 991,989
-----------
7,858,473
-----------
Fixed Income Funds - 52.71%
Delaware Group Government Funds -
Delaware American Government Bond Fund ............. 1,152,958 8,358,948
Delaware Group Income Funds -
Delaware Delchester Fund ........................... 237,389 978,042
-----------
9,336,990
-----------
Total Investment Companies
(cost $17,311,103) ................................. 17,195,463
-----------

Principal
Amount
Repurchase Agreements - 3.14%
With Chase Manhattan 6.40% 10/2/00
(dated 9/29/00, collateralized by $216,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $209,647) ............................. $204,300 204,300
With J.P. Morgan Securities 6.40% 10/2/00
(dated 9/29/00, collateralized by $84,000
U.S. Treasury Notes 6.625% due 4/30/02,
market value $86,562) .............................. 84,700 84,700
With PaineWebber 6.50% 10/2/00
(dated 9/29/00, collateralized by $1,000
U.S. Treasury Notes 5.75% due 10/31/00,
market value $993 and $42,000 U.S. Treasury
Notes 4.625% due 12/31/00, market
value $42,660 and $42,000 U.S. Treasury
Notes 6.25% due 1/31/02, market
value $42,845) ..................................... 84,700 84,700
With Prudential Securities 6.50% 10/2/00
(dated 9/29/00, collateralized by $149,000
U.S. Treasury Notes 12.375% due 5/15/04,
market value $185,993) ............................. 182,300 182,300
-----------
Total Repurchase Agreements
(cost $556,000) .................................... 556,000
-----------

<PAGE>

-------------------------------------------------------------------------------
Total Market Value of Securities - 100.21%
(cost $17,867,103) ...................................... $17,751,463
Liabilities Net of Receivables and
Other Assets - (0.21%) .................................. (36,156)
-----------
Net Assets Applicable to 2,043,311 Shares
Outstanding - 100.00% ................................... $17,715,307
-----------
Net Asset Value - Delaware Income Portfolio
A Class ($17,051,415 / 1,967,039 shares) ................ $8.67
-----
Net Asset Value - Delaware Income Portfolio
B Class ($369,756 / 42,422 shares) ...................... $8.72
-----
Net Asset Value - Delaware Income Portfolio
C Class ($192,039 / 22,078 shares) ...................... $8.70
-----
Net Asset Value - Delaware Income Portfolio
Institutional Class ($102,097 / 11,772 shares) .......... $8.67
-----
Components of Net Assets at September 30, 2000:
Shares of beneficial interest (unlimited
authorization-no par) ................................... $18,049,852
Undistributed net investment income ....................... 44,560
Accumulated net realized loss on investments .............. (263,465)
Net unrealized depreciation of Investments ................ (115,640)
-----------
Total net assets .......................................... $17,715,307
===========
Net Asset Value and Offering Price per Share -
Delaware Income Portfolio
Net asset value A Class (A) ............................... $8.67
Sales charge (5.75% of offering price or 6.11% of
the amount invested per share)(B) ....................... 0.53
-----
Offering price ............................................ $9.20
=====
----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $50,000 or more.

See accompanying notes

<PAGE>

Statements of Operations

Delaware Foundation Funds Delaware Delaware Delaware
Growth Balanced Income
Year Ended September 30, 2000 Portfolio Portfolio Portfolio
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest ........................................... $ 34,839 $ 57,195 $ 57,740
Dividends from investment companies ................ 360,516 848,900 883,381
---------- ---------- ----------
395,355 906,095 941,121
---------- ---------- ----------
Expenses:
Management fees .................................... 38,751 65,154 44,946
Custodian fees ..................................... 9,882 15,550 4,290
Dividend disbursing and transfer agent fees
and expenses ..................................... 99,793 98,530 121,558
Distribution expenses .............................. 60,256 80,750 48,905
Registration fees .................................. 31,833 29,357 46,431
Reports and statements to shareholders ............. 24,000 28,250 24,585
Accounting and administration expenses ............. 6,262 10,521 7,278
Professional fees .................................. 1,260 75 --
Trustees' fees ..................................... 2,431 1,807 1,306
Taxes (other than taxes on income) ................. 123 160 200
Amortization of organization expenses .............. 4,652 4,652 4,647
Other .............................................. 7,069 697 7,851
---------- ---------- ----------
286,312 335,503 311,997

Less expenses absorbed or waived ................... (140,302) (112,656) (163,623)
Less expenses paid indirectly ...................... (357) (600) (414)
---------- ---------- ----------
Total expenses ..................................... 145,653 222,247 147,960
---------- ---------- ----------
Net Investment Income .............................. 249,702 683,848 793,161
---------- ---------- ----------
Net Realized and Unrealized Gain (Loss) on
Investments:
Capital gain distributions from investment
companies ........................................ 288,543 293,507 149,239
Net realized loss on investments ................... (285,057) (578,386) (348,726)
Net change in unrealized appreciation/depreciation
of investments ................................... 1,179,710 1,821,450 690,596
---------- ---------- ----------
Net Realized and Unrealized Gain on Investments .... 1,183,196 1,536,571 491,109
---------- ---------- ----------
Net Increase in Net Assets Resulting from
Operations ....................................... $1,432,898 $2,220,419 $1,284,270
========== ========== ==========
</TABLE>

See accompanying notes

<PAGE>

Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Growth Balanced Income
Delaware Foundation Funds Portfolio Portfolio Portfolio
----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
9/30/00 9/30/99 9/30/00 9/30/99 9/30/00 9/30/99

<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ................................ $ 249,702 $ 150,639 $ 683,848 $ 431,667 $ 793,161 $ 608,102
Net realized gain (loss) on investments .............. 3,486 374,414 (284,879) 289,279 (199,487) 44,912
Net change in unrealized appreciation/depreciation
of investments ..................................... 1,179,710 56,705 1,821,450 (335,144) 690,596 (775,667)
--------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .......................... 1,432,898 581,758 2,220,419 385,802 1,284,270 (122,653)
--------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
A Class ............................................ (328,851) (16,588) (765,253) (268,006) (926,642) (408,473)
B Class ............................................ (36,717) -- (35,252) (11,355) (13,692) (10,673)
C Class ............................................ (13,139) -- (26,860) (10,723) (8,623) (3,980)
Institutional Class ................................ (3,940) (588) (5,355) (1,373) (4,655) (1,913)
Net realized gain on investments:
A Class ............................................ (327,655) (5,317) (306,567) (6,916) (84,213) (2,256)
B Class ............................................ (49,076) (3,737) (19,061) (1,985) (1,276) (994)
C Class ............................................ (17,562) (599) (14,846) (2,649) (953) (401)
Institutional Class ................................ (3,598) (147) (2,009) (166) (372) (149)
--------------------------------------------------------------------------
(780,538) (26,976) (1,175,203) (303,173) (1,040,426) (428,839)
--------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ............................................ 3,890,304 15,667,690 15,285,084 22,952,044 4,569,647 22,106,262
B Class ............................................ 1,356,326 758,187 364,784 652,910 124,231 706,701
C Class ............................................ 651,583 484,774 340,201 302,321 39,696 147,129
Institutional Class ................................ 195,022 9,370 244,048 7,483 40,494 4,114
Net asset value of shares issued upon reinvestment
of distributions:
A Class ............................................ 656,681 21,959 1,071,663 274,932 1,010,794 410,729
B Class ............................................ 84,612 3,675 53,244 13,190 12,079 9,874
C Class ............................................ 30,700 597 40,451 12,919 9,888 4,381
Institutional Class ................................ 7,538 735 7,364 1,539 5,026 2,062
--------------------------------------------------------------------------
6,872,766 16,946,987 17,406,839 24,217,338 5,811,855 23,391,252
--------------------------------------------------------------------------
Cost of shares repurchased:
A Class ............................................ (4,070,669) (5,256,441) (6,354,705) (6,789,571) (6,003,847) (5,122,105)
B Class ............................................ (789,677) (264,719) (280,764) (81,066) (14,994) (499,183)
C Class ............................................ (254,849) (73,721) (309,305) (279,472) (54,450) (80,420)
Institutional Class ................................ (49,794) (566) (47,390) (531) (1,339) --
--------------------------------------------------------------------------
(5,164,989) (5,595,447) (6,992,164) (7,150,640) (6,074,630) (5,701,708)
--------------------------------------------------------------------------
Increase (decrease) in net assets derived from
capital share transactions ......................... 1,707,777 11,351,540 10,414,675 17,066,698 (262,775) 17,689,544
--------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets ................ 2,360,137 11,906,322 11,459,891 17,149,327 (18,931) 17,138,052

Net Assets:
Beginning of period .................................. 13,459,884 1,553,562 19,271,328 2,122,001 17,734,238 596,186
--------------------------------------------------------------------------
End of period ........................................ $15,820,021 $13,459,884 $30,731,219 $19,271,328 $17,715,307 $17,734,238
--------------------------------------------------------------------------
</TABLE>

See accompanying notes

<PAGE>

Financial Highlights

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Growth Portfolio A Class Delaware Growth Portfolio B Class
------------------------------------------------------------------------------------------------------------------------------------
12/31/97(1) 12/31/97(1)
Year Ended to Year Ended to
9/30/00 9/30/99 9/30/98 9/30/00 9/30/99 9/30/98
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $9.500 $8.170 $8.500 $9.470 $8.140 $8.500

Income (loss) from investment operations:
Net investment income(2) ............................... 0.174 0.138 0.062 0.099 0.068 0.014
Net realized and unrealized gain (loss)
on investments ....................................... 0.845 1.295 (0.392) 0.840 1.287 (0.374)
--------------------------------------------------------------------
Total from investment operations ....................... 1.019 1.433 (0.330) 0.939 1.355 (0.360)
--------------------------------------------------------------------

Less dividends and distributions:
Dividends from net investment income ................... (0.275) (0.078) -- (0.205) -- --
Distributions from net realized gain on investments .... (0.274) (0.025) -- (0.274) (0.025) --
--------------------------------------------------------------------
Total dividends and distributions ...................... (0.549) (0.103) -- (0.479) (0.025) --
--------------------------------------------------------------------

Net asset value, end of period ........................... $9.970 $9.500 $8.170 $9.930 $9.470 $8.140
====================================================================

Total return(3) .......................................... 10.99% 17.33% (3.88%) 10.14% 16.41% (4.24%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $12,342 $11,328 $547 $2,295 $1,561 $885
Ratio of expenses to average net assets ................ 0.80% 0.80% 0.80% 1.55% 1.55% 1.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.70% 2.21% 14.36% 2.45% 2.96% 15.11%
Ratio of net investment income to average
net assets ........................................... 1.75% 1.45% 0.96% 1.00% 0.70% 21.00%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................. 0.85% 0.04% (12.60%) 0.10% (0.71%) (13.35%)
Portfolio turnover ..................................... 87% 104% 77% 87% 104% 77%
</TABLE>

----------------------
(1) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
(2) Per share information was based on the average shares outstanding method.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.

See accompanying notes

15
<PAGE>

Financial Highlights (continued)

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Growth Portfolio C Class
------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $9.480 $8.140 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................ 0.099 0.067 0.013
Net realized and unrealized gain (loss)
on investments ........................................ 0.840 1.298 (0.373)
---------------------------------
Total from investment operations ........................ 0.939 1.365 (0.360)
---------------------------------

Less dividends and distributions:
Dividends from net investment income .................... (0.205) -- --
Distributions from net realized gain on investments ..... (0.274) (0.025) --
---------------------------------
Total dividends and distributions ....................... (0.479) (0.025) --
---------------------------------

Net asset value, end of period ............................ $9.940 $9.480 $8.140
=================================

Total return(3) ........................................... 10.13% 16.53% (4.24%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $962 $506 $74
Ratio of expenses to average net assets ................. 1.55% 1.55% 1.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 2.45% 2.96% 15.11%
Ratio of net investment income to average
net assets ............................................ 1.00% 0.70% 0.21%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly .............................. 0.10% (0.71%) (13.35%)
Portfolio turnover ...................................... 87% 104% 77%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Growth Portfolio Institutional Class
-----------------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ...................... $9.520 $8.180 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................ 0.199 0.162 0.078
Net realized and unrealized gain (loss)
on investments ........................................ 0.835 1.303 (0.398)
-------------------------------
Total from investment operations ........................ 1.034 1.465 (0.320)
-------------------------------

Less dividends and distributions:
Dividends from net investment income .................... (0.300) (0.100) --
Distributions from net realized gain on investments ..... (0.274) (0.025) --
-------------------------------
Total dividends and distributions ....................... (0.574) (0.125) --
-------------------------------

Net asset value, end of period ............................ $9.980 $9.520 $8.180
===============================

Total return(3) ........................................... 11.13% 17.71% (3.77%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $221 $65 $48
Ratio of expenses to average net assets ................. 0.55% 0.55% 0.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.45% 1.96% 14.11%
Ratio of net investment income to average
net assets ............................................ 2.00% 1.70% 1.21%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly .............................. 1.10% 0.29% (12.35%)
Portfolio turnover ...................................... 87% 104% 77%
</TABLE>

See accompanying notes

<PAGE>

Financial Highlights (continued)

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Balanced Portfolio A Class
------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $8.940 $8.130 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................. 0.246 0.249 0.153
Net realized and unrealized gain (loss)
on investments ......................................... 0.572 0.789 (0.463)
-------------------------------
Total from investment operations ......................... 0.818 1.038 (0.310)
-------------------------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.338) (0.200) (0.060)
Distributions from net realized gain on investments ...... (0.160) (0.028) --
-------------------------------
Total dividends and distributions ........................ (0.498) (0.228) (0.060)
-------------------------------

Net asset value, end of period ............................. $9.260 $8.940 $8.130
===============================

Total return(3) ............................................ 9.49% 12.52% (3.68%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $28,344 $17,373 $972
Ratio of expenses to average net assets .................. 0.80% 0.80% 0.80%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.23% 1.57% 12.87%
Ratio of net investment income to average
net assets ............................................. 2.67% 2.73% 2.34%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................... 2.24% 1.96% (9.73%)
Portfolio turnover ....................................... 80% 93% 73%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Balanced Portfolio B Class
------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $8.950 $8.130 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................. 0.178 0.181 0.104
Net realized and unrealized gain (loss)
on investments ......................................... 0.577 0.787 (0.444)
-------------------------------
Total from investment operations ......................... 0.755 0.968 (0.340)
-------------------------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.285) (0.120) (0.030)
Distributions from net realized gain on investments ...... (0.160) (0.028) --
-------------------------------
Total dividends and distributions ........................ (0.445) (0.148) (0.030
-------------------------------

Net asset value, end of period ............................. $9.260 $8.950 $8.130
===============================

Total return(3) ............................................ 8.75% 11.66% (4.02%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $1,213 $1,035 $408
Ratio of expenses to average net assets .................. 1.55% 1.55% 1.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.98% 2.32% 13.62%
Ratio of net investment income to average
net assets ............................................. 1.92% 1.98% 1.59%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................... 1.49% 1.21% (10.48%)
Portfolio turnover ....................................... 80% 93% 73%
</TABLE>

See accompanying notes

17
<PAGE>

Financial Highlights (continued)

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Balanced Portfolio C Class
------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $8.960 $8.140 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................. 0.177 0.182 0.104
Net realized and unrealized gain (loss)
on investments ......................................... 0.588 0.786 (0.434)
-------------------------------
Total from investment operations ......................... 0.765 0.968 (0.330)
-------------------------------

Net asset value, end of period ............................. $9.280 $8.960 $8.140
===============================

Total return(3) ............................................ 8.74% 11.77% (3.90%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $904 $802 $694
Ratio of expenses to average net assets .................. 1.55% 1.55% 1.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.98% 2.32% 13.62%
Ratio of net investment income to average
net assets ............................................. 1.92% 1.98% 1.59%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................... 1.49% 1.21% (10.48%)
Portfolio turnover ....................................... 80% 93% 73%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Balanced Portfolio Institutional Class
------------------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $8.940 $8.130 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................. 0.269 0.271 0.169
Net realized and unrealized gain (loss)
on investments ......................................... 0.579 0.792 (0.469)
-------------------------------
Total from investment operations ......................... 0.848 1.063 (0.300)
-------------------------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.358) (0.225) (0.070)
Distributions from net realized gain on investments ...... (0.160) (0.028) --
-------------------------------
Total dividends and distributions ........................ (0.518) (0.253) (0.070)
-------------------------------

Net asset value, end of period ............................. $9.270 $8.940 $8.130
===============================

Total return(3) ............................................ 9.85% 12.83% (3.56%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $270 $61 $48
Ratio of expenses to average net assets .................. 0.55% 0.55% 0.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 0.98% 1.32% 12.62%
Ratio of net investment income to average
net assets ............................................. 2.92% 2.98% 2.59%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................... 2.49% 2.21% (9.48%)
Portfolio turnover ....................................... 80% 93% 73%
</TABLE>

See accompanying notes

<PAGE>

Financial Highlights (continued)

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Income Portfolio A Class Delaware Income Portfolio B Class
-----------------------------------------------------------------------------------------------------------------------------------
12/31/97(1) 12/31/97(1)
Year Ended to Year Ended to
9/30/00 9/30/99 9/30/98 9/30/00 9/30/99 9/30/98
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $8.550 $8.290 $8.500 $8.590 $8.290 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................ 0.382 0.382 0.250 0.317 0.316 0.201
Net realized and unrealized gain (loss)
on investments ........................................ 0.249 0.198 (0.350) 0.252 0.219 (0.331)
--------------------------------------------------------------------
Total from investment operations ........................ 0.631 0.580 (0.100) 0.569 0.535 (0.130)
--------------------------------------------------------------------

Less dividends and distributions:
Dividends from net investment income .................... (0.468) (0.295) (0.110) (0.396) (0.210) (0.080)
Distributions from net realized gain on investments ..... (0.043) (0.025) -- (0.043) (0.025) --
--------------------------------------------------------------------
Total dividends and distributions ....................... (0.511) (0.320) (0.110) (0.439) (0.235) (0.080)
--------------------------------------------------------------------

Net asset value, end of period ............................ $8.670 $8.550 $8.290 $8.720 $8.590 $8.290
====================================================================

Total return(3) ........................................... 7.66% 6.85% (1.21%) 6.99% 6.18% (1.56%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $17,051 $17,239 $398 $370 $243 $26
Ratio of expenses to average net assets ................. 0.80% 0.80% 0.80% 1.55% 1.55% 1.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.71% 2.13% 32.95% 2.46% 2.88% 33.70%
Ratio of net investment income to average
net assets ............................................ 4.43% 4.34% 3.80% 3.68% 3.59% 3.05%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly .............................. 3.52% 3.01% (28.35%) 2.77% 2.26% (29.10%)
Portfolio turnover ...................................... 65% 73% 81% 65% 73% 81%
</TABLE>

See accompanying notes

19
<PAGE>

Financial Highlights (continued)

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Income Portfolio C Class
-------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $8.580 $8.290 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................. 0.317 0.316 0.204
Net realized and unrealized gain (loss)
on investments ......................................... 0.242 0.209 (0.334)
-------------------------------
Total from investment operations ......................... 0.559 0.525 (0.130)
-------------------------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.396) (0.210) (0.080)
Distributions from net realized gain on investments ...... (0.043) (0.025) --
-------------------------------
Total dividends and distributions ........................ (0.439) (0.235) (0.080)
-------------------------------

Net asset value, end of period ............................. $8.700 $8.580 $8.290
===============================

Total return(3) ............................................ 6.88% 6.06% (1.56%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $192 $195 $123
Ratio of expenses to average net assets .................. 1.55% 1.55% 1.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 2.46% 2.88% 33.70%
Ratio of net investment income to average
net assets ............................................. 3.68% 3.59% 3.05%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................... 2.77% 2.26% (29.10%)
Portfolio turnover ....................................... 65% 73% 81%
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Delaware Foundation Funds
Selected data for each share of the Portfolio outstanding
throughout each period were as follows: Delaware Income Portfolio Institutional Class
----------------------------------------------------------------------------------------------------------
12/31/97(1)
Year Ended to
9/30/00 9/30/99 9/30/98
<S> <C> <C> <C>
Net asset value, beginning of period ....................... $8.560 $8.280 $8.500

Income (loss) from investment operations:
Net investment income(2) ................................. 0.404 0.403 0.266
Net realized and unrealized gain (loss)
on investments ......................................... 0.237 0.212 (0.356)
-------------------------------
Total from investment operations ......................... 0.641 0.615 (0.090)
-------------------------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.488) (0.310) (0.130)
Distributions from net realized gain on investments ...... (0.043) (0.025) --
-------------------------------
Total dividends and distributions ........................ (0.531) (0.335) (0.130)
-------------------------------

Net asset value, end of period ............................. $8.670 $8.560 $8.280
===============================

Total return(3) ............................................ 7.90% 7.16% (1.10%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $102 $57 $49
Ratio of expenses to average net assets .................. 0.55% 0.55% 0.55%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.46% 1.88% 32.70%
Ratio of net investment income to average
net assets ............................................. 4.68% 4.59% 4.05%
Ratio of net investment income (loss) to average
net assets prior to expense limitation and
expenses paid indirectly ............................... 3.77% 3.26% (28.10%)
Portfolio turnover ....................................... 65% 73% 81%
</TABLE>

See accompanying notes

20
<PAGE>

Notes to Financial Statements

September 30, 2000
--------------------------------------------------------------------------------
Delaware Foundation Funds (the "Trust") is registered as an open-end investment
company under the Investment Company Act of 1940, as amended. The Trust is
organized as a Delaware business trust and offers four portfolios: the Delaware
Growth Portfolio, the Delaware Balanced Portfolio, the Delaware Income Portfolio
and the Delaware S&P 500 Index Fund. These financial statements pertain only to
the Delaware Growth Portfolio, Delaware Balanced Portfolio and Delaware Income
Portfolio (individually a "Portfolio" and collectively, the "Portfolios"). The
Portfolios are diversified and offer four classes of shares. The A class carries
a front-end sales charge of 5.75%. The B class carries a back-end deferred sales
charge, the C class carries a level load deferred sales charge and the
Institutional has no sales charge. The Portfolios will invest in open-end
investment companies (mutual funds) that are members of the Delaware Investments
Family of Funds (collectively, the "Underlying Funds"). The Underlying Funds
include funds investing in U.S. and foreign stocks, bonds and money market
instruments.

The investment objective of Delaware Growth Portfolio is to seek long-term
capital growth.

The investment objective of Delaware Balanced Portfolio is to achieve capital
appreciation with current income as a secondary objective.

The investment objective of Delaware Income Portfolio is to seek a combination
of current income and preservation of capital with capital appreciation.

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
Portfolios.

Security Valuation - The market value of the Portfolios' investments in the
Underlying Funds is based on the published net asset value of the Underlying
Funds computed as of the close of regular trading on the New York Stock Exchange
on days when the Exchange is open. Money market instruments having less than 60
days to maturity are valued at amortized cost, which approximates market value.

Federal Income Taxes - Each Portfolio 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 Portfolios on the basis of daily net assets of each class. Distribution
expenses relating to a specific class are charged directly to that class.

<PAGE>

--------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Repurchase Agreements - The Portfolios 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 Portfolios' 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
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported 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.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Dividend income includes short-term capital gain
distributions received from the Underlying Funds. Each Portfolio declares and
pays distributions from net realized gain on investments, if any, annually and
from net investment income quarterly for Delaware Income Portfolio and annually
for Delaware Balanced Portfolio and Delaware Growth Portfolio.

Certain expenses of the Portfolios are paid through commission arrangements with
brokers. These transactions are done subject to best execution. In addition, the
Portfolios receive earnings credits from their custodian when positive cash
balances are maintained, which are used to offset custody fees. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statement of Operations with the corresponding offset shown as
"expenses paid indirectly". The amount of these expenses and credits for the
period ended September 30, 2000 are as follows:

Delaware Delaware Delaware
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Commission reimbursement ........... $357 $600 $414
Earnings credits ................... -- -- --

21
<PAGE>

Notes to Financial Statements (continued)

--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of their respective investment management
agreements, each Portfolio pays Delaware Management Company (DMC), the
investment manager of each Portfolio, an annual asset allocation fee which is
calculated at the rate of 0.25% (currently waived to 0.10%) of each of the
Portfolios' average daily net assets.

DMC has elected to waive that portion of the management fee and reimburse each
Portfolio to the extent that annual operating expenses, exclusive of taxes,
interest, brokerage commissions, extraordinary expenses and distribution
expenses, exceed 0.55% of average daily net assets of the Portfolios through
November 30, 2000.

The Portfolios have engaged Delaware Service Company, Inc. (DSC), an affiliate
of DMC, to provide dividend disbursing, transfer agent, accounting and
administration services. Each Portfolio pays DSC a monthly fee based on the
number of shareholder accounts, shareholder transactions and average net assets,
subject to certain minimums.

Pursuant to the distribution agreement, the Portfolios pay Delaware
Distributors, L.P. (DDLP), the distributor and an affiliate of DMC, an annual
fee not to exceed 0.25% 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.

On September 30, 2000, the Portfolios had liabilities payable to affiliates as
follows:

Delaware Delaware Delaware
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- ---------- ----------
Investment management fee
payable to DMC .................. $ -- $ -- $ --
Dividend disbursing, transfer
agent and accounting
services and other
expenses payable to DSC ......... 11,107 13,038 12,185
Other expenses payable
to DMC and affiliates .......... 465 588 464

For the period ended September 30, 2000, DDLP earned commissions on sales of the
A Class shares for each Portfolio as follows:

Delaware Delaware Delaware
Growth Balanced Income
Portfolio Portfolio Portfolio
---------- --------- ---------
$2,860 $1,138 $81

Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Portfolios. These officers, trustees and employees are paid no compensation
by the Portfolios.

3. Investments
For the period ended September 30, 2000, the Portfolios made purchases and sales
of investment securities (including shares of the Underlying Funds), other than
U.S. government securities and temporary cash investments as follows:

<PAGE>

--------------------------------------------------------------------------------
3. Investments (continued)

Delaware Delaware Delaware
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Purchases ................... $14,809,133 $30,290,357 $11,593,865
Sales ....................... 12,944,003 20,182,172 11,233,667

As of September 30, 2000, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Portfolio
were as follows:

Delaware Delaware Delaware
Growth Balanced Income
Portfolio Portfolio Portfolio
--------- --------- ---------
Cost of investments ......... $14,977,405 $29,791,440 $18,098,450
----------- ----------- -----------
Aggregate unrealized
appreciation .............. $ 1,144,525 $ 1,361,587 $ 587,537
Aggregate unrealized
depreciation .............. (279,622) (428,033) (934,524)
----------- ----------- -----------
Net unrealized appreciation
(depreciation) ............ $ 864,903 $ 933,554 $ (346,987)
=========== =========== ===========

4. Capital Shares

Transactions in capital shares were as follows:
Delaware Growth
Portfolio
---------------------
Year Ended
9/30/00 9/30/99
Shares sold:
A Class .................................... 389,833 1,668,679
B Class .................................... 137,359 83,142
C Class .................................... 65,705 52,132
Institutional Class ........................ 19,364 950

Shares issued upon reinvestment
of distributions:
A Class .................................... 66,198 2,382
B Class .................................... 8,513 398
C Class .................................... 3,085 64
Institutional Class ........................ 760 80
------- ---------
690,817 1,807,827
------- ---------
Shares repurchased:
A Class .................................... (409,722) (545,940)
B Class .................................... (79,400) (27,503)
C Class .................................... (25,391) (7,945)
Institutional Class ........................ (4,827) (57)
------- ---------
(519,340) (581,445)
------- ---------
Net increase ................................. 171,477 1,226,382
======= =========

<PAGE>

Notes to Financial Statements (continued)

--------------------------------------------------------------------------------
4. Capital Shares (continued)
Transactions in capital shares were as follows:

Delaware Balanced
Portfolio
-----------------------
Year Ended
9/30/00 9/30/99
Shares sold:
A Class .................................... 1,691,395 2,536,969
B Class .................................... 39,916 72,833
C Class .................................... 37,207 34,165
Institutional Class ........................ 26,619 823

Shares issued upon reinvestment
of distributions:
A Class .................................... 116,689 30,428
B Class .................................... 5,793 1,463
C Class .................................... 4,397 1,433
Institutional Class ........................ 803 171
--------- ---------
1,922,819 2,678,285
--------- ---------

Shares repurchased:
A Class .................................... (692,555) (742,675)
B Class .................................... (30,267) (8,853)
C Class .................................... (33,644) (31,351)
Institutional Class ........................ (5,140) (58)
--------- ---------
(761,606) (782,937)
--------- ---------
Net increase ................................. 1,161,213 1,895,348
========= =========

Delaware Income
Portfolio
----------------------
Year Ended
9/30/00 9/30/99
Shares sold:
A Class .................................... 529,957 2,501,936
B Class .................................... 14,483 82,008
C Class .................................... 4,540 16,945
Institutional Class ........................ 4,665 470

Shares issued upon reinvestment
of distributions:
A Class .................................... 117,543 47,302
B Class .................................... 1,396 1,128
C Class .................................... 1,146 502
Institutional Class ........................ 584 237
------- ---------
674,314 2,650,528
------- ---------

Shares repurchased:
A Class .................................... (695,721) (582,005)
B Class .................................... (1,731) (57,950)
C Class .................................... (6,327) (9,577)
Institutional Class ........................ (156) 0
------- ---------
(703,935) (649,532)
------- ---------
Net increase ................................. 29,621 2,000,996
======= =========
<PAGE>

--------------------------------------------------------------------------------
5. Line of Credit
The Portfolios, along with certain other funds in the Delaware Investments
Family of Funds (the "Participants"), participate in a $375,400,000 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 Portfolio's allocation of the entire facility.
The Participants may borrow up to one third of their net assets under the
agreement. The Portfolios had no amounts outstanding at September 30, 2000, or
at any time during the fiscal year.

6. Tax Information (unaudited)
The information set forth below is for each Portfolio'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 portfolio. 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 period ended September 30, 2000, each Portfolio designates distributions
paid during the year as follows:

(A) (B)
Long-Term Ordinary
Capital Gains Income
Distributions Distributions
------------- -------------
Delaware Growth Portfolio 8% 92%
Delaware Balanced Portfolio 5% 95%
Delaware Income Portfolio 2% 98%

(C)
Total (D)
Distributions Qualifying
(Tax Basis) Dividends(1)
------------- -------------
Delaware Growth Portfolio 100% --
Delaware Balanced Portfolio 100% --
Delaware Income Portfolio 100% --

(A) and (B) are based on a percentage of the Portfolio's total distributions.
(D) is based on a percentage of ordinary income of the Portfolio.

----------------------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.

<PAGE>

Report of Independent Auditors

--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group Foundation Funds

We have audited the accompanying statements of net assets of Delaware Growth
Portfolio, Delaware Balanced Portfolio and Delaware Income Portfolio (the
"Funds") (each a series of Delaware Group Foundation Funds) as of September 30,
2000, and the related statements 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 Funds' 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 September 30, 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 each
of the above listed Funds at September 30, 2000, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
periods indicated therein, in conformity with accounting principles generally
accepted in the United States.

/s/ Ernst & Young

Philadelphia, Pennsylvania
November 10, 2000

<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
-------------------------------
TAX-
TAXABLE EXEMPT INTERNATIONAL ASSET
MODERATE GROWTH BOND BOND AND GLOBAL ALLOCATION
EQUITY FUNDS FUNDS FUNDS
--------------------------------------------------------------------------------
STABILITY OF PRINCIPAL
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C> <C>
[ ] Growth of Capital [ ] International and Global [ ] Tax-Exempt Income
o Technology and Innovation o Emerging Markets Fund o National High-Yield
Fund o New Pacific Fund Municipal Bond Fund
o Select Growth Fund o Overseas Equity Fund o Tax-Free USA Fund
o Trend Fund o International Equity Fund o Tax-Free Insured Fund
o Growth Opportunities Fund* o Global Equity Fund o Tax-Free USA
o Small Cap Value Fund o Global Bond Fund Intermediate Fund
o U.S. Growth Fund [ ] Current Income o State Tax-Free Funds**
o Tax-Efficient Equity Fund o Delchester Fund [ ] Stability of Principal
o Social Awareness Fund o High-Yield o Cash Reserve
[ ] Total Return Opportunities Fund o Tax-Free Money Fund
o Blue Chip Fund o Strategic Income Fund [ ] Asset Allocation
o Devon Fund o Corporate Bond Fund o Foundation Funds
o Growth and Income Fund o Extended Duration Growth Portfolio
o Decatur Equity Income Fund Bond Fund Balanced Portfolio
o REIT Fund o American Government Income Portfolio
o Balanced Fund Bond Fund
o U.S. Government
Securities Fund
o Limited-Term
Government Fund

</TABLE>

* 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)
INVESTMENTS
---------------------
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 Foundation Funds
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Delaware Foundation Funds prospectus 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 each Portfolio. 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 each Portfolio 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 2005 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>

(3997) Printed in the USA
AR-444 [9/00] PPL 11/00 (J6493)