<PAGE>
FOR CURRENT INCOME
Strategic Income Fund
[PHOTO OF ILLUSTRATION FROM
CURRENT INCOME BROCHURE]
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
professional management
[various photos demonstrating service guidance,
professional management and goals]
professional management
MORE THAN 70 YEARS of investment experience has taught us that disciplined
strategies and prudent risk management are a sound approach to any market
environment.
goals
goals
WHATEVER YOUR GOALS, the years ahead will be shaped by choices you make today.
Delaware offers many options that can be an appropriate part of a sound
investment plan.
service and guidance
service and guidance
DELAWARE BELIEVES THAT THE GUIDANCE of a professional financial adviser is vital
to your long-term success. We are committed to providing you and your adviser
with the highest quality information and service.
<PAGE>
February 5, 1999
for current
income
1
Dear Shareholder:
FIXED-INCOME PERFORMANCE FOR THE first six months of fiscal 1999 can be best
described as a tale of two markets. On one hand, we saw markets fall into a deep
late summer tailspin following Russia's devaluation of the ruble and failure to
meet certain debt obligations.
The Asian recession added to investors' concerns as it continued to escalate
into a global problem for both emerging and established nations. Global
recession reduced demand for goods, services and raw materials, which slowed
corporate earnings growth and heightened stock market volatility.
Caution became the word of the day. U.S. Treasury bonds rallied as investors
in both in the U.S. and abroad sought to protect their assets from volatile
global economic conditions. Long-term Treasury yields reached 30-year lows.
Prices for other bonds, especially in the higher risk, high-yield market,
dropped sharply as investors fled to the safer ground of better quality
investments.
The market's tale turned by November when investor confidence began to creep
back into the market after three Federal Reserve interest rate cuts. Lower
interest rates added liquidity, helping to ease concerns about a troubled world
economy and slower corporate earnings growth. Treasuries lost some appeal as
investors pursued opportunities to increase their total return and earn more
attractive yields. In December and January, high-yield bonds, investment grade
corporate bonds and mortgage-backed securities bounced back vigorously from
their lows.
In the midst of these shifting market conditions, Strategic Income Fund
provided a total return of -0.05% (for Class A shares with distributions
reinvested at net asset value) for the six months ended January 31, 1999. The
Fund was more successful at preserving capital than a peer group of similar
funds, but lagged the Lehman Brothers Aggregate Bond Index, its unmanaged
benchmark. This Index, however, is composed entirely of investment-grade bonds
and does not reflect volatility experienced by high-yield, higher risk bonds
during the spring and summer. This explains why Strategic Income Fund did not
keep pace with it.
Within its overseas holdings, Strategic Income Fund continued to limit
exposure to bonds issued by Asian governments and corporations. We focused
instead on the attractive yields available
CUMULATIVE TOTAL RETURNS
- --------------------------------------------------------------------------------
Six Months Ended
January 31, 1999
- --------------------------------------------------------------------------------
Strategic Income Fund A Class -0.05%
- --------------------------------------------------------------------------------
Lipper Multi-Sector Fund Average (99 Funds) -1.26%
Lehman Brothers Aggregate Bond Index +4.36%
- --------------------------------------------------------------------------------
All performance shown above is at net asset value. All performance quoted above
assumes reinvestment of all distributions. Complete Fund performance for all
classes can be found on page 9.
<PAGE>
for current
income
2
in South Africa, Canada, Australia and New Zealand. During the autumn, concerns
about declining world commodity prices reduced bond returns in these markets,
but performance returned to form in the fourth quarter, as investors seemed to
believe the world's economic crisis was unlikely to worsen.
Despite ongoing global economic turmoil, the U.S. economy demonstrated its
resilience. In December, the current period of U.S. economic growth surpassed
the 92-month record for peacetime expansion, set during the Reagan era.* Strong
consumer spending helped sustain brisk economic growth in 1998, which matched
1997's annual increase of 3.9%. Despite vigorous economic growth, inflation was
nearly non-existent.
In the pages that follow, Paul A. Matlack, Paul Grillo and Ian G. Sims,
discuss Strategic Income Fund's investment strategy, its performance for the
first half of fiscal 1999 and their outlook for the next six months. By
investing in three distinct market sectors, Strategic Income Fund provides
flexibility that helps capitalize on opportunities and reduce investment risk.
We encourage you to meet regularly with your financial adviser to discuss the
performance of your Fund and review your portfolio's overall asset mix. Thank
you for your continued confidence in Delaware Investments.
Sincerely,
/s/ Jeffrey J. Nick
- -------------------
JEFFREY J. NICK
Chairman, President
and Chief Executive Officer
Delaware Investments Family of Funds
IN DECEMBER, THE CURRENT PERIOD OF U.S. ECONOMIC GROWTH SURPASSED THE 92-MONTH
RECORD FOR PEACETIME EXPANSION, SET DURING THE REAGAN ERA.
Jeffrey J. Nick Named Chairman
On December 17, 1998, Jeffrey J. Nick was named Chairman of the Delaware
Investments Family of Funds. He replaces Wayne A. Stork who has retired as
Chairman of the Board of Directors, but continues to serve as a Board Member.
Mr. Nick was named President and Chief Executive Officer of Delaware Investments
Family of Funds in October 1997. He has been CEO of Lincoln National Investment
Companies, an indirect parent company of Delaware Investments, since October
1996 and previously managed Lincoln's operations in the United Kingdom. Mr. Nick
holds an MBA from the University of Chicago and a Bachelor of Arts degree from
Princeton University.
*Source: Bloomberg Business News
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for current
income
3
Portfolio Managers' Review
By
PAUL A. MATLACK
Delaware Management Company
U.S. High Yield Bonds
PAUL GRILLO
Delaware Management Company
U.S. Investment Grade Bonds
IAN SIMS
Delaware International Advisers Ltd.
Foreign Bonds
February 5, 1999
INVESTMENT STRATEGY
Strategic Income Fund attempts to earn high current income, while providing
investors with opportunities for attractive total return through price
appreciation and the reinvestment of income. We invest the Fund's assets in
three distinct bond market sectors:
o High-yield, higher risk U.S. corporate bonds*
o Investment grade foreign government and corporate bonds**
o Investment grade U.S. government and corporate bonds
By investing in different bond categories, Strategic Income Fund helps reduce
exposure to economic conditions and market events that could adversely affect
the performance of any specific type of bond. For example, our high-yield bond
sector suffered from the investor flight to quality, especially in late August,
September and October. At the same time, strong investor demand for safer
investments bolstered the U.S. investment grade bond sector, cushioning the
Fund's overall performance.
At any given time, between 20% and 60% of Strategic Income Fund's assets may
be invested in any of the three specific bond categories. When comparing bond
market sectors, we evaluate the risks and potential rewards related to current
interest rate trends, inflation and the overall state of the U.S. economy. When
investing overseas, we analyze political developments, economic conditions, and
currency movements to identify investment opportunities and help reduce risk.
In August, nearly 50% of Strategic Income Fund's assets were invested in U.S
high-yield corporate bonds, which offered the most substantial opportunities for
income. We reduced this allocation to 40% in September and added to our U.S.
investment grade bond holdings to help shelter the Fund's assets from the
volatile environment during the fall.
After getting off to a rocky start in August, Strategic Income Fund's foreign
bond performance smoothed out and provided both attractive yields and a modest
total return for the balance of the fiscal period. Over the previous six
* High-yielding non-investment grade bonds involve higher risk that under
adverse conditions may affect the issuer's ability to pay interest and
principal on these securities.
** Foreign investments are subject to certain special risks, such as currency
fluctuations, political and economic instability and differences in
accounting standards that do not affect domestic investments.
<PAGE>
for current
income
4
months, foreign bonds were our smallest investment category, comprising
approximately one quarter of the Fund's total assets. Under current
circumstances, we believe a limited foreign allocation is prudent given the
special risks involved with foreign investing, many of which have increased
amidst ongoing global volatility.
The Fund's average effective duration will normally fluctuate between five
and 10 years. As of January 31, 1999, our duration was slightly under the
baseline at 4.5 years. In our opinion, extending the Fund's average effective
duration currently offers minimal additional yield in return for increased risk
associated with interest rate fluctuations. A heavier weighting in U.S.
high-yield bonds, which generally have a shorter duration than the Fund's other
asset classes, also contributed to a shorter average effective duration for the
Fund.
HIGH-YIELD U.S. BONDS
Performance Suffers Following Global Flight To Treasuries
Global instability and a slowing domestic economy led investors to sell higher
risk investments in August, September and October in favor of safer U.S.
Treasuries. Bond quality became a primary factor in investment decisions. Demand
for lower rated bonds fell, pushing prices lower and yields higher.
Lower interest rates paved the way for a slight recovery in the high-yield
bond market that began late in October and continued into the new year.
Investors seemed to view the liquidity boost as evidence that the Federal
Reserve was committed to keeping the U.S. economy on track.
In selecting high yield bonds, we continued to emphasize income and capital
preservation over price appreciation, investing primarily in bonds rated B or
BB, the two highest non-investment grade ratings. Unfortunately, we were more
heavily focused on bonds rated B. These bonds lost more ground
LOWER INTEREST RATES PAVED THE WAY FOR A HIGH-YIELD BOND MARKET RECOVERY THAT
BEGAN LATE IN OCTOBER AND CONTINUED INTO THE NEW YEAR.
PORTFOLIO HIGHLIGHTS AND ASSET MIX
- --------------------------------------------------------------------------------
January 31, 1999
U.S. High-Yield Bonds 29.93%
Foreign Bonds 26.27%
Mortgage-Related Securities 17.25%
U.S. Treasuries 5.31%
U.S. Investment Grade Corporate Bonds 11.26%
Cash 7.18%
Equities 2.80%
- --------------------------------------------------------------------------------
Average Quality BAA(domestic)/AA-(foreign)
Average Effective Duration 4.54 years
Average Effective Maturity 6.94 years
Thirty-Day Current SEC Yield 7.84%*
Number of Issues 156
* For A Class shares measured according to Securities and Exchange Commission
guidelines. Thirty-day current SEC yield for B and C classes was 7.48% as of
January 31, 1999. Institutional Class yield was 8.51%
<PAGE>
for current
income
5
than bonds with a BB rating during the autumn sell off, and did not recover as
quickly late in the year. This reduced the Fund's six-month total return.
Despite volatile performance during the past six months, the following market
fundamentals suggest the current high-yield bond rebound should continue:
o Default rates that remain at historic lows;
o An abundance of available credit;
o The improving financial condition (less outstanding debt) of many U.S.
corporations;
o Average credit quality of B+.
New bond issues increased in December and January, providing us with numerous
opportunities to purchase bonds with solid credit ratings, attractive yield and
the potential to appreciate in value.
FOREIGN BONDS
Over the last six months, the recession that began in Asia had a domino effect
on currencies in many countries, including Malaysia, Russia and Brazil.
Fortunately, nearly all the currencies represented in the Strategic Income Fund
portfolio rose in value relative to the U.S. dollar, increasing the Fund's total
return.
In an uncertain international arena, we focused Strategic Income Fund's
foreign bond component on quality bonds, rated A or better by Standard & Poors,
which we believed had the potential to deliver substantial income. The average
credit rating of our foreign bonds remained at AA- as of January 31, 1999.
Central banks in 22 countries lowered interest rates in the aftermath of the
Russian financial crisis. In our opinion, this could lead to an expansion of
money supply which may eventually have to be corrected by swinging the pendulum
back toward higher interest rates. We
FORTUNATELY, NEARLY ALL THE CURRENCIES REPRESENTED IN THE STRATEGIC INCOME FUND
PORTFOLIO ROSE IN VALUE RELATIVE TO THE U.S. DOLLAR, INCREASING THE FUND'S TOTAL
RETURN.
Salomon Smith Barney High
Yield Cash Pay Index Comparable U.S. Treasury Bond
- --------------------------------------------------------------------------------
Jan-99 9.98% 4.62%
Dec-98 10.04% 4.63%
Nov-98 10.02% 4.65%
Oct-98 10.8% 4.46%
Sep-98 10.41% 4.37%
Aug-98 10.62% 4.99%
- --------------------------------------------------------------------------------
The Salomon Smith Barney High Yield Cash Pay Index is unmanaged. A direct
investment in the index is not possible. High yield bonds vary in quality, and
unlike U.S. Treasuries are not guaranteed by the U.S. government. This
illustration is not intended to represent the yield of any Delaware Investments
fund.
<PAGE>
for current
income
6
minimized our sensitivity to rising interest rates by investing in
intermediate-length bonds with an average effective maturity of 5.8 years.
Equity funds often attempt to neutralize the risk of international currency
fluctuations by defensively hedging with forward currency contracts. Strategic
Income Fund does not use this strategy since it could reduce the Fund's income
potential. Instead, we limited our investments in countries where we believed
the currency was overvalued such as the U.K., Poland and Hungary.
Strategic Income Fund's largest country allocation remained South Africa,
where yields on intermediate bonds provided nearly twice the income potential of
many European countries. Bond prices in South Africa collapsed early last summer
following a 20% devaluation of the Rand. In August, we took advantage of
exceptional bond market values and increased our position by 5%. We viewed the
South African government as fundamentally sound, exhibiting greater stability
than most other emerging market countries. Strategic Income Fund benefited from
yields that approached 15% and price appreciation as the South African bond
market began to recover in September.
We also maintained substantial holdings in Canada, Australia and New Zealand.
Currencies in these commodity-driven nations were weak against the U.S. dollar
due to declining demand for goods and raw materials. However, we expect
Strategic Income Fund to benefit from stronger currencies in these countries as
global conditions improve.
South African New Zealand Australian
Government Government Government
Bonds Bonds U.S. Treasuries Bonds
- --------------------------------------------------------------------------------
3 Months 15.45% 4.22% 5% 4.78%
6 Months 15.35% 4.56% 5.04% 4.79%
1 Year 14.6% 4.82% 5.18% 4.88%
2 Year 14.55% 5.35% 5.37% 5.11%
3 Year 14.53% 5.74% 5.45% 5.35%
4 Year 14.53% 5.96% 5.51% 5.49%
5 Year 14.52% 6.1% 5.59% 5.58%
7 Year 14.5% 6.28% 5.68% 5.79%
10 Year 14.49% 6.37% 5.8% 5.91%
15 Year 5.97% 6.02%
20 Year 6.06% 6.03%
30 Year 6.05%
- --------------------------------------------------------------------------------
The above illustration is not intended to represent the yield of Strategic
Income Fund. Past performance does not guarantee future results. Unlike U.S.
Treasuries, foreign bonds have currency, political and economic risks and are
not guaranteed by the U.S. government.
Source: Bloomberg Business News
<PAGE>
for current
income
7
INVESTMENT GRADE U.S. BONDS
Falling currencies and rising debt burdens in a growing number of foreign
countries enhanced the already strong demand for U.S. Treasury bonds. A
remarkable Treasury bond rally produced high double-digit returns and drove
yields on long-term Treasury bonds to 30-year lows.
As of August 1, 1998, U.S. investment grade bonds were Strategic Income
Fund's smallest sector allocation, representing 21% of net assets. Shortly
thereafter, problems in Russia and Latin America began to reduce the performance
of higher risk investments. Anticipating a resurgence of cautious investing, we
increased our U.S. investment grade weighting to nearly 40% of the Fund. This
increase consisted largely of U.S. Treasury bonds, which allowed us to benefit
as prices rallied in the fall.
Strategic Income Fund also took advantage of strong investor demand and a
tightening 10-year Treasury bond supply by lending them to approved
institutional investors in return for acceptable collateral. By participating in
securities lending we were able to add income during the loan period and still
benefit from any price appreciation.
By November, price gains for Treasuries returned to approved more normal
levels. For this reason, we started reducing our Treasury holdings in favor of
mortgages and corporate bonds, which offered higher return potential and more
yield.
While lower short-term interest rates benefited many investment sectors, they
were a challenge for Strategic Income Fund's mortgage-related securities.
Mortgage securities are particularly sensitive to falling interest rates because
homeowners often refinance their mortgages when borrowing costs decline. The
proceeds from mortgage prepayments must then be reinvested, often at lower
interest rates.
Strategic Income Fund attempted to mitigate prepayment risk by investing in
mortgages that were less sensitive to declining interest rates, including:
o Commercial mortgages - which carry penalties for prepayment and are less
likely to be refinanced.
o Discount mortgages - with interest rates that are lower than the current
rates and offer no incentive for property owners to refinance.
o Community Reinvestment Act Mortgages - backed by U.S. agencies and subsidized
for lower middle class residents in certain geographic areas. Because the
mortgages are issued at lower interest rates than conventional mortgages,
there is little incentive for homeowners to refinance.
This strategy helped reduce prepayment on Strategic Income Fund's mortgage
related securities. However, investors shied away from these investments due to
the possibility of higher prepayments, which lowered their return.
ANTICIPATING A RESURGENCE OF CAUTIOUS INVESTING, WE INCREASED OUR U.S.
INVESTMENT GRADE WEIGHTING TO NEARLY 40% OF THE FUND. THIS INCREASE CONSISTED
LARGELY OF U.S. TREASURY BONDS, WHICH ALLOWED US TO BENEFIT AS PRICES RALLIED IN
THE FALL.
<PAGE>
for current
income
8
OUTLOOK
The U.S. economy surged ahead in the final quarter of 1998, as consumers seemed
to overlook the continuing global crisis. U.S. Gross Domestic Product grew at a
5.6% annual rate in the fourth quarter, led by strong consumer spending.
Consumer spending rose at an annual of 4.4% in the quarter and 4.8% for all of
1998, the largest gain in more than 14 years.*
Indeed, U.S. economic conditions have created a nearly ideal environment for
continued robust spending. U.S. consumers are benefitting from low inflation,
low interest rates, low unemployment and substantial gains in most stock market
sectors. The strong U.S. economy leads us to believe further cuts to interest
rates are unlikely in the near future.
In fact, we believe higher interest rates might be a possibility unless
economic turmoil abroad begins to have a deeper impact in the U.S. Though
current indicators look positive, in our opinion, the U.S. economy may begin to
lose steam this summer if problems overseas and in Latin America worsen. This
could result in more stock market volatility and another Treasury bond rally.
Over the next several months, we plan to continue with our current overall
asset allocation. High-yield bonds will remain the Fund's largest asset category
for the foreseeable future. We expect the rebound in high-yield bonds to
continue through the spring and allow our holdings to fully recover from their
lows.
Over the next several months, mortgage-related securities and corporate
bonds, which we believe currently offer better value than Treasuries, will
remain our largest U.S. investment grade allocations. However, we may increase
our Treasury holdings this summer based on our belief that safety could
resurface as a primary investor consideration.
We believe some overseas investors have become complacent about the
possibility of higher interest rates. If rates increase, bond prices may deflate
in some countries. However, our focus on undervalued markets and currencies
should help to reduce the impact of any bond market weakness. We will also limit
our exposure to inflation risk by maintaining a relatively short average
effective duration.
The first six months of your Fund's fiscal year have shown that market
conditions can change quickly. Strategic Income Fund, by investing in multiple
bond sectors, has the flexibility to respond to these changes. Over the next six
months, we will continue to monitor developments in the high-yield, U.S.
investment grade and foreign bond markets and allocate your Fund's assets to the
areas that we think offer the best reward/risk profiles.
*Source: Bloomberg Business News
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for current
income
9
STRATEGIC INCOME FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH JANUARY 31, 1999
Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 10/1/96)
Excluding Sales Charge +6.92% +1.57%
Including Sales Charge +4.75% -3.26%
- --------------------------------------------------------------------------------
Class B (Est. 10/1/96)
Excluding Sales Charge +6.20% +0.86%
Including Sales Charge +5.07% -2.86%
- --------------------------------------------------------------------------------
Class C (Est. 10/1/96)
Excluding Sales Charge +6.20% +0.86%
Including Sales Charge +6.20% -0.07%
Strategic Income Fund invests a portion of its portfolio in high-yield bonds,
which involves greater risks than investing in higher quality fixed-income
securities. Foreign investments are subject to certain special risks, such as
currency fluctuations, political and economic instability and differences in
accounting standards that do not affect domestic investments. Return and share
value will fluctuate so that shares, when redeemed, may be worth more or less
than the original cost. All results include reinvestment of distributions and
sales charges as shown below. Past performance is not a guarantee of future
results. Performance for Class B and C shares excluding sales charge assumes
either contingent deferred sales charges did not apply or the investment was not
redeemed.
A voluntary expense limitation of 0.75% has been in effect since inception.
Performance would have been lower if the expense limitation was not in effect.
Class A shares have a maximum 4.75% front-end sales charge and a 12b-1 fee of
0.25%.
Class B shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee, and a contingent deferred sales charge of
up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution service fee. If shares are redeemed
within 12 months, a 1% contingent deferred sales charge applies.
The average annual total returns for the lifetime and one-year periods ended
January 31, 1999, for Strategic Income Fund's Institutional Class, which is
available without sales or asset-based distribution charges only to certain
eligible institutional accounts were 7.15% and 1.70% respectively.
<PAGE>
10 for current income
FINANCIAL STATEMENTS
DELAWARE GROUP INCOME FUNDS, INC. -
STRATEGIC INCOME FUND
STATEMENT OF NET ASSETS
JANUARY 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT* VALUE
(U.S. $)
--------- ---------
CORPORATE BONDS - 41.01%
AUTOMOBILES & AUTOMOTIVE PARTS - 1.03%
Stanadyne Automotive sr sub notes
10.25% 12/15/07 ................................. $ 500,000 $ 506,250
---------
506,250
---------
BANKING, FINANCE & INSURANCE - 3.05%
American Banknote sr sub notes
11.25% 12/01/07 ................................. 300,000 202,125
Banco Santander-Chile nts 6.50% 11/01/05 ........... 75,000 74,344
Credit Foncier de France sr sub notes
8.00% 01/14/02 .................................. 200,000 212,500
Olympic Financial Units 11.50% 03/15/07 ............ 350,000 332,500
Popular North America co. guarantee
6.625% 01/15/04 ................................. 200,000 200,000
Southern Investments United Kingdom sr notes
6.375% 11/15/01 ................................. 200,000 203,500
Summit Bancorp sub notes 8.625% 12/10/02 ........... 100,000 110,000
U.S. Bancorp sub notes 8.125% 05/15/02 ............. 150,000 160,688
---------
1,495,657
---------
BUILDING & MATERIALS - 0.38%
American Builders and Contractors sr sub notes
10.625% 05/15/07 ................................ 200,000 188,000
---------
188,000
---------
CABLE, MEDIA, & PUBLISHING - 1.86%
Cox Communications nts 6.15% 08/01/03 nts .......... 135,000 137,700
Turner Broadcasting sr nts 8.375% 07/01/13 ......... 150,000 181,125
Verio sr nts 11.25% 12/01/08 sr nts ................ 550,000 589,875
---------
908,700
---------
CHEMICALS - 2.87%
LaRoche Industries sr sub nts 9.50% 9/15/07 ........ 300,000 252,000
Octel Developments sr notes
10.00% 05/01/06 ................................. 650,000 682,500
Raychem unsec nts 7.20% 10/15/08 ................... 200,000 209,250
Sterling Chemicals sr sub nts 11.75% 8/15/06 ....... 300,000 262,500
---------
1,406,250
---------
COMPUTERS & TECHNOLOGY - 0.41%
Computer Associates sr nts 6.50% 04/15/08 .......... 200,000 202,250
---------
202,250
---------
CONSUMER PRODUCTS - 1.83%
Drypers sr notes 10.25% 06/15/07 ................... 350,000 339,500
Precise Technology sr sub notes
11.125% 06/15/07 ................................ 350,000 338,625
Spinnaker Industries sr notes
10.75% 10/15/06 ................................. 250,000 217,500
---------
895,625
---------
ENERGY - 1.51%
First Wave Marine sr notes 11.00% 02/01/08 ......... 350,000 329,000
General Electric Capital nts 8.85% 03/01/07 ........ 225,000 275,344
Transamerican Energy sr notes
11.50% 06/15/02 ................................. 475,000 133,000
---------
737,344
---------
<PAGE>
- --------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
FOOD, BEVERAGE & TOBACCO - 3.12%
PRINCIPAL MARKET
AMOUNT* VALUE
(U.S. $)
--------- ---------
Big V Supermarkets sr sub notes
11.00% 02/15/04 ................................. $350,000 $364,000
Community Distributors sr notes
10.25% 10/15/04 ................................. 400,000 377,000
DiGiorgio sr notes 10.00% 06/15/07 ................. 350,000 329,875
Fleming sr sub notes 10.50% 12/01/04 ............... 250,000 237,500
Philip Morris unsec nts 7.20% 02/01/07 ............. 200,000 218,000
---------
1,526,375
---------
HEALTHCARE & PHARMACEUTICALS - 0.48%
Cardinal Health nts 6.00% 01/15/06 ................. 130,000 130,975
United Health Care nts 6.60% 12/01/03 .............. 100,000 101,875
---------
232,850
---------
INDUSTRIAL MACHINERY - 2.08%
Alliance Laundry Systems sr sub notes
9.625% 05/01/08 ................................. 500,000 483,750
Anthony Crane Rentals sr nts
10.375% 08/01/08 ................................ 400,000 385,000
U.S. Filter bonds 6.375% 05/15/01 .................. 150,000 148,313
---------
1,017,063
---------
LEISURE, LODGING & ENTERTAINMENT - 2.47%
American General Institute Cap A
7.57% 12/01/46 .................................. 100,000 110,500
Carmike Cinemas sr sub nts 9.375% 02/01/09 ......... 375,000 380,625
Silver Cinemas sr sub notes 10.50% 04/15/05 ........ 500,000 345,000
Trump Atlantic City 1st mtg nts
11.25% 05/01/06 ................................. 400,000 372,000
---------
1,208,125
---------
METALS & MINING - 4.07%
Anker Coal Group sr notes 9.75% 10/01/07 ........... 100,000 56,000
Doe Run Resources sr notes 11.25% 03/15/05 ......... 500,000 435,000
ISG Resources sr sub notes 10.00% 04/15/08 ......... 550,000 550,000
Metallurg sr notes 11.00% 12/01/07 ................. 350,000 325,500
Schuff Steel sr notes 10.50% 06/01/08 .............. 700,000 623,000
---------
1,989,500
---------
PACKAGING & CONTAINERS - 0.97%
Portola Packaging sr notes 10.75% 10/01/05 ......... 150,000 155,250
Riverwood International sr sub notes
10.875% 04/01/08 ................................ 350,000 318,500
---------
473,750
---------
RETAIL - 4.71%
Advance Stores sr sub notes
10.25% 04/15/08 ................................. 500,000 507,500
Frank's Nursery and Crafts sr sub notes
10.25% 03/01/08 ................................. 500,000 500,000
SAKS sr unsec nts 8.25% 11/15/08 ................... 200,000 220,000
Tommy Hilfiger unsec nts 6.85% 06/01/08 ............ 200,000 198,250
US Office Products sr sub notes
9.75% 06/15/08 .................................. 500,000 371,250
<PAGE>
for current income 11
STRATEGIC INCOME FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT* VALUE
(U.S. $)
--------- ---------
CORPORATE BONDS (CONTINUED)
RETAIL (CONTINUED)
Wilsons The Leather Expert sr notes
11.25% 08/15/04 ................................. $ 500,000 $ 505,000
---------
2,302,000
---------
TELECOMMUNICATIONS - 1.39%
CBS Radio sub debs 11.375% 01/15/09 ................ 6,000 7,080
MCI Communications notes
6.125% 04/15/02 ................................. 200,000 203,250
MCI World com sr nts 7.55% 04/01/04 ................ 150,000 163,500
Metrocall sr sub notes
10.375% 10/01/07 ................................ 100,000 98,500
Sprint Capital sr unsec nts
6.125% 11/15/08 ................................. 200,000 205,500
---------
677,830
---------
TEXTILES, APPAREL & FURNITURE - 2.85%
Norton McNaughton sr notes
12.50% 06/01/05 ................................. 750,000 682,500
Ntex sr notes 11.50% 06/01/06 ...................... 500,000 470,000
Scovill Fasteners sr notes
11.25% 11/30/07 ................................. 250,000 242,500
---------
1,395,000
---------
TRANSPORTATION & SHIPPING - 1.53%
Continental Airlines pass thru certificates
6.8% 01/02/09 ................................... 111,717 111,298
Federal Express pass thru certificates
7.65% 01/15/14 .................................. 94,995 99,388
MC Shipping sr notes 11.25% 03/01/08 ............... 800,000 536,000
---------
746,686
---------
MISCELLANEOUS - 4.40%
ATC Group Services 12.00% 01/15/08
Derby Cycle/Lyon Cycle sr notes
10.00% 05/15/08 ................................. 500,000 461,250
EV International unsec sr sub nts
11.00% 03/15/07 ................................. 500,000 450,000
Lehman Brothers Holdings
6.625% 02/05/06 ................................. 200,000 198,620
MSX International sr sub notes
11.375% 01/15/08 ................................ 500,000 490,000
Pueblo Xtra International sr notes
9.50% 08/01/03 .................................. 350,000 336,000
Republic of Korea 8.875% 04/15/08 .................. 200,000 214,750
---------
2,150,620
---------
Total Corporate Bonds
(cost of $21,450,575) ........................... 20,059,875
----------
FOREIGN BONDS - 26.27%
AUSTRALIA - 2.18%
Australian Government
13.00% 07/15/00 ......................... A$ 200,000 140,589
Bank of Austria 10.875% 11/17/04 ........... 150,000 116,779
Commerzbank 10.50% 01/19/00 ................ 200,000 132,248
Queensland Treasury Global
8.00% 08/14/01 .......................... 1,000,000 675,686
---------
1,065,302
---------
<PAGE>
PRINCIPAL MARKET
AMOUNT* VALUE
(U.S. $)
--------- ---------
FOREIGN BONDS (CONTINUED)
CANADA - 3.45%
Bank Neder Gemeeten 9.125% 09/27/04 ........ C$ 500,000 $ 389,359
Electric Power Development
10.375% 09/27/01 ........................ 200,000 148,465
General Electric Capital of Canada
7.125% 02/12/04 ......................... 80,000 57,169
Government of Canada 10.25% 03/15/14 ....... 850,000 870,568
InterAmerica Development Bank Notes
7.25% 11/03/03 .......................... 100,000 71,586
Kansai International Airport
8.00% 07/02/03 .......................... 80,000 58,261
Kingdom of Norway 8.375% 01/27/03 .......... 130,000 95,481
----------
1,690,889
----------
GREECE - 2.83%
European Investment Bank
17.50% 03/08/99 ......................... Grd 30,000,000 107,086
Ford Credit Europe 9.45% 03/01/00 .......... 120,000,000 425,155
Hellenic Republic 8.70% 04/08/05 ........... 80,000,000 317,449
Hellenic Republic 11.00% 11/26/99 .......... 120,000,000 427,655
International Finance 15.25% 05/11/99 ...... 30,000,000 107,352
----------
1,384,697
----------
ITALY - 1.90%
European Investment Bank
12.75% 02/15/00 ......................... Eur 300,000,000 193,356
Italian Government 9.50% 02/01/01 .......... 258,228 329,999
Italian Government 12.00% 01/01/03 ......... 273,722 408,934
----------
932,289
----------
MEXICO - 0.93%
Mexican Cetes Government
0.00% 10/22/98 .......................... Mxp 5,000,000 453,627
----------
453,627
----------
NEW ZEALAND - 4.42%
International Bank of Reconstruction &
Development 5.375% 11/06/03 ............. NZ$ 500,000 265,328
International Bank of Reconstruction &
Development 5.50% 04/15/04 .............. 500,000 264,999
New Zealand Government
8.00% 04/15/04 .......................... 500,000 302,297
New Zealand Government
8.00% 11/15/06 .......................... 1,700,000 1,064,733
Ontario Province 6.25% 12/03/08 ............ 500,000 266,646
----------
2,164,003
----------
POLAND - 0.57%
International Bank of Reconstruction &
Development 19.50% 06/17/99 ............. Plz 1,000,000 276,994
----------
276,994
----------
SOUTH AFRICA - 5.27%
Electric Supply Communication
11.00% 6/01/08 .......................... Sa 4,500,000 560,007
Republic of South Africa
12.50% 01/15/02 ......................... 6,650,000 1,004,968
Republic of South Africa
13.00% 08/31/10 ......................... 3,000,000 425,265
Transnet 16.50% 04/01/10 ................... 3,500,000 586,606
----------
2,576,846
----------
<PAGE>
12 for current income
Strategic Income Fund
Statement of Net Assets (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT* VALUE
(U.S. $)
--------- ---------
FOREIGN BONDS (CONTINUED)
SWEDEN - 3.35%
Swedish Government 8.00% 08/15/07 .......... Sk 3,000,000 $496,218
Swedish Government 10.25% 05/05/00 ......... 1,800,000 250,034
Swedish Government 10.25% 05/05/03 ......... 5,500,000 890,680
----------
1,636,932
----------
UNITED KINGDOM - 1.37%
Anglian Water 12.00% 01/07/14 .............. Gbp 60,000 158,585
Blue Circle 10.75% 11/29/13 ................ 40,000 95,274
Glaxo Wellcome 8.75% 12/01/05 .............. 60,000 119,834
John Lewis 10.50% 01/23/14 ................. 40,000 99,141
Nippon Telegraph & Telephone
10.875% 05/10/01 ........................ 30,000 54,764
Pearson 10.50% 06/13/08 .................... 40,000 86,471
Thames Water Utilities
10.50% 11/21/01 ......................... 30,000 55,566
----------
669,635
----------
Total Foreign Bonds
(cost of $13,646,354) ................... 12,851,214
----------
AGENCY MORTGAGE-BACKED SECURITIES - 10.20%
Federal Home Loan Mortgage
6.00% 04/15/21 .......................... $100,000 100,970
6.00% 11/01/26 .......................... 48,376 48,376
6.50% 01/25/15 .......................... 50,000 50,563
Federal National Mortgage Association
5.75% 04/15/03 .......................... 610,000 627,573
6.00% 05/15/08 .......................... 225,000 237,768
6.00% 05/01/13 .......................... 207,794 208,704
6.00% 11/01/13 .......................... 499,851 502,038
6.00% 10/01/28 .......................... 1,302,607 1,288,767
6.00% 12/01/28 .......................... 404,000 399,707
6.00% 02/01/29 .......................... 792,850 784,426
6.50% 07/25/28 .......................... 210,000 212,166
7.00% 07/01/28 .......................... 245,114 250,935
7.50% 03/01/28 .......................... 179,814 185,601
Government National Mortgage Association
9.50% 09/15/17 .......................... 38,584 41,924
10.00% 07/15/17 ......................... 45,244 50,094
----------
Total Agency Mortgage-Backed Securities
(cost of $3,959,073) .................... 4,989,612
----------
ASSET-BACKED SECURITIES - 3.09%
CIT Group Securitization-Series 95-2 A2
6.00% 05/15/26 .......................... 200,000 201,500
CIT RV Trust 1998-A A5 6.12% 07/15/14 ...... 200,000 203,460
Countrywide Home Equity Loan-Series 97-1 A4
6.95% 05/25/21 .......................... 150,000 151,284
EQCC Home Equity Loan Trust 1998-2 A6
6.88% 07/15/14 .......................... 200,000 204,480
EQCC Home Equity Loan Trust 1998-2 A3F
6.229% 03/15/13 ......................... 275,000 276,525
<PAGE>
PRINCIPAL MARKET
AMOUNT* VALUE
(U.S. $)
--------- ---------
ASSET-BACKED SECURITIES (CONTINUED)
MetLife Capital Equipment Loan Trust-Series
97-AA 6.85% 05/20/08 .................... $255,000 $264,129
NationsCredit Grantor Trust-Series 97-1 A
6.75% 08/15/13 .......................... 205,927 210,663
----------
Total Asset-Backed Securities
(cost of $1,496,824) ...................... 1,512,041
----------
COLLATERALIZED MORTGAGE OBLIGATIONS - 3.96%
Asset Securitization
Series 96-D3 A1B 7.21% 10/13/26 ......... 100,000 105,281
Series 97-D4 A1A 7.35% 04/14/29 ......... 74,110 76,623
Series 97-D5 A2 7.0624% 02/14/41 ........ 150,000 155,063
Series 97-D5 A3 7.1124% 02/14/41 ........ 200,000 202,750
Capco America Securization Series 98-D7 A1B
6.26% 09/16/30 .......................... 150,000 151,828
Contitrade Services Home Equity Loan Trust
91-2 A 7.70% 09/05/06 ................... 39,822 39,761
General Electric Capital Mortgage Services
Series 1998-6 1A6 6.75% 04/25/28 ........ 200,000 201,875
Lehman Large Loan Series 97-LLI A1
6.79% 06/12/04 .......................... 194,498 201,974
Mortgage Capital Funding 96-MC2-C
7.224% 09/20/06 ......................... 150,000 156,773
Nomura Asset Securities-Series 93-1 A1
6.68% 12/15/01 .......................... 77,429 78,639
Nomura Asset Securities-Series 95-MD3 A1A
8.17% 03/04/20 .......................... 61,522 63,637
Residential Accredit Loans
Series 97-QS3 A3 7.50% 04/25/27 ......... 100,000 100,610
Series 98-QS9 A3 6.75% 07/25/28 ......... 200,000 201,313
Residential Funding Mortgage
Series 1994-S10 6.50% 03/25/09 .......... 100,000 102,901
Series 1998-S6 6.75% 03/25/28 ........... 100,000 101,063
----------
Total Collateralized Mortgage Obligations
(cost $1,914,534) ......................... 1,940,091
----------
MUNICIPAL BONDS - 0.18%
Philadelphia, Pennsylvania Authority For
Industrial Development Tax Claim
Revenue-Class A 6.488% 06/15/04 ......... 90,630 89,837
----------
Total Municipal Bonds (cost of $90,630) ... 89,837
----------
U.S. TREASURY OBLIGATIONS - 5.31%
U.S. Treasury Bond 6.125% 11/15/27 ........ 330,000 370,997
U.S. Treasury Note 4.25% 11/15/03 ......... 600,000 592,303
U.S. Treasury Note 4.75% 11/15/08 ......... 300,000 302,317
+U.S. Treasury Note 5.25% 08/15/03 ......... 1,000,000 1,025,506
U.S. Treasury Note 6.375% 01/15/00 ........ 70,000 71,124
U.S. Treasury Strips 0.00% 02/15/19 ....... 700,000 233,719
----------
Total U.S. Treasury Obligations
(cost $2,592,321) ........................ 2,595,966
----------
<PAGE>
for current income 13
STRATEGIC INCOME FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
NUMBER MARKET
OF SHARES VALUE
(U.S. $)
----------- ----------
COMMON STOCK - 0.22%
REAL ESTATE - 0.22%
Kilroy Realty ................................... 5,000 $109,063
----------
Total Common Stock (cost $115,000) .............. 109,063
----------
PREFERRED STOCKS - 2.52%
TELECOMMUNICATIONS - 2.24%
21st Century Telecommunications ................. 1,088 1,093,563
----------
1,093,563
----------
CABLE, MEDIA & PUBLISHING - 0.28%
Pegasus Communications Unit pik
12.75% 01/01/07 ............................... 250 27,228
Pegasus Communications Unit ..................... 1,000 111,000
----------
138,228
----------
Total Preferred Stocks (cost $1,163,011) ........ 1,231,791
----------
WARRANTS - 0.06%
BANKING, FINANCE & INSURANCE - 0.06%
**21st Century Telecommunications ................. 8,338 28,500
**American Banknote Warrant ....................... 3,744 3,000
----------
Total Warrants (cost of $55,265) ............... 31,500
----------
PRINCIPAL
AMOUNT*
-----------
REPURCHASE AGREEMENTS - 4.74%
With Chase Manhattan 4.68% 02/01/99
(dated 01/29/99, collateralized by $21,000
U.S. Treasury Notes 5.625% due 12/31/02,
market value $21,566 and $235,000 U.S.
Treasury Notes 6.625% due 06/30/01,
market value $246,042 and $244,000 U.S.
Treasury Notes 6.375% due 03/31/01,
market value $258,027 and 235,000 U.S.
Treasury Notes 7.875% due 08/15/01,
market value $260,579) ........................ $770,000 770,000
With J.P. Morgan Securities 4.70% 02/01/99
(dated 01/29/99, collateralized by $136,000
U.S. Treasury Notes 5.75% due 08/15/03,
market value $145,441 and $375,000
U.S. Treasury Notes 5.50% due 03/31/03,
market value $387,240 and $249,000
U.S. Treasury Notes 5.375% due 06/30/03,
market value $257,443) ........................ 773,000 773,000
With PaineWebber 4.70% 02/01/99
(dated 01/29/99, collateralized by $249,000
U.S. Treasury Notes 5.50% due 02/29/00,
market value $257,297 and $172,000 U.S.
Treasury Notes 6.00% due 07/31/02, market
value $183,808 and $245,000 U.S. Treasury
Notes 6.00% due 06/30/99, market value
$247,724 and $96,000 U.S. Treasury Notes
6.25% due 04/30/01,
market value $100,417)......................... 774,000 774,000
----------
Total Repurchase Agreements
(cost $2,317,000) ............................... 2,317,000
----------
<PAGE>
MARKET
VALUE
(U.S. $)
----------
TOTAL MARKET VALUE OF SECURITIES - 97.56%
(cost $49,827,549) ....................................... $47,727,990
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 2.44% ............................... 1,192,921
-----------
NET ASSETS APPLICABLE TO 9,366,863 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% .................. $48,920,911
===========
NET ASSET VALUE - STRATEGIC INCOME FUND A CLASS
($19,283,609 / 3,691,931 shares) ......................... $5.22
=====
NET ASSET VALUE - STRATEGIC INCOME FUND B CLASS
($19,180,768 / 3,672,336 shares) ......................... $5.22
=====
NET ASSET VALUE - STRATEGIC INCOME FUND C CLASS
($6,437,656 / 1,231,897 shares) .......................... $5.23
=====
NET ASSET VALUE - STRATEGIC INCOME FUND INSTITUTIONAL CLASS
($4,018,878 / 770,699 shares) ............................ $5.21
=====
COMPONENTS OF NET ASSETS AT JANUARY 31, 1999:
Common stock, $0.01 par value, 200,000 shares
authorized to the Fund with 100,000,000
shares allocated to Strategic Income
Fund A Class, 25,000,000 shares allocated to
Strategic Income Fund B Class, 25,000,000
shares allocated to Strategic Income Fund C
Class, and 50,000,000 shares allocated
to Strategic Income Fund Institutional
Class .................................................... $51,975,196
Undistributed net investment loss** ......................... (27,828)
Accumulated net realized loss on investments ................ (929,161)
Net unrealized depreciation of investments,
futures contracts and foreign currencies ................. (2,097,296)
-----------
Total net assets ............................................ $48,920,911
===========
- ----------
* Principal amount is stated in the currency in which each bond is
denominated.
A$ - Australian Dollars Eur - European Monitary Unit Sk - Swedish Kroner
Gbp - British Pounds Mxp - Mexican Peso Sa - South African Rand
C$ - Canadian Dollars NZ$ - New Zealand Dollars $ - U.S. Dollars
Grd - Greek Drakma Plz - Polish Zloty
**Non-income producing security.
***Undistributed net investment income includes net realized gains (losses) on
foreign currencies. Net realized gains on foreign currencies are distributed
as net investment income in accordance with provisions of the Internal
Revenue Code.
+Fully or partially pledged as collateral for financial futures contracts.
pik - pay-in-kind sub - subordinated debs - debentures
sr - senior unsec - unsecured co. guarantee - company guarantee
NET ASSET VALUE AND OFFERING PRICE PER SHARE--
STRATEGIC INCOME FUND A CLASS:
Net asset value A Class (A) ................................. $5.22
Sales charge (4.75% of offering price or 4.98% of the
amount invested per share)(B) ............................ 0.26
-----
Offering price .............................................. $5.48
=====
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current prospectus for purchases of $100,000
or more.
See accompanying notes
<PAGE>
14 for current income
DELAWARE GROUP INCOME FUNDS, INC. -
STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
Investments at market .................................... $47,727,990
Cash and foreign currencies .............................. 356,327
Dividends and interest receivable ........................ 1,152,099
Subscriptions receivable ................................. 390,842
Receivable for securities sold ........................... 1,039,992
Other assets ............................................. 13,481
-----------
Total Assets .......................................... 50,680,731
-----------
LIABILITIES
Liquidations payable ........................................ 103,857
Payable for securities purchased ............................ 1,431,862
Distributions payable ....................................... 105,922
Other accounts payable and accrued expenses ................. 118,179
-----------
Total liabilities ........................................ 1,759,820
-----------
Total Net Assets ............................................ $48,920,911
===========
See accompanying notes
DELAWARE GROUP INCOME FUNDS, INC. -
STRATEGIC INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
JANUARY 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ........................................ $ 2,014,405
Dividends ....................................... 72,715
Foreign tax withheld ............................ (1,854) $2,085,266
-----------
EXPENSES:
Management fees ................................. 148,044
Distribution expense ............................ 141,710
Dividend disbursing and transfer agent fees
and expenses ................................. 79,300
Registration fees ............................... 32,475
Reports and statements to shareholders .......... 21,721
Accounting and Administration fees .............. 9,242
Amortization of organization expenses ........... 7,307
Professional fees ............................... 3,785
Directors' fees ................................. 972
Taxes (other than taxes on income) .............. 738
Other ........................................... 11,080 456,374
----------- ----------
Less expenses absorbed or waived ................ (143,143)
-----------
Total expenses ............................... 313,231
-----------
NET INVESTMENT INCOME ........................... 1,772,035
-----------
NET REALIZED AND UNREALIZED GAIN(LOSS)
ON INVESTMENTS AND FOREIGN CURRENCIES:
Net realized gain (loss) on:
Investment transactions ...................... (829,437)
Future contracts ............................. 443
Foreign currencies ........................... (962)
-----------
Net realized loss ............................ (829,956)
Net change in unrealized appreciation/
depreciation of investments and
foreign currencies ........................... (938,720)
-----------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FOREIGN CURRENCIES ........... (1,768,676)
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $ 3,359
===========
See accompanying notes
<PAGE>
for current income 15
DELAWARE GROUP INCOME FUNDS, INC. -
STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED ENDED
1/31/99 7/31/98
(UNAUDITED)
----------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income ........................... $ 1,772,035 $ 2,484,508
Net realized gain(loss) on investments
and foreign currencies ....................... (829,956) 521,283
Net change in unrealized appreciation/
depreciation during the period ............... (938,720) (1,290,402)
----------- -----------
Net increase in net assets resulting
from operations .............................. 3,359 1,715,389
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
Strategic Income Fund A Class ................ (765,717) (1,072,908)
Strategic Income Fund B Class ................ (662,195) (836,538)
Strategic Income Fund C Class ................ (229,355) (261,064)
Strategic Income Fund Institutional Class .... (163,754) (292,986)
Net realized gain on investment transactions:
Strategic Income Fund A Class ................ (122,311) (260,060)
Strategic Income Fund B Class ................ (119,046) (218,690)
Strategic Income Fund C Class ................ (41,353) (67,987)
Strategic Income Fund Institutional Class .... (24,621) (73,555)
----------- -----------
(2,128,352) (3,083,788)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
Strategic Income Fund A Class ................ $ 4,040,094 $11,710,278
Strategic Income Fund B Class ................ 6,509,006 10,936,630
Strategic Income Fund C Class ................ 1,866,267 4,184,459
Strategic Income Fund Institutional Class .... 1,623,791 160,252
Net asset value of shares issued upon rein-
vestment of dividends from net investment
income and net realized gain on investment
transactions:
Strategic Income Fund A Class ................ 589,340 937,123
Strategic Income Fund B Class ................ 488,627 652,466
Strategic Income Fund C Class ................ 157,836 158,936
Strategic Income Fund Institutional Class .... 187,558 365,597
----------- -----------
15,462,519 29,105,741
----------- -----------
Cost of shares repurchased:
Strategic Income Fund A Class ................ (3,423,331) (3,355,061)
Strategic Income Fund B Class ................ (2,611,017) (2,362,012)
Strategic Income Fund C Class ................ (585,743) (859,105)
Strategic Income Fund Institutional Class .... (309,903) (18,853)
----------- -----------
(6,929,994) (6,595,031)
----------- -----------
Increase in net assets derived from capital
share transactions ........................... 8,532,525 22,510,710
----------- -----------
NET INCREASE IN NET ASSETS ...................... 6,407,532 21,142,311
NET ASSETS:
Beginning of period ............................. 42,513,379 21,371,068
----------- -----------
End of period ................................... $48,920,911 $42,513,379
=========== ===========
See accompanying notes
<PAGE>
16 for current income
DELAWARE GROUP INCOME FUND, INC. - STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS (UNAUDITED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each year were
as follows:
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND A CLASSS STRATEGIC INCOME FUND B CLASS
----------------------------------- -----------------------------------
SIX MONTHS YEAR ENDED 10/01/96(1) SIX MONTHS YEAR ENDED 10/01/96(1)
ENDED TO TO ENDED TO TO
1/31/99(2) 7/31/98 7/31/97 1/31/99(2) 7/31/98 7/31/97
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $5.480 $5.700 $5.500 $5.480 $5.700 $5.500
Income from investment operations:
Net investment income(3) ................................ 0.216 0.444 0.337 0.196 0.402 0.308
Net realized and unrealized gain (loss) from
investments and foreign currencies .................... (0.221) (0.104) 0.204 (0.220) (0.100) 0.204
------- ------- ------ ------- ------- ------
Total from investment operations. ....................... (0.005) 0.340 0.541 (0.024) 0.302 0.511
------- ------- ------ ------- ------- ------
Less dividends and distributions:
Dividends from net investment income .................... (0.220) (0.440) (0.341) (0.201) (0.402) (0.311)
Distributions from net realized gain on
investment transactions ............................... (0.035) (0.120) none (0.035) (0.120) none
------- ------- ------ ------- ------- ------
Total dividends and distributions ....................... (0.255) (0.560) (0.341) (0.236) (0.522) (0.311)
------- ------- ------ ------- ------- ------
Net asset value, end of period ............................. $ 5.220 $ 5.480 $5.700 $ 5.220 $ 5.480 $5.700
======= ======= ====== ======= ======= ======
Total return(4) ............................................ (0.05%) 6.23% 10.11% (0.23%) 5.32% 9.53%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $19,283 $17,871 $9,144 $19,181 $15,602 $6,878
Ratio of expenses to average net assets ................. 1.00% 1.00% 1.00% 1.75% 1.75% 1.75%
Ratio of expenses to average net assets prior to
expense limitation ................................... 1.62% 1.73% 2.12% 2.37% 2.48% 2.87%
Ratio of net investment income to average net assets .... 8.08% 7.92% 7.76% 7.33% 7.18% 7.01%
Ratio of net investment income to average net assets
prior to expense limitation ........................... 7.46% 7.20% 6.64% 6.71% 6.45% 5.89%
Portfolio turnover ...................................... 99% 175% 183% 99% 175% 183%
</TABLE>
- ----------
(1) Date of commencement of operations; ratios have been annualized and total
returns have not been annualized.
(2) Ratios have been annualized and the total return has not been annualized.
(3) Per share information for the six months ended January 31, 1999 and the year
ended July 31, 1998 were based on the average shares outstanding method.
(4) 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 17
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each year were
as follows:
<TABLE>
<CAPTION>
STRATEGIC INCOME FUND C CLASSS STRATEGIC INCOME INSTITUTIONAL CLASS
----------------------------------- ------------------------------------
SIX MONTHS YEAR ENDED 10/01/96(1) SIX MONTHS YEAR ENDED 10/01/96(1)
ENDED TO TO ENDED TO TO
1/31/99(2) 7/31/98 7/31/97 1/31/99(2) 7/31/98 7/31/97
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $5.480 $5.700 $5.500 $5.470 $5.700 $5.500
Income from investment operations:
Net investment income(3) ................................ 0.196 0.402 0.313 0.223 0.458 0.367
Net realized and unrealized gain (loss) from
investments and foreign currencies .................... (0.210) (0.100) 0.198 (0.219) (0.111) 0.187
------ ------ ------ ------ ------ ------
Total from investment operations. ....................... (0.014) 0.302 0.511 0.004 0.347 0.554
------ ------ ------ ------ ------ ------
Less dividends and distributions:
Dividends from net investment income .................... (0.201) (0.402) (0.311) (0.229) (0.457) (0.354)
Distributions from net realized gain on
investment transactions ............................... (0.035) (0.120) none (0.035) (0.120) none
------ ------ ------ ------ ------ ------
Total dividends and distributions ....................... (0.236) (0.522) (0.311) (0.264) (0.577) (0.354)
------ ------ ------ ------ ------ ------
Net asset value, end of period ............................. $5.230 $5.480 $5.700 $5.210 $5.470 $5.700
====== ====== ====== ====== ====== ======
Total return(4) ............................................ (0.23%) 5.32% 9.53% (0.11%) 6.36% 10.36%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $6,438 $5,276 $1,944 $4,019 $3,764 $3,405
Ratio of expenses to average net assets ................. 1.75% 1.75% 1.75% 0.75% 0.75% 0.75%
Ratio of expenses to average net assets prior to
expense limitation .................................... 2.37% 2.48% 2.87% 1.37% 1.48% 1.87%
Ratio of net investment income to average net assets .... 7.33% 7.18% 7.01% 8.33% 8.18% 7.90%
Ratio of net investment income to average net assets
prior to expense limitation ........................... 6.71% 6.45% 5.89% 7.71% 7.45% 6.77%
Portfolio turnover ...................................... 99% 175% 183% 99% 175% 183%
</TABLE>
- ----------
(1) Date of commencement of operations; ratios have been annualized and total
returns have not been annualized.
(2) Ratios have been annualized and the total return has not been annualized.
(3) Per share information for the six months ended January 31, 1999 and the year
ended July 31, 1998 were based on the average shares outstanding method.
(4) 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>
18 for current income
DELAWARE GROUP INCOME FUNDS, INC. - STRATEGIC INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Delaware Group Income Funds, Inc. - Strategic Income Fund (the "Fund") 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 four classes of shares. The Strategic Income Fund A Class carries a
front-end sales charge of 4.75%. The Strategic Income Fund B Class carries a
back-end deferred sales charge. The Strategic Income Fund C Class carries a
level load deferred sales charge and Strategic Income Fund Institutional Class
has no sales charge.
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 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. Securities listed on a foreign exchange are
valued at the last quoted sales price before the Fund is valued. 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.
Foreign Currency Transactions - Transactions denominated in foreign currencies
are recorded at the prevailing exchange rates on the valuation date. The value
of all assets and liabilities denominated in foreign currencies are translated
into U.S. dollars at the exchange rate of such currencies against the U.S.
dollar as of 3:00 PM EST. Transaction gains or losses resulting from changes in
exchange rates during the reporting period or upon settlement of the foreign
currency transaction are reported in operations for the current period. It is
not practical to isolate that portion of both realized and unrealized gains and
losses on investments in equity securities in the statement of operations that
result from fluctuations in foreign currency exchange rates. The Fund does
isolate that portion of gains and losses on investments in debt securities which
are due to changes in the foreign exchange rate from that which are due to
changes in market prices of debt securities. The Fund reports certain foreign
currency related transactions as components of realized gains (losses) for
financial reporting purposes, whereas such components are treated as ordinary
income (loss) for federal income tax purposes.
<PAGE>
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.
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. Foreign dividends are also recorded on the
ex-dividend date or as soon after the ex-dividend date that the Fund is aware of
such dividends, net of all non-rebatable tax withholdings. Original issue
discounts are accreted to interest income over the lives of the respective
securities. Withholding taxes on foreign interest have been provided for in
accordance with the Fund's understanding of the applicable country's tax rules
and rates. The Fund declares dividends daily from net investment income and pays
such dividends monthly and declares and pays distributions from net realized
gain on investment transactions, if any, semi-annually.
Certain Fund expenses are paid through "soft dollar" arrangements with brokers.
The amount of these expenses is less than 0.01% of the Fund's average daily net
assets.
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company (DMC), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.65% on the first $500
million of daily net assets, 0.625% on the next $500 million and 0.60% on the
daily net assets in excess of $1 billion. DMC has entered into a sub-advisory
agreement with Delaware International Advisors Ltd. (DIAL) with respect to the
management of the investments in foreign securities. DIAL will receive a fee
equal to one third of the investment management fees and other expenses. At
January 31, 1998 the Fund had a liability for investment management fees and
other expenses payable to DMC of $8,573.
DMC has elected to waive that portion, if any, of the management fee and
reimburse the Fund to the extent that annual operating expenses, exclusive of
taxes, interest, brokerage commissions, extraordinary expenses and distribution
expenses exceed 0.75% of average daily net assets of the Fund through June 30,
1999.
<PAGE>
for current income 19
NOTES TO FINANCIAL STATMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 January 31,
1999, the Fund had a liability for such fees and other expenses payable to DSC
of $9,301.
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 0.25% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class.
For the six months ended January 31, 1999, DDLP earned $16,720 for commissions
on sales of the Fund A Class shares.
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.
3. Investments
For the six months ended January 31, 1999, the Fund made purchases of
$21,849,289 and sales of $13,416,280 of investment securities other than U.S.
government securities and temporary cash investments. For the six months ended
January 31, 1999, the Fund made purchases of $7,210,491 and sales of $7,769,248
of U.S. government securities.
At January 31, 1999, the aggregate cost of securities for federal income tax
purposes was $49,829,181.
At January 31, 1999, unrealized depreciation for federal income tax purposes
aggregated $2,101,191 of which $620,379 related to unrealized appreciation of
securities and $2,721,570 related to unrealized depreciation of securities.
4. Capital Stock
Transactions in capital stock shares were as follows:
SIX MONTHS YEAR
ENDED ENDED
1/31/99 7/31/98
----------- -------
Shares sold:
Strategic Income Fund A Class 1,015,277 3,876,312
Strategic Income Fund B Class 1,224,554 3,214,496
Strategic Income Fund C Class 349,967 1,108,542
Strategic Income Fund Institutional Class 53,079 594,368
Shares issued upon reinvestment of dividends from
net investment income and net realized gain on
investments:
Strategic Income Fund A Class 111,551 211,934
Strategic Income Fund B Class 92,554 139,679
Strategic Income Fund C Class 29,877 32,654
Strategic Income Fund Institutional Class 35,556 99,895
--------- ---------
2,912,415 9,277,880
========= =========
Shares repurchased:
Strategic Income Fund A Class (696,038) (827,107)
Strategic Income Fund B Class (493,813) (505,134)
Strategic Income Fund C Class (110,848) (178,294)
Strategic Income Fund Institutional Class (6,096) (6,102)
--------- ---------
(1,306,795) (1,516,637)
--------- ---------
Net increase 1,605,620 7,761,243
========= =========
<PAGE>
5. Lines of Credit
The Fund has a committed line of credit for $1,600,000. No amount was
outstanding at January 31, 1999, or at any time during the fiscal year.
6. Foreign Exchange Contracts
The Fund will generally enter into forward foreign currency contracts as a way
of managing foreign exchange rate risk. The Fund may enter into these contracts
to fix the U.S. dollar value of a security that it has agreed to buy or sell for
the period between the date the trade was entered into and the date the security
is delivered and paid for. The Fund may also use these contracts to hedge the
U.S. dollar value of securities it already owns denominated in foreign
currencies.
Forward foreign currency contracts are valued at the mean between the bid and
asked prices of the contracts and are marked-to-market daily. Interpolated
values are derived when the settlement date of the contract is an interim date
for which quotations are not available. The change in market value is recorded
by the Fund as an unrealized gain or loss. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's securities, but it does establish a rate of
exchange that can be achieved in the future. Although forward foreign currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, they also limit any potential gain that might result should the value
of the currency increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their contracts.
No forward foreign currency contracts were outstanding at January 31, 1999.
7. Futures Contracts
The Fund invest in financial futures contracts for purpose of hedging its
existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market rates. Upon entering into a futures contract, the
fund deposits cash or pledges U.S. government securities to a broker, equal to
the minimum "initial margin" requirements of the exchange on which the contract
is traded. Subsequent payments are received from or paid to the broker each day,
based on the daily fluctuation in the market value of the contract. These
receipts or payments are known as "variation margin" and are recorded daily by
the fund as unrealized gains or losses until the contracts are closed. When the
contracts are closed, the fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Risk may arise upon entering into futures
contracts from potentail inperfect correlation between the futures contracts and
the underlying securities and from the possibility of an illiquid secondary
market for these instruments.
The following financial futures contracts open at January 31, 1999 were as
follows:
Notional
Contract Cost Amount Expiration Date Unrealized Gain
- ----------------- ----------- --------------- ---------------
2 U.S. 10 Yr Note $237,125 3/99 $1,250
8. Market and Credit Risk
Some countries in which the Fund may invest require governmental approval for
the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
<PAGE>
20 for current income
NOTES TO FINANCIAL STATMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The securities exchanges of certain foreign markets are substantially smaller,
less liquid and more volatile than the major securities markets in the United
States. Consequently, acquisition and disposition of securities by the Fund may
be inhibited. In addition, a significant proportion of the aggregate market
value of equity securities listed on the major securities exchanges in emerging
markets are held by a smaller number of investors. This may limit the number of
shares available for acquisition or disposition of the Fund.
The Fund may invest 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 may invest in securities whose value is derived from an underlying pool
of mortgages or consumer loans. Prepayment of these loans may shorten the stated
maturity of the respective obligation and may result in a loss of premium, if
any has been paid.
The Fund may invest 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.
9. Securities Lending
During the six months ended January 31, 1999, the Fund participated in
securities lending. Security loans are required at all times to be secured by
collateral at least equal to 102% of the market value of the securities on loan.
However, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings. In the event that the borrower fails to return loaned
securities, and cash collateral being maintained by the borrower is insufficient
to cover the value of loaned securities and provided such collateral
insufficiency is not the result of investment losses, the lending agent has
agreed to pay the amount of the shortfall to the Fund or, at the option of the
lending agent, replace the loaned securities.
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
FOR GROWTH OF CAPITAL
Aggressive Growth Fund
Trend Fund
DelCap Fund
Small Cap Value Fund
U.S. Growth Fund
Growth Stock Fund
Tax-Efficient Equity Fund
Social Awareness Fund
FOR TOTAL RETURN
Blue Chip Fund
Devon Fund
Growth and Income Fund
Decatur Equity Income Fund
REIT Fund
Delaware Balanced Fund
FOR INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund
New Pacific Fund
Overseas Equity Fund
International Equity Fund
Global Equity Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
High-Yield Opportunities Fund
Strategic Income Fund
Corporate Bond Fund
Extended Duration Bond Fund
U.S. Government Fund
US Government Securities Fund
Limited-Term Government Fund
FOR TAX-EXEMPT INCOME
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
MONEY MARKET FUNDS
Delaware Cash Reserve
Tax-Free Money Fund
ASSET ALLOCATION FUNDS
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New Jersey,
New Mexico, New York, Ohio, Oregon, Pennsylvania, Utah, Washington, Wisconsin.
Insured and intermediate bond funds are available in selected states.
funds
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.
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF STRATEGIC INCOME FUND
SHAREHOLDERS, BUT IT MAY BE USED WITH prospective investors when preceded or
accompanied by a current Prospectus for Strategic Income 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. Summary investment results are documented in
the Fund's current Statement of Additional Information. 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.
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company, Inc.
Philadelphia
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
[Photo of Globes]
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.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.
Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
DELAWARE
INVESTMENTS
- -----------
PhiladelphiaoLondon
Printed in the USA
on recycled paper
SA-125 [1/99] PP3/99
(1510)
