<PAGE>
For Current Income
Delaware High-Yield
Opportunities Fund
(various photos demonstrating services and
guidance, professional management and goals)
service and guidance
professional management
1999
Annual
Report
goals
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
A TRADITION OF SOUND INVESTING
commitment
A Commitment
To Our Investors
(photo of computer keyboard)
(photo of illustration
from current income
brochure)
Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions--including some of America's largest pension funds--reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also manage
investments for variable annuities and closed-end funds as well as offer a wide
range of retirement plan services for individuals and businesses.
Delaware Investments manages approximately $47 billion in mutual fund assets
and institutional advisory accounts for more than half-a-million investors.
Complete 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.
Delaware High-Yield
Opportunities Fund
Investment Objective
To seek total return and, as a secondary objective,
high current income.
Table of Contents
Letter to Shareholders Page 1
Portfolio Managers' Review Page 3
Performance Summary Page 6
Statement of Net Assets Page 7
Financial Highlights Page 11
current
income
tradition
<PAGE>
August 4, 1999
for current
income
1
Dear Shareholder:
U.S. HIGH-YIELD CORPORATE BONDS MET
with an unusually difficult period during fiscal 1999. In spite of a near
perfect domestic economy, investor demand for high-yield, higher risk bonds was
weak, sharply reducing market liquidity and generally causing high-yield bond
prices to decline.
At the start of our fiscal year last August, uncertainty about economic
weakness in Southeast Asia, Russia and Latin America pushed down prices of
virtually all types of U.S. securities, including domestic stocks and high-yield
bonds. The exception was U.S. Treasury bonds which rose in value as risk-averse
investors sought a safe haven from global financial turmoil.
Late in 1998, stock and high-yield bond prices stabilized after the Federal
Reserve Board reduced interest rates and helped restore investor confidence.
Though large company stocks recouped the summer's losses--and then
some--high-yield bonds experienced only a partial price recovery.
During that recovery period, renewed investor demand focused on the highest
yielding, lowest quality segments of the market--bonds rated CCC and below.
Because High-Yield Opportunities Fund's management emphasizes higher quality,
slightly lower yielding bonds within the high-yield universe--those rated BB and
B--the Fund did not benefit as much from the rising prices. Then, in the second
calendar quarter, rising interest rates and volatility in the U.S. stock market
sparked new concerns about credit risk. Consequently, demand for high-yield
bonds of all quality ratings weakened again and prices declined.
For the 12 months ended July 31, 1999, High-Yield Opportunities Fund had a
total return of -4.26% (capital change plus reinvested dividends for A Class
shares at
OUR OUTLOOK
FOR THE
INCOME-PAYING
POTENTIAL OF
HIGH-YIELD
BONDS IS VERY
POSITIVE.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ---------------------------------------------------------------------------------------------------
For Periods Ended July 31, 1999
Lifetime
12/30/96 to
12 Months 7/31/99*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
High-Yield Opportunities Fund A Class -4.26% +8.21%
Lipper High Current Yield Fund Average -1.91% (293 funds) +5.80% (176 funds)
Salomon Smith Barney High-Yield Bond Index -0.21% +7.26%
- ---------------------------------------------------------------------------------------------------
</TABLE>
The performance shown above is based on net asset value without effect of sales
charges and assumes reinvestment of distributions. Performance of other Fund
classes varies due to different expenses. See page 6 for performance for all
Classes. The Salomon Smith Barney High-Yield Bond Index is an unmanaged measure
of U.S. high-yield corporate bonds. You cannot invest directly in an index. Past
performance is not a guarantee of future results.
* Lifetime period for High-Yield Opportunities Fund A Class.
<PAGE>
for current
income
2
net asset value). The Fund trailed its benchmark index, the Salomon Smith Barney
High-Yield Bond Index and its peers in the Lipper High Current Yield Fund
Average. Though we attribute our underperformance primarily to our focus on
bonds rated B and BB, we remain committed to that strategy because we believe it
is a sound approach for the long term.
During the fiscal period, the difference in yield between high-yield bonds
and 10-year U.S. Treasuries widened from roughly 3% at the start of the fiscal
period to 6% at the peak of the U.S. Treasury rally last October. As Treasury
prices rose, their yields fell. By late March 1999, Treasury prices were falling
and yields were rising as many investors demonstrated a willingness to give up
the safety of Treasuries as their confidence in the economy grew. Consequently,
the yield difference between Treasuries and high-yield bonds narrowed to about
5%. Though we expected the yield difference to narrow, we thought this would be
the result of rising high-yield bond prices, not rising Treasury yields.
While a number of factors have hurt high-yield bond prices in the past
year--higher interest rates, weak demand, heavy new supply and poor
liquidity--there are many positive factors that we believe support the
income-paying ability of issuers. In our view, the following factors create a
favorable scenario for investors seeking an attractive level of income from
non-investment grade high-yield bonds:
o a strong economy,
o low inflation, and
o better-than-average credit quality of companies issuing high-yield debt.
On the following pages, Paul Matlack and Gerald Nichols, senior portfolio
managers of the High-Yield Opportunities Fund, look back on the challenging year
for high-yield bonds and provide a look ahead for fiscal 2000.
We appreciate your continued confidence in High-Yield Opportunities Fund. Our
outlook for the income-paying potential of high-yield bonds is very positive.
And given that over time, income has contributed more to high-yield bond total
return than price changes, we remain confident that high-yield bonds will
continue to play an important role in well-allocated portfolios.
Sincerely,
/s/ Wayne A. Stork
- -------------------------------
Wayne A. Stork
Chairman
Delaware Investments Family of Funds
/s/ David K. Downes
- -------------------------------
David K. Downes
Executive Vice President
and Chief Executive Officer
Delaware Investments Family of Funds
discipline
<PAGE>
for current
income
3
Portfolio Managers' Review
BY PAUL A. MATLACK
Vice President/Senior Portfolio Manager
(photo of couple talking to
financial planner)
GERALD T. NICHOLS
Vice President/Senior Portfolio Manager
August 4, 1999
STRONG ECONOMY
SUPPORTS ISSUERS' ABILITY
TO MEET OBLIGATIONS
Through the second quarter of 1999, the U.S. economy continued to expand beyond
expectations. A strong economy and rising corporate earnings generally enhanced
the ability of high-yield bond issuers to generate enough cash flow from
operations or asset sales to pay their debt obligations.
Economic data released during the writing of this report suggest that the
economy will expand during the rest of 1999. The U.S. Conference Board's index
of Leading Economic Indicators, which is used to predict future economic
activity, rose 0.3% for the month of June. If the economy remains strong, as we
think it will, bond issuers should be able to continue making income payments on
their existing high-yielding, higher risk bonds.
REDUCED DEMAND PUTS
DAMPER ON HIGH-YIELD
BOND PRICES
Throughout fiscal 1999, the high-yield bond market generally suffered from
reduced demand and a corresponding low level of liquidity. The lack of liquidity
stemmed in large part from unwillingness
WE CONTINUE TO USE
THE FUND'S AGILITY TO
TAKE ADVANTAGE OF
MORE ATTRACTIVE
INVESTMENT
OPPORTUNITIES.
overview
Why Invest in High-Yield Bonds?
o Broader portfolio diversification. High-yield bonds behave differently than
either stocks or high-quality bonds. Though there is no guarantee that
high-yield bonds will continue to behave this way, we believe they are likely
to do so because their value depends both on the interest rate environment
(similar to bonds) and whether corporations are enjoying favorable economic
conditions (similar to stocks). Adding high-yield bonds to a portfolio
provides another layer of diversification that can help reduce the volatility
risk of your overall portfolio.
o High income potential. High-yield bonds involve greater risk, but they also
typically offer the highest income potential of any other fixed-income
alternative.
o Stock-like return potential with less volatility. Over the long term,
high-yield bonds have historically delivered returns comparable to the
long-term average of stocks with a lower level of volatility than stocks. Past
performance is not a guarantee of future results. (Source: Lipper Analytical
Services, Inc.)
<PAGE>
for current
income
4
(photo of family on beach)
among Wall Street underwriters to use their own capital to create markets for
the issues they had underwritten.
We believe dealers were reluctant to commit capital to the market because of
losses during the flight to Treasuries in 1998. As a result of those losses,
many firms implemented new risk management guidelines, which included cutting
their exposure to the bond market by reducing inventories of corporate and
mortgage-backed securities.
We also believe firms are keeping inventories light in case interest rates
move higher this year. When interest rates rise, bond prices generally decline.
And, we think uncertainty about Y2K may be contributing to reduced activity.
Should sentiment shift and high-yield bond prices rebound, we believe that
Wall Street's underwriters and market makers will ultimately commit more capital
to high-yield, higher risk bonds, seeking to capture their upside potential. We
do not expect this to happen before year-end. For now, we believe high-yield
bond performance will be driven primarily by income.
PORTFOLIO POSITIONING
In managing High-Yield Opportunities Fund, we focus on bonds that we believe
offer an attractive level of income and the potential for price appreciation. We
also seek to manage credit risk by focusing on issuers who demonstrate a high
likelihood of being able to pay their debt obligations.
In keeping with this approach and the Fund's primary investment objective to
seek total return, we typically concentrate on bonds rated BB and B, the upper
credit tiers of non-investment grade bonds. As of July 31, 1999, single B bonds
represented 60% of net assets with 33% allocated to BB bonds.
Though our emphasis on bonds rated BB and B was the primary reason for the
Fund's underperformance in fiscal 1999, we continue to structure the portfolio
with a bias toward bonds in the higher tiers of non-investment grade issues
rather than those with the lowest credit ratings, in an effort to help preserve
capital in down markets.
FOR NOW, WE BELIEVE
HIGH-YIELD BOND
PERFORMANCE WILL
BE DRIVEN PRIMARILY
BY INCOME.
positioning
PORTFOLIO CHARACTERISTICS
- --------------------------------------------------------------------------------
AS OF JULY 31, 1999
Current 30-Day SEC Yield+ 8.07%
Average Effective Duration 5.01 years
Average Effective Maturity 7.67 years
Portfolio Turnover 382%
Number of Securities 79
- --------------------------------------------------------------------------------
+ For A Class shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 7/31/99 for B and C Class
shares was 7.77%. The Institutional Class yield was 8.79%.
<PAGE>
for current
income
5
(photo of computer keyboard)
[GRAPHIC]
During fiscal 1999, High-Yield Opportunities Fund's total net assets
increased from $15 million to $25 million--still fairly small compared to other
high-yield mutual funds. Since it began operations two and a half years ago, the
Fund's small size has given us added flexibility to move in and out of
securities as needed.
We continue to use the Fund's agility to take advantage of more attractive
investment opportunities. That is reflected in the Fund's 382% turnover rate for
fiscal 1999. Much of the turnover occurred in the first fiscal half, when we
found opportunities to replace many of the portfolio's existing holdings with
bonds we considered to have better risk/reward profiles. There were fewer such
opportunities between February 1 and July 31 due to reduced liquidity in the
high-yield market and consequently, the turnover rate for that period was
significantly lower at just 77%.
INVESTMENT OUTLOOK
The high-yield bond market is in the midst of an unusual period in its history.
In spite of a near perfect domestic economy and the prospect of imminent
economic recovery in Asia and Latin America, the high-yield bond market has been
stymied by poor trading liquidity and an uncertain market outlook.
Our long-term expectations for U.S. high-yield bonds are positive. If the
U.S. economy remains strong and fundamental conditions in the high-yield
market--relatively strong credit quality, low default rates and above average
yields--do not change, we believe investors will eventually re-allocate assets
to high-yield bonds, seeking to capture the compelling opportunities for high
current income with potential for capital appreciation.
outlook
SECTOR ALLOCATION
- --------------------------------------------------------------------------------
TOP INDUSTRY SECTORS AS OF JULY 31, 1999
Percentage of Assets
- --------------------------------------------------------------------------------
Building & Materials 5.61%
Cable, Media & Publishing 9.15%
Chemicals 10.48%
Energy 11.17%
Food, Beverage & Tobacco 9.50%
Industrial Machinery 5.09%
Leisure, Lodging & Entertainment 9.08%
Telecommunications 5.85%
Miscellaneous 6.14%
- --------------------------------------------------------------------------------
Includes all sectors representing more than 5% of the portfolio. The remaining
27.93% of the portfolio is diversified among 11 different sectors.
<PAGE>
for current
income
6
Performance Summary
HIGH-YIELD OPPORTUNITIES FUND
Growth of a $10,000 Investment
December 31, 1996 to July 31, 1999
Delaware High-Yield Salomon Smith Barney
Opportunties U.S. Consumer High-Yield Bond
Fund A Class Price Index Cash Pay Index
------------------- ------------ --------------------
Dec. '96 $ 9,525 $10,000 $10,000
Jan. '97 $ 9,723 $10,032 $10,153
Feb. '97 $ 9,983 $10,063 $10,314
Mar. '97 $ 9,792 $10,088 $10,231
Apr. '97 $ 9,844 $10,101 $10,317
May '97 $10,196 $10,095 $10,513
Jun. '97 $10,393 $10,107 $10,682
Jul. '97 $10,562 $10,120 $10,916
Aug. '97 $10,607 $10,139 $10,930
Sep. '97 $10,957 $10,164 $11,101
Oct. '97 $11,043 $10,189 $11,198
Nov. '97 $11,068 $10,183 $11,285
Dec. '97 $11,151 $10,170 $11,399
Jan. '98 $11,495 $10,189 $11,646
Feb. '98 $11,644 $10,208 $11,728
Mar. '98 $11,779 $10,227 $11,857
Apr. '98 $11,899 $10,246 $11,932
May '98 $12,018 $10,265 $11,959
Jun. '98 $11,999 $10,277 $11,994
Jul. '98 $12,184 $10,290 $12,083
Aug. '98 $11,738 $10,303 $11,339
Sep. '98 $11,518 $10,315 $11,481
Oct. '98 $11,252 $10,340 $11,376
Nov. '98 $11,568 $10,340 $11,904
Dec. '98 $11,474 $10,334 $11,904
Jan. '99 $11,655 $10,359 $12,057
Feb. '99 $11,684 $10,372 $11,949
Mar. '99 $11,751 $10,404 $12,024
Apr. '99 $11,848 $10,479 $12,228
May '99 $11,699 $10,479 $12,071
Jun. '99 $11,687 $10,479 $12,035
Jul. '99 $11,666 $10,479 $12,098
Chart assumes $10,000 invested on December 30, 1996, a 4.75% front-end sales
charge and reinvestment of all distributions. Performance for other Fund classes
will vary due to differing charges and expenses. Past performance does not
guarantee future results.
<PAGE>
HIGH-YIELD OPPORTUNITIES FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JULY 31, 1999
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est.12/30/96)
Excluding Sales Charge +8.21% -4.26%
Including Sales Charge +6.23% -8.88%
- --------------------------------------------------------------------------------
Class B (Est. 2/17/98)
Excluding Sales Charge -1.06% -4.91%
Including Sales Charge -3.50% -8.37%
- --------------------------------------------------------------------------------
Class C (Est. 2/17/98)
Excluding Sales Charge -1.08% -4.91%
Including Sales Charge -1.08% -5.78%
The Fund invests primarily in high-yield bonds, which involve greater risk than
higher quality bonds. Returns reflect reinvestment of distributions and any
applicable sales charges as noted below. Return and share value will fluctuate
so that shares, when redeemed, may be worth more or less than the original cost.
B and C Class results excluding sales charge assumes either that contingent
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results. An expense limitation was in effect for
the periods shown. Performance would have been lower without the limitation.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales charge
of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
Institutional Class shares are available without sales or asset-based
distribution charges only to certain eligible institutional accounts. Average
annual Institutional Class returns through July 31, 1999 were:
Lifetime One Year
High-Yield Opportunities Fund
(Est. 12/30/96) +8.39% -3.96%
<PAGE>
for current income 7
Financial Statements
DELAWARE GROUP INCOME FUNDS, INC. - HIGH-YIELD OPPORTUNITIES FUND
STATEMENT OF NET ASSETS
JULY 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
CORPORATE BONDS - 96.51%
Aerospace & Defense - 2.23%
BE Aerospace 9.50% 11/1/08 ....................... $350,000 $ 355,688
Compass Aerospace sub nts 10.125% 4/15/05 ........ 200,000 189,750
---------
545,438
---------
AUTOMOBILE & AUTOMOTIVE PARTS - 1.33%
Federal Mogul 7.50% 1/15/09 ...................... 350,000 325,063
---------
325,063
---------
BUILDING & MATERIALs - 5.61%
Formica sr sub nts 10.875% 3/1/09 ................ 400,000 391,500
Henry sr nts 10.00% 4/15/08 ...................... 200,000 181,750
Kaufman & Broad Home sr unsec nts
7.75% 10/15/04 ................................ 400,000 399,500
Williams Scotsman sr nts 9.875% 6/1/07 ........... 400,000 400,000
---------
1,372,750
---------
CABLE, MEDIA & PUBLISHING - 9.15%
Adelphia Communications sr nts 7.875% 5/1/09 ..... 450,000 418,500
Classic Cable sr sub nts 9.375% 8/1/09 ........... 400,000 399,000
Classic Cable sr sub nts 9.875% 8/1/08 ........... 325,000 338,000
Emmis Communications sr sub nts
8.125% 3/15/09 ................................ 250,000 241,875
Hollinger International Publishing sr sub nts
9.25% 3/15/07 ................................. 300,000 309,000
Muzac sr sub nts 9.875% 3/15/09 .................. 200,000 200,000
R.H. Donnelly sr nts 9.125% 6/1/08 ............... 325,000 331,906
---------
2,238,281
---------
CHEMICALS - 10.48%
LaRoche Industries sr sub nts 9.50% 9/15/07 ...... 200,000 146,000
Lyondell Chemical 10.875% 5/1/09 ................. 350,000 357,873
Phillip Brothers sr sub nts 9.875% 6/1/08 ........ 350,000 328,561
Precise Technology unsec sr sub nts
11.125% 6/15/07 ............................... 250,000 238,436
Scotts Company sr sub nts 8.625% 1/15/09 ......... 375,000 373,125
Sterling Chemicals 12.375% 7/15/06 ............... 400,000 409,000
Sterling Chemicals sr sub nts 11.75% 8/15/06 ..... 375,000 300,000
ZSC Specialty Chemicals 11.00% 7/1/09 ............ 400,000 410,000
---------
2,562,995
---------
CONSUMER PRODUCTS - 3.08%
CEX Holdings sr sub nts 9.625% 6/1/08 ............ 325,000 330,688
Doskocil Manufacturing sr sub nts
10.125% 9/15/07 ............................... 275,000 156,750
Riddell Sports sr unsec sub nts
10.50% 7/15/07 ................................ 250,000 223,750
+Spin Cycle sr disc nts 12.75% 5/1/05 ............. 250,000 42,500
---------
753,688
---------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ----------
CORPORATE BONDS (Continued)
Electronics & Electrical Equipment - 0.40%
Electronic Retailing Systems sr disc nts
13.25% 2/1/04 ................................... $300,000 $ 97,500
----------
97,500
----------
ENERGY - 11.17%
Comstock Resources sr nts 11.25% 5/1/07 ............ 350,000 358,750
Leviathan Gas 10.375% 6/1/09 ....................... 425,000 437,750
P and L Coal Holdings 8.875% 5/15/08 ............... 325,000 325,000
Pride International Inc 10.00% 6/1/09 .............. 450,000 461,250
RBF Finance sr sec nts 11.375% 3/15/09 ............. 725,000 754,000
Swift Energy 10.25% 8/1/09 ......................... 400,000 396,944
----------
2,733,694
----------
ENVIRONMENTAL SERVICES - 2.90%
Allied Waste North America sr unsec nts
7.875% 1/1/09 ................................... 400,000 370,000
Safety Kleen Services unsec sr sub nts
9.25% 6/1/08 .................................... 325,000 339,219
----------
709,219
----------
FOOD, BEVERAGE & TOBACCO - 9.50%
AFC Enterprises sr sub nts 10.25% 5/15/07 .......... 75,000 78,000
Aurora Foods sr sub nts 8.75% 7/1/08 ............... 200,000 199,000
Avado Brands 11.75% 6/15/09 ........................ 500,000 491,250
Canadaigua Brands 8.50% 3/1/09 ..................... 350,000 337,750
Carrols 9.50% 12/1/08 .............................. 400,000 381,500
Chiquita Brands 10.00% 6/15/09 ..................... 350,000 346,500
National Wine & Spirit sr nts 10.125% 1/15/09 ...... 475,000 491,031
----------
2,325,031
----------
HEALTHCARE & PHARMACEUTICALS - 2.96%
Fisher Scientific International 9.00% 2/1/08 ....... 400,000 385,000
Tenet Healthcare 8.625% 1/15/07 .................... 350,000 338,625
----------
723,625
----------
INDUSTRIAL MACHINERY - 5.09%
Anthony Crane Rental 10.375% 8/1/08 ................ 200,000 194,500
Jackson Products 9.50% 4/15/05 ..................... 225,000 219,094
Mark IV sr sub nts 7.75% 4/1/06 .................... 400,000 387,500
United Rentals 9.25% 1/15/09 ....................... 450,000 444,938
----------
1,246,032
----------
LEISURE, LODGING & ENTERTAINMENT - 9.08%
Carmike Cinemas sr sub nts 9.375% 2/1/09 ........... 575,000 562,063
Cinemark USA Series C sr sub nts
9.625% 8/1/08 ................................... 350,000 338,625
Harrah's Operating unsec sr sub nts
7.875% 12/15/05 ................................. 400,000 384,000
Mohegan Tribal Gaming 8.75% 1/1/09 ................. 350,000 344,750
Park Place Entertainment sr sub nts
7.875% 12/15/05 ................................. 400,000 379,000
United Artists Theatre sr sub nts 9.75% 4/15/08 .... 325,000 211,250
----------
2,219,688
----------
<PAGE>
8 for current income
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
----------- -----------
CORPORATE BONDS (Continued)
METALS & MINING - 4.59%
AK Steel 9.125% 12/15/06 ........................ $350,000 $ 362,250
Armco sr nts 8.875% 12/1/08 ..................... 400,000 408,000
Kaiser Aluminum & Chemical 9.875% 2/15/02 ....... 350,000 351,750
-----------
1,122,000
-----------
PAPER & FOREST PRODUCTS - 1.33%
Republic Group sr sub nts 9.50% 7/15/08 ......... 325,000 324,594
-----------
324,594
-----------
RETAIL - 2.86%
Duane Reade sr sub nts 9.25% 2/15/08 ............ 175,000 177,625
Leslie's Poolmart sr nts 10.375% 7/15/04 ........ 250,000 257,188
Pueblo Xtra International 9.50% 8/1/03 .......... 300,000 264,000
-----------
698,813
-----------
TELECOMMUNICATIONS - 5.85%
Intermedia Communications sr nts
9.50% 3/1/09 ................................. 250,000 240,000
Level 3 Communications sr nts 9.125% 5/1/08 ..... 350,000 332,500
McLeodUSA sr nts 8.125% 2/15/09 ................. 250,000 226,875
+Nextel Communications sr disc nts
10.65% 9/15/07 ............................... 300,000 220,500
Pathnet sr nts 12.25% 4/15/08 ................... 300,000 174,000
+Viatel sr disc nts 12.50% 4/15/08 ............... 375,000 236,250
-----------
1,430,125
-----------
TRANSPORTATION & SHIPPING - 2.76%
American Commercial Lines 10.25% 6/30/08 ........ 325,000 332,719
Atlas Air sr nts 9.375% 11/15/06 ................ 350,000 342,563
-----------
675,282
-----------
MISCELLANEOUS - 6.14%
Avis Rent A Car 11.00% 5/1/09 ................... 400,000 411,000
Caithness 9.05% 12/15/09 ........................ 400,000 400,000
Group Maintenance sr sub nts 9.75% 1/15/09 ...... 375,000 367,500
Integrated Electric Services 9.375% 2/1/09 ...... 325,000 322,563
-----------
1,501,063
-----------
Total Corporate Bonds (cost $24,629,015) ........ 23,604,881
-----------
Number of
Shares
---------
PREFERRED STOCK - 0.82%
TELECOMMUNICATIONS - 0.82%
21st Century Telecommunications Group ........... 4,739 199,025
Nextel Communications ........................... 1 1,055
-----------
Total Preferred Stock (cost $445,531) ........... 200,080
-----------
WARRANTS - 0.34%
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.01%
*Electronic Retailing System ..................... 300 38
*Pathnet ......................................... 300 3,000
*Spin Cycle ...................................... 250 3
-----------
3,041
-----------
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF MARKET
SHARES VALUE
----------- -----------
<S> <C> <C>
WARRANTS (Continued)
TELECOMMUNICATIONS - 0.33%
*21st Century Telecommunications .................................. 3,511 $ 80,000
-----------
80,000
-----------
Total Warrants (cost $34,767) .................................... 83,041
-----------
PRINCIPAL
AMOUNT
---------
REPURCHASE AGREEMENTS - 3.16%
With Chase Manhattan Bank 5.03% 8/2/99
(dated 7/30/99, collateralized by $269,000
U.S. Treasury Notes 5.625% due 10/31/99,
market value $273,292) ........................................ $ 266,000 266,000
With JP Morgan Securities 5.00% 8/2/99
(dated 7/30/99, collateralized by $84,000
U.S. Treasury Notes 5.625% due 2/28/01,
market value $86,500 and $84,000 U.S. .........................
Treasury Notes 6.50% due 5/31/01, market
value $86,612 and $82,000 U.S. Treasury
Notes 6.625% due 3/31/02, market value
$85,450)....................................................... 253,000 253,000
With PaineWebber 5.00% 8/2/99
(dated 7/30/99, collateralized by $82,000
U.S. Treasury Notes 5.625% due 12/31/99,
market value $82,420 and $169,000 U.S. ........................
Treasury Notes 6.625% due 3/31/02, market
value $176,179) ............................................... 254,000 254,000
-----------
Total Repurchase Agreements (cost $773,000) ...................... 773,000
-----------
TOTAL MARKET VALUE OF SECURITIES
(COST $25,882,313) - 100.83% .................................. $24,661,002
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.83%)......... (203,209)
-----------
NET ASSETS APPLICABLE TO 4,775,097 SHARES
($1 PAR VALUE) OUTSTANDING - 100.00% .......................... $24,457,793
===========
NET ASSET VALUE - HIGH-YIELD OPPORTUNITIES FUND A CLASS
($12,558,130 / 2,451,789 SHARES) .............................. $ 5.12
===========
NET ASSET VALUE - HIGH-YIELD OPPORTUNITIES FUND B CLASS
($6,295,688 / 1,229,150 SHARES) ............................... $ 5.12
===========
NET ASSET VALUE - HIGH-YIELD OPPORTUNITIES FUND C CLASS
($1,913,176 / 373,524 SHARES) ................................. $ 5.12
===========
NET ASSET VALUE - HIGH-YIELD OPPORTUNITIES FUND
INSTITUTIONAL CLASS ($3,690,799 / 720,634 SHARES) ............. $ 5.12
===========
</TABLE>
<PAGE>
for current income 9
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT JULY 31, 1999:
Common 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........................................ $26,490,963
Undistributed net investment income........................... 6,592
Accumulated net realized loss on investments.................. (818,451)
Net unrealized depreciation of investments.................... (1,221,311)
------------
Total net assets.............................................. $24,457,793
============
- ----------------------
+Zero coupon security as of July 31, 1999. The coupon shown is the step-up rate.
*Non-income producing security for the year ended July 31, 1999.
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
HIGH-YIELD OPPORTUNITIES FUND A CLASS
Net asset value A class (A)................................... $5.12
Sales charge (4.75% of offering price or 5.08% of the amount
invested per share) (B).................................... 0.26
------------
Offering price................................................ $5.38
============
- ----------------------
(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 How to Buy Shares in the current Prospectus for purchases of $100,000 or
more.
Summary of Abbreviations:
disc - discount
nts - notes
sr - senior
sec - secured
sub - subordinated
unsec - unsecured
See accompanying notes
<PAGE>
DELAWARE GROUP INCOME FUNDS, INC. -
HIGH-YIELD OPPORTUNITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments at market (cost $25,882,313) .. $24,661,002
Receivable for securities sold ............ 1,008,044
Dividends and interest receivable ......... 523,511
Subscriptions receivable .................. 50,522
-----------
Total assets .............................. 26,243,079
-----------
LIABILITIES:
Payable for securities purchased .......... 1,697,548
Dividends payable ......................... 34,652
Liquidations payable ...................... 11,558
Other accounts payable and accrued expenses 41,528
-----------
Total liabilities ......................... 1,785,286
-----------
TOTAL NET ASSETS .......................... $25,457,793
===========
See accompanying notes
<PAGE>
10 for current income
DELAWARE GROUP INCOME FUNDS, INC. -
HIGH-YIELD OPPORTUNITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ......................................... $ 1,807,004
Dividends ........................................ 64,003 $ 1,871,007
----------- -----------
EXPENSES:
Management fees .................................. 131,019
Registration fees ................................ 85,000
Distribution expense ............................. 78,703
Reports and statements to shareholders ........... 42,629
Dividend disbursing and transfer agent fees
and expenses .................................. 33,551
Professional fees ................................ 9,301
Accounting and administration .................... 7,997
Custodian fees ................................... 7,559
Taxes (other than taxes on income) ............... 5,000
Directors' fees .................................. 1,304
Other ............................................ 6,507 408,570
----------- -----------
Less expenses absorbed or waived ................. (126,963)
Less fees paid indirectly ........................ (2,870)
-----------
Total expenses ................................... 278,737
-----------
NET INVESTMENT INCOME ............................ 1,592,270
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments ................. (818,418)
Net change in unrealized appreciation/depreciation
of investments ................................ (1,440,010)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ................................ (2,258,428)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................... $ (666,158)
===========
See accompanying notes
<PAGE>
DELAWARE GROUP INCOME FUNDS, INC. -
HIGH-YIELD OPPORTUNITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
7/31/99 7/31/98
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ..................................................... $ 1,592,270 $ 964,255
Net realized gain (loss) on investments ................................... (818,418) 545,351
Net change in unrealized appreciation/depreciation
of investments ......................................................... (1,440,010) 4,234
------------ ------------
Net increase (decrease) in net assets resulting
from operations ........................................................ (666,158) 1,513,840
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ................................................................ (929,578) (696,516)
B Class ................................................................ (271,969) (15,881)
C Class ................................................................ (90,611) (4,660)
Institutional Class .................................................... (311,216) (369,702)
Net realized gain on investments:
A Class ................................................................ (219,201) (264,225)
B Class ................................................................ (58,238) --
C Class ................................................................ (18,815) --
Institutional Class .................................................... (69,788) (146,731)
------------ ------------
(1,969,416) (1,497,715)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ................................................................ 6,326,031 3,291,902
B Class ................................................................ 6,467,171 1,599,171
C Class ................................................................ 1,946,694 554,661
Institutional Class .................................................... 26,516 --
Net asset value of shares issued upon reinvestment of distributions from net
investment income and net realized gain on investments:
A Class ................................................................ 997,958 922,596
B Class ................................................................ 160,232 6,132
C Class ................................................................ 63,760 3,037
Institutional Class .................................................... 356,221 507,888
------------ ------------
16,344,583 6,885,387
------------ ------------
Cost of shares repurchased:
A Class ................................................................ (2,872,684) (546,285)
B Class ................................................................ (1,534,693) (4,598)
C Class ................................................................ (502,146) (11,944)
Institutional Class .................................................... -- --
------------ ------------
(4,909,523) (562,827)
------------ ------------
Increase in net assets derived from capital
share transactions ..................................................... 11,435,060 6,322,560
------------ ------------
NET INCREASE IN NET ASSETS ................................................ 8,799,486 6,338,685
NET ASSETS:
Beginning of year ......................................................... 15,658,307 9,319,622
------------ ------------
End of year ............................................................... $24,457,793 $ 15,658,307
============ ============
</TABLE>
See accompanying notes
<PAGE>
for current income 11
DELAWARE GROUP INCOME FUNDS, INC. -
HIGH-YIELD OPPORTUNITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
HIGH-YIELD OPPORTUNITIES HIGH-YIELD OPPORTUNITIES
FUND A CLASS FUND B CLASS
----------------------------------------- --------------------------
YEAR YEAR 12/30/96(1) YEAR 2/17/98(1)
ENDED ENDED TO ENDED TO
7/31/99 7/31/98 7/31/97 7/31/99 7/31/98
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $5.920 $5.920 $5.500 $5.920 $5.870
Income (loss) from investment operations:
Net investment income ................................. 0.434 0.523 0.290(2) 0.401 0.161
Net realized and unrealized gain (loss) on investments (0.691) 0.336 0.299 (0.694) 0.044
------- ------- -------- ------- -------
Total from investment operations ...................... (0.257) 0.859 0.589 (0.293) 0.205
------- ------- -------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.438) (0.605) (0.169) (0.402) (0.155)
Distributions from net realized gain on investments ... (0.105) (0.254) -- (0.105) --
------- ------- -------- ------- -------
Total dividends and distributions ..................... (0.543) (0.859) (0.169) (0.507) (0.155)
------- ------- -------- ------- -------
Net asset value, end of period ........................... $5.120 $5.920 $5.920 $5.120 $5.920
======= ======= ======== ======= =======
Total return(3) .......................................... (4.26%) 15.66% 10.81% (4.91%) 3.54%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $12,558 $9,670 $5,990 $6,296 $1,603
Ratio of expenses to average net assets ............... 1.27% 1.14% 0.75% 1.97% 1.84%
Ratio of expenses to average net assets prior to
expense limitation and fees paid indirectly ........ 1.89% 1.44% 1.57% 2.59% 2.14%
Ratio of net investment income to average net assets .. 8.02% 8.88% 8.53% 7.32% 8.18%
Ratio of net investment income to average net assets
prior to expense limitation and fees paid indirectly 7.39% 8.58% 7.70% 6.69% 7.88%
Portfolio turnover .................................... 382% 317% 270% 382% 317%
</TABLE>
- ---------------
(1) Date of initial public offering: ratios have been annualized but total
return has not been annualized. Total return for this short of a time
period may not be representative of longer term results.
(2) The average shares outstanding method has been applied for per share
information.
(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
<PAGE>
12 for current income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:
<TABLE>
<CAPTION>
HIGH-YIELD OPPORTUNITIES FUND HIGH-YIELD OPPORTUNITIES FUND
C CLASS INSTITUTIONAL CLASS
----------------------------- ----------------------------------------
YEAR 2/17/98(1) YEAR YEAR 12/30/96(1)
ENDED TO ENDED ENDED TO
7/31/99 7/31/98 7/31/99 7/31/98 7/31/97
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $5.920 $5.870 $5.920 $5.920 $5.500
Income (loss) from investment operations:
Net investment income .................................. 0.403 0.161 0.444 0.537 0.290(2)
Net realized and unrealized gain (loss) on investments . (0.696) 0.044 (0.684) 0.330 0.299
------ ------ ------ ------ ------
Total from investment operations ....................... (0.293) 0.205 (0.240) 0.867 0.589
------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income ................... (0.402) (0.155) (0.455) (0.613) (0.169)
Distributions from net realized gain on investments .... (0.105) 0.000 (0.105) (0.254) --
------ ------ ------ ------ ------
Total dividends and distributions ...................... (0.507) (0.155) (0.560) (0.867) (0.169)
------ ------ ------ ------ ------
Net asset value, end of period ............................ $5.120 $5.920 $5.120 $5.920 $5.920
====== ====== ====== ====== ======
Total return(3) ........................................... (4.91%) 3.54% (3.96%) 15.82% 10.81%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $1,913 $547 $3,691 $3,837 $3,330
Ratio of expenses to average net assets ................ 1.97% 1.84% 0.97% 0.84% 0.75%
Ratio of expenses to average net assets prior to
expense limitation and fees paid indirectly ........ 2.59% 2.14% 1.59% 1.14% 1.27%
Ratio of net investment income to average net assets ... 7.32% 8.18% 8.32% 9.18% 8.53%
Ratio of net investment income to average net assets
prior to expense limitation and fees paid indirectly 6.69% 7.88% 7.69% 8.88% 8.00%
Portfolio turnover ..................................... 382% 317% 382% 317% 270%
</TABLE>
- --------------
(1) Date of initial public offering: ratios have been annualized but total
return has not been annualized. Total return for this short of a time
period may not be representative of longer term results.
(2) The average shares outstanding method has been applied for per share
information.
(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
<PAGE>
for current income 13
DELAWARE GROUP INCOME FUNDS, INC. -
HIGH-YIELD OPPORTUNITIES FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1999
- --------------------------------------------------------------------------------
Delaware Group Income Funds, Inc. is 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 five series: the
Corporate Bond Fund, the Extended Duration Bond Fund, the Delchester Fund, the
High-Yield Opportunities Fund and the Strategic Income Fund. These financial
statements and related notes pertain to the High-Yield Opportunities Fund (the
"Fund"). The Fund offers four classes of shares. The A Class carries a front-end
sales charge of 4.75%. The B Class carries a back-end deferred sales charge. The
C Class carries a level load deferred sales charge and the Institutional Class
has no sales charge.
The investment objective of the High-Yield Opportunities Fund is to seek total
return, and as a secondary objective, high current income.
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 the close of the NYSE 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 such prices are believed to reflect the fair
value of such securities. Money market instruments having less than 60 days to
maturity are valued at amortized cost, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's 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.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles 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.
<PAGE>
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. Original issue discounts are accreted to interest
income over the lives of the respective securities. The Fund declares dividends
daily from net investment income and pays such dividends monthly and declares
and pay distributions from net realized gain on investments, if any, annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to the best price and execution.
The amount of these expenses was approximately $464 for the year ended July 31,
1999. In addition, the Fund receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
The earnings credits for the year ended July 31, 1999 were $2,406. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statement of Operations with the corresponding expense offset
shown as "fees paid indirectly".
2. Investment Management and Other Transactions with Affiliates
Commencing April 1, 1999, and in accordance with the terms of the Investment
Management Agreement, the Fund pays Delaware Management Company (DMC), the
Investment Manager of the Fund, an annual fee which is calculated daily at the
rate of 0.65% on the first $500 million of the average daily net assets, 0.60%
on the next $500 million, 0.55% on the next $1,500 million, and 0.50% of the
average net assets in excess of $2,500 million. Prior to April 1, 1999, the Fund
paid DMC an annual fee which was calculated at the rate of 0.65% on the first
$500 million of the average daily net assets, 0.625% on the next $500 million
and 0.60% of the average net assets in excess of $1 million, less fees paid to
unaffiliated directors. At July 31, 1999, the liability for investment
management fees and other expenses payable to DMC was $3,991.
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Fund to the extent that annual expenses, exclusive of taxes,
interest, brokerage commissions, distribution and extraordinary expenses, exceed
1.00% of average daily net assets of the Fund through September 30, 1999. Prior
to April 12, 1999, the expenses were limited to 0.95% of average daily net
assets of the Fund.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent and accounting services. The Fund
pays DSC a monthly fee based on the number of shareholder accounts, shareholder
transactions, and average net assets, subject to certain minimums. At July 31,
1999, the Fund had a liability for such fees and other expenses payable to DSC
of $3,191.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes.
For the year ended July 31, 1999, commissions earned by DDLP on sales of the
Fund's A Class shares were $15,293.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
<PAGE>
14 for current income
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. Investments
During the year ended July 31, 1999, the Fund made purchases and sales of
$76,403,261 and $64,790,337, respectively, of investment securities other than
U.S. government securities and temporary cash investments.
At July 31, 1999, net unrealized depreciation for federal income tax purposes
aggregated $1,221,311 of which $220,928 related to unrealized appreciation of
securities and $1,442,239 related to unrealized depreciation of securities. At
July 31, 1999, the aggregate cost of securities for federal income tax purposes
was $25,882,313.
For federal income tax purposes, the Fund had a capital loss carryforward of
$65,503 expiring in 2007 which may be carried forward and applied against future
gains.
4. Capital Stock
Transactions in capital stock shares were as follows:
YEAR YEAR
ENDED ENDED
7/31/99 7/31/98
---------- ---------
Shares sold:
A Class ................................... 1,173,029 557,471
B Class ................................... 1,218,230 270,668
C Class ................................... 364,066 94,007
Institutional Class ....................... 5,052 --
Shares issued upon reinvestment of dividends
from net investment income and net realized
gain on investments:
A Class ................................... 187,800 158,375
B Class ................................... 30,387 1,039
C Class ................................... 12,081 514
Institutional Class ....................... 66,867 87,197
---------- ----------
3,057,512 1,169,271
---------- ----------
Shares repurchased:
A Class ................................... (543,858) (92,469)
B Class ................................... (290,396) (778)
C Class ................................... (95,113) (2,031)
Institutional Class ....................... -- --
---------- ----------
(929,367) (95,278)
---------- ----------
Net increase ................................. 2,128,145 1,073,933
========== ==========
<PAGE>
5. Lines of Credit
The Fund has a committed line of credit of $400,000. No amount was outstanding
at July 31, 1999, or at any time during the fiscal year.
6. Credit and Market Risk
The Fund invests in high-yield fixed-income securities, which carry ratings of
BB or lower by S&P 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 securities.
The Fund invests up to 15% of its total assets in illiquid securities which may
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.
<PAGE>
for current income 15
DELAWARE GROUP INCOME FUNDS, INC. -
HIGH-YIELD OPPORTUNITIES FUND
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
DELAWARE GROUP INCOME FUNDS, INC. - HIGH-YIELD OPPORTUNITIES FUND
We have audited the accompanying statement of net assets and statement of assets
and liabilities of Delaware Group Income Funds, Inc. -- High-Yield Opportunities
Fund (the "Fund") as of July 31, 1999, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of July 31, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware Group Income Funds, Inc. -- High-Yield Opportunities Fund at July 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
\s\ ERNST & YOUNG LLP
-----------------------
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
September 6, 1999
<PAGE>
16 for current income
PROXY RESULTS
(UNAUDITED)
- --------------------------------------------------------------------------------
The Delaware Group Income Funds, Inc. shareholders voted the following proposals
at the annual meeting of shareholders on March 17, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:
1. To elect the Delaware Group Income Funds, Inc. Board of Directors.
SHARES SHARES VOTED
VOTED WITHHELD
FOR AUTHORITY
---------------------------
Jeffrey J. Nick......................... 167,789,240 14,445,510
Walter P. Babich........................ 167,879,941 14,354,809
John H. Durham.......................... 168,015,378 14,219,372
Anthony D. Knerr........................ 168,075,457 14,159,293
Ann R. Leven............................ 168,052,435 14,182,315
Thomas F. Madison....................... 168,053,081 14,181,669
Charles E. Peck......................... 168,093,442 14,141,308
Wayne A. Stork.......................... 168,129,118 14,105,632
Jan L. Yeomans.......................... 168,135,284 14,099,466
2. To approve standardized fundamental investment restrictions for the
High-Yield Opportunities Fund (proposal involves separate votes on seven
sub-proposals 2A-2G).
2A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
FOR AGAINST ABSTAIN
------------------------------------------
2,629,824 71,655 143,463
2B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
FOR AGAINST ABSTAIN
------------------------------------------
2,619,290 82,189 143,463
2C. To adopt a new fundamental investment restriction concerning underwriting.
FOR AGAINST ABSTAIN
------------------------------------------
2,620,873 80,606 143,463
<PAGE>
2D. To adopt a new fundamental investment restriction concerning investments in
real estate.
FOR AGAINST ABSTAIN
------------------------------------------
2,620,159 72,369 152,414
2E. To adopt a new fundamental investment restriction concerning investments in
commodities.
FOR AGAINST ABSTAIN
------------------------------------------
2,612,410 86,880 145,652
2F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
FOR AGAINST ABSTAIN
------------------------------------------
2,629,437 72,369 143,136
2G. To reclassify all current fundamental investment restrictions as
non-fundamental.
FOR AGAINST ABSTAIN
------------------------------------------
2,597,738 72,515 174,690
3. To approve a new investment management agreement with Delaware Management
Company for the High-Yield Opportunities Fund.
FOR AGAINST ABSTAIN
------------------------------------------
3,244,100 74,225 160,485
4. To ratify the selection of Ernst & Young LLP, as the independent auditors
for Delaware Group Income Funds, Inc.
FOR AGAINST ABSTAIN
------------------------------------------
170,342,196 1,709,355 10,183,195
5. To approve the restructuring of the Delaware Group Income Funds, Inc. from a
Maryland Corporation into a Delaware Business Trust.
FOR AGAINST ABSTAIN
------------------------------------------
133,129,206 5,660,859 12,632,334
<PAGE>
THIS ANNUAL REPORT IS FOR THE INFORMATION OF HIGH-YIELD OPPORTUNITIES FUND
SHAREHOLDERS, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Delaware High-Yield Opportunities Fund
and the Delaware Investments Performance Update for the most recently completed
calendar quarter. The Prospectus sets forth details about charges, expenses,
investment objectives and operating policies of the Fund. You should read the
prospectus carefully before you invest or send money. The figures in this report
represent past results which are not a guarantee of future results. The return
and principal value of an investment in the Fund will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES
WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
JOHN H. DURHAM
Partner, Complete Care Services
Horsham, PA
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
JAN L. YEOMANS
Vice President and Treasurer
3M Corporation
St. Paul, Minnesota
<PAGE>
AFFILIATED OFFICERS
RICHARD J. FLANNERY
Executive Vice President and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
ERIC E. MILLER
Senior Vice President, Secretary
and Deputy General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
(photo of globes)
directors
& officers
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
<PAGE>
(photo of globes)
When used with prospective investors, this report must be preceded or
accompanied by a current Delaware High-Yield Opportunities Fund Prospectus and
the Delaware Investments Performance Update for the most recently completed
calendar quarter. For a prospectus of any other mutual fund from Delaware
Investments, contact your financial adviser or Delaware Investments.
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
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Printed in the USA
on recycled paper
(2096)
AR-137[7/99] PPL9/99
