<PAGE>
Delaware Group Income Funds, Inc.
High Yield Opportunities Fund
Statement of Net Assets
For the Period Ended January 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Principal Market
Amount Value
<S> <C> <C> <C> <C>
CORPORATE BONDS - 70.08%
Automobiles & Automotive Parts - 2.44%
* CSK Auto Inc. nts 11.00% 11/01/06 . . .$ 100,000 $ 105,125
* Motors & Gears nts 10.75% 11/15/06 . . . 100,000 102,750
--------------
207,875
--------------
Banking, Finance & Insurance- 1.81%
* Imperial Credit Industries sr nts 9.875% 01/15/07 . . . 150,000 154,125
--------------
154,125
--------------
Building & Materials - 4.25%
* Atrium 10.50% 11/15/06 . . . 350,000 361,813
--------------
361,813
--------------
Cable, Media, & Publishing - 2.42%
Adelphia Communications sr unsec nts 12.50% 05/15/02 . . . 100,000 102,750
Lamar Advertising 9.63% 12/01/06 . . . 100,000 103,000
--------------
205,750
--------------
Consumer Products - 9.02%
* Pen-Tab Industries 10.875% 02/01/07 . . . 400,000 406,500
* Rayovac nts 10.25% 11/01/96 . . . 350,000 361,813
--------------
768,313
--------------
Electronics/Electrical Equipment 2.43%
Electronic Retailing Systems 0.00%/
13.25% 02/01/04 . . . 300,000 207,000
--------------
207,000
--------------
Energy/Environmental Services 9.19%
* Allied Waste North America 10.25% 12/01/06 . . . 250,000 266,875
Clark USA nts 10.88% 12/01/05 . . . 100,000 102,375
Costilla Energy sr nts 10.25% 10/01/06 . . . 100,000 106,000
* Loomis Fargo & Co sr sub nts 10.00% 01/15/04 . . . 150,000 153,750
* Petro Stopping Centers 10.50% 02/01/07 . . . 150,000 153,375
--------------
782,375
--------------
Food, Beverage & Tobacco - 4.84%
* CFP Holdings 11.63% 01/15/04 . . . 300,000 309,000
Core-Mark 11.38% 09/15/03 . . . 100,000 103,125
--------------
412,125
--------------
Industrial Machinery - 17.86%
* Collins & Aikman sr sub nts 10.00% 01/15/07 . . . 400,000 407,500
DVI sr nts 9.875% 02/01/04 . . . 400,000 404,500
Delran Manufacturing sr nts 10.00% 01/15/07 . . . 500,000 506,250
* Hawk 10.25% 12/01/03 . . . 100,000 102,125
Jordan Industries sr sec nts 10.375% 08/01/03 . . . 100,000 100,000
--------------
1,520,375
--------------
Leisure, Lodging & Entertainment - 1.14%
Trump-Atlantic City mtg nts 11.25% 05/01/06 . . . 100,000 96,875
--------------
96,875
--------------
Metals & Mining - 1.22%
Weirton Steel sr nts 11.375% 07/01/04 . . . 100,000 103,625
--------------
103,625
--------------
<PAGE>
Retail - 1.22%
Fleming sr nts 10.625% 12/15/01 . . . 100,000 103,750
--------------
103,750
--------------
Transportation & Shipping - 10.41%
Amerking sr nts 10.75% 12/01/06 . . . 100,000 104,375
* Atlantic Express 10.75% 02/01/04 . . . 400,000 412,000
* Blue Bird Body 10.75% 11/15/06 . . . 350,000 370,125
--------------
886,500
--------------
Miscellaneous - 1.83%
* LDM Technologies 10.75% 01/15/07 . . . 150,000 155,625
--------------
155,625
--------------
Total Corporate Bonds (cost $5,898,106) 5,966,125
--------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 18.33%
U.S. Treasury Notes 9.00% 05/15/98 . . . 1,500,000 1,560,195
--------------
Total U.S. Treasury Obligations (cost $1,559,063) 1,560,195
--------------
PREFERRED STOCK - 9.45%
* American Radio Systems 11.375% 01/15/09 . . . . . . . . 5,000 503,750
* Chancellor Radio 12% 01/15/02 . . . . . . . . 1,500 151,125
Pegasus Communication 12.75% 01/01/02 . . . . . . . . 1,500 150,000
--------------
Total Preferred Stock (cost $800,469) 804,875
--------------
REPURCHASE AGREEMENTS- 15.20%
With Chase Manhattan 5.52% 2/3/97 (dated 1/31/97,
collateralized by $85,000 U.S. Treasury Notes 6.625%
due 6/30/01, market value $ 87,102 and $279,000
U.S. Treasury Notes 6.625% due 6/30/01, market value 363,000 363,000
$284,090)
With J.P. Morgan Securities 5.50% 2/3/97 (dated 1/31/97,
collateralized by $279,000 U.S. Treasury Notes 8.75%
due 8/15/00, market value $311,909 and $143,000
U.S. Treasury Notes 8.75% due 8/15/00, market value 463,000 463,000
$160,689)
WithPaine Webber 5.52% 2/3/97 (dated 1/31/97,
collateralized by $279,000 U.S. Treasury Notes 6.25%
due 8/31/00, market value $ 286,910 and
$191,000 U.S. Treasury Notes 5.25% due 12/31/97,
market value $191,014) 468,000 468,000
--------------
Total Repurchase Agreements (cost $1,294,000) 1,294,000
--------------
TOTAL MARKET VALUE OF SECURITIES - 113.06%
(cost $9,551,638) 9,625,195
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES (13.06)% (1,111,471)
--------------
NET ASSETS APPLICABLE TO 971,368 HIGH YIELD
OPPORTUNITIES FUND A CLASS SHARES AND 545,455
HIGH YIELD OPPORTUNITIES FUND INSTITUTIONAL
CLASS SHARES ($1 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $5.61 PER SHARE - 100.00% $ 8,513,724
==============
COMPONENTS OF NET ASSETS AT JANUARY 31, 1997:
Capital Stock, $1 par value, 200,000,000 shares
authorized to the Fund with 100,000,000 shares
allocated to High Yield Opportunities
Fund A Class, 25,000,000 shares allocated
to High Yield Opportunities Fund
B Class, 25,000,000 shares allocated to
High Yield Opportunities Fund C
Class and 50,000,000 shares allocated
to High Yield Opportunities Fund
Institutional Class $ 8,408,312
Accumulated undistributed:
Net investment income 21,111
Net realized gain on investments 11,312
Net unrealized appreciation of investments 72,989
--------------
Total net assets $ 8,513,724
==============
</TABLE>
-------------------------------------------------------------------
*These securities are exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers (see
note 5). At January 31, 1997, these securities amounted to $4,477,376 or
52.59% of net assets.
Summary of Abbreviations:
mtg - mortgage
nts - notes
sec - secured
sr - senior
sub - subordinated
unsec - unsecured
See accompanying notes
<PAGE>
DELAWARE GROUP INCOME FUNDS, INC.
HIGH YIELD OPPORTUNITIES FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED
JANUARY 31, 1997
(Unaudited)
INVESTMENT INCOME:
Interest $ 23,510
EXPENSES:
Management fees 2,136
Registration fees 864
Custodian fees 342
Dividend disbursing and transfer
agent fees and expenses 115
Accounting fees 94
Reports and statements
to shareholders 8
Professional fees 4
Taxes (other than taxes on income) 4
Other 48
-------
3,615
Less expenses absorbed by
Delaware Management Company, Inc. 1,216 2,399
----- --------
NET INVESTMENT INCOME 21,111
--------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on:
investment transactions 11,312
Net unrealized appreciation of
investments during the period 72,989
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 84,301
--------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $105,412
========
See accompanying notes
<PAGE>
DELAWARE GROUP INCOME FUNDS, INC.
HIGH YIELD OPPORTUNITIES FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED
JANUARY 31, 1997
(Unaudited)
OPERATIONS:
Net investment income $ 21,111
Net realized gain
on investments 11,312
Net unrealized appreciation
of investments during the period 72,989
---------
Net increase in net
assets resulting from
operations 105,412
---------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
High Yield Opportunities A Class -
High Yield Opportunities B Class -
High Yield Opportunities C Class -
High Yield Opportunities Institutional Class -
---------
-
---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
High Yield Opportunities A Class 5,408,307
High Yield Opportunities B Class -
High Yield Opportunities C Class -
High Yield Opportunities Institutional Class 3,000,005
Net asset value of shares issued upon
reinvestment of dividends from net
investment income
High Yield Opportunities A Class -
High Yield Opportunities B Class -
High Yield Opportunities C Class -
High Yield Opportunities Institutional Class -
---------
8,408,312
---------
Cost of shares repurchased:
High Yield Opportunities A Class -
High Yield Opportunities B Class -
High Yield Opportunities C Class -
High Yield Opportunities Institutional Class -
---------
-
---------
Increase in net assets derived from capital
share transactions 8,408,312
---------
NET INCREASE IN NET ASSETS 8,513,724
---------
NET ASSETS:
Beginning of period -
End of period (including undistributed
net investment income of $1,672) $ 8,513,724
===========
See accompanying notes
<PAGE>
DELAWARE GROUP INCOME FUNDS, INC.
HIGH YIELD OPPORTUNITIES FUND
Notes to Financial Statements
For the Period Ended
January 31, 1997
(Unaudited)
Delaware Group Income Funds, Inc. - High Yield Opportunities Fund, Inc. (the
"Fund") registered as a diversified open-end investment company under the
Investment Company Act of 1940, as amended. The Fund is organized as a Maryland
corporation and offers four classes of shares.
The objective of the Fund is to seek to provide investors with high current
income and total return.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund:
Security Valuation-Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 pm EST on the valuation date.
Securities not traded or securities not listed on an exchange are valued at the
mean of the last quoted bid and asked prices. Long-term debt securities are
valued by an independent pricing service and are believed to reflect the fair
value of such securities. Securities listed on a foreign exchange are valued at
the last quoted sale price before the time when the Fund is valued. 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 Directors. Money market instruments having less than 60 days
to maturity are valued at amortized cost which approximates market value.
Federal Income Taxes-The Series 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.
Repurchase Agreements-The Series may invest in a pooled cash account along with
other members of the Delaware Group 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 Series'
custodian bank until the maturity of the respective repurchase agreements. Each
repurchase agreement is at least 100% 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.
Class Accounting - Expenses directly attributable to a class are charged to that
class. Other common expenses are prorated between all classes of the Fund.
Other-Expenses common to all Funds within the Delaware Group 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 an
accrual basis. Original issue discounts are accreted to interest income over the
lives of the respective securities.
Certain fund expenses are paid directly by brokers. The amount of these expenses
was less than 0.01% of the Series' average net assets.
<PAGE>
Notes to Financial Statements (Continued)
2. Investment Management Fees and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the investment manager of the
Fund, an annual fee which is calculated daily at the rate of 0.65% of average
daily net assets of the Fund. At January 31, 1997, the Fund had a liability for
Investment Management fees and other expenses payable to DMC of $2,141.
DMC has elected voluntarily to waive that portion, if any, of the annual
management fees payable for the Fund to the extent necessary to ensure that the
annual operating expenses exclusive of taxes, interest, brokerage commissions,
extraordinary expenses and 12b-1 expenses do not exceed 0.75% for each class
through June 30, 1997. Total expenses absorbed by DMC were $1,216.
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 Class and C Class. No distribution expenses are paid
by the Institutional Class.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC
to serve as dividend disbursing and transfer agent for the Fund. For the period
ended January 31, 1997, the amount expensed for these services was $15. The Fund
also engaged DSC to provide accounting services for the Fund. For the period
ended January 31, 1997 the Fund has expensed $94 for these services. At January
31, 1997, the Fund had a liability for these and other expenses payable to DSC
for $249.
3. Investments
During the period ended January 31, 1997, the Fund made purchases of $9,207,214
and sales of $949,576 of investment securities other than direct U.S. government
securities and temporary cash investments.
At January 31, 1997, the aggregate cost of securities for federal income tax
purposes was $11,312.
At January 31, 1997, net unrealized appreciation for federal income tax purposes
aggregated $72,989 of which $77,426 related to unrealized appreciation of
securities and $4,437 related to unrealized depreciation of securities.
<PAGE>
Notes to Financial Statements (Continued)
4.Capital Stock
Transactions in capital stock shares were as follows:
1/2/97*
TO
1/31/97
-------
Shares sold:
High-Yield Opportunities Fund A Class 971,368
High-Yield Opportunities Fund B Class -
High-Yield Opportunities Fund C Class -
High-Yield Opportunities Institutional Class 545,455
Shares issued upon reinvestment of dividends
from net investment income:
High-Yield Opportunities Fund A Class -
High-Yield Opportunities Fund B Class -
High-Yield Opportunities Fund C Class
High-Yield Opportunities Institutional Class -
---------
1,516,823
---------
Shares repurchased:
High-Yield Opportunities Fund A Class -
High-Yield Opportunities Fund B Class -
High-Yield Opportunities Fund C Class -
High-Yield Opportunities Institutional Class -
---------
-
---------
Net increase 1,516,823
=========
- ----------
*Date of Initial Public offering
5. Concentration of Credit Risk
The Fund invests in high-yield fixed income securities which carry rating of BB
or lower by Standard & Poors and/or Ba or lower by Moody's. Investments in these
higher yielding securities may be accompanied by a greater degree of credit
risk, than higher rated securities. Additionally, lower-rated securities may be
more susceptible to adverse economic and competitive industry conditions than
investment grade secruities.
The Fund may invest up to 15% of its assets in illiquid securities which include
securities with contractual restrictions on resale, securities exempt from
registration under Rule 144A of the Securities Act of 1933, as amended, and
other securities which may not be readily marketable. The relative illiquidity
of some of these securities may adversely affect the Fund's ability to dispose
of such securities in a timely manner and at a fair price when it is necessary
to liquidate such securities. These securities that are exempt from registration
under rule 144A have been denoted in the Statement of Net Assets. Of these
securities, none have been determined to be illiquid.
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights
Selected data for each share of the fund throughout each period were as follows:
<TABLE>
<CAPTION>
High-Yield High-Yield
Opportunities Opportunities
Fund Fund
A Class Institutional Class
------- -------------------
12/27/96(1) 12/27/96(1)
to to
1/31/97 1/31/97
<S> <C> <C>
Net asset value, beginning of period $5.5000 5.5000
Income from investment operations:
Net investment income 0.0011 0.0011
Net realized and unrealized gain
from security transactions 0.1089 0.1089
------ ------
Total from investment operations 0.1100 0.1100
Less distributions:
Dividends from net investment income none none
Distributions from net realized gain on
security transactions none none
------ ------
Total distributions 0.0000 0.0000
Net asset value, end of period $5.6100 $5.6100
======= =======
Total return(2)
Ratios/supplemental data:
Net asset, end of period (000 omitted) $5.452 $3.062
Ratio of expenses to average net assets 0.75% 0.75%
Ratio of expenses to average net assets
prior to expense limitation 1.11% 1.11%
Ratio of net investment income to average
net assets 6.30% 6.30%
Ratio of net investment income to average
net assets prior to expense limitation 5.94% 5.94%
Portfolio turnover 140% 140%
</TABLE>
- ----------
(1) Date of initial public offering. Ratios have been annualized and total
return has not been annualized.
(2) Does not include maximum sales charge of 4.75% for A Class nor the limited
contingent deferred sales charge which varies from 1%-4% for C Class
depending upon the holding period.
