DELAWARE GROUP INCOME FUNDS, N-30D, 1999-09-28

DELAWARE GROUP INCOME FUNDS
N-30D, 1999-09-28

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<PAGE>
Delaware Corporate Bond Fund
Delaware Extended Duration Bond Fund

FOR CURRENT INCOME

service and guidance

(various photos demonstrating service and guidance,
professional management and goals)

professional management

1999
Annual
Report

goals

DELAWARE(SM)
INVESMENTS
- ---------------------
Philadelphia o London

<PAGE>

A TRADITION OF SOUND INVESTING

A Commitment
To Our Investors

(photo of computer keyboard)
(illustration of waterfall)

commitment

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 has approximately $47 billion in mutual fund assets
and institutional advisory accounts under management 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.

tradition

Investment Objectives
Both Funds seek to provide investors total return.

Table of Contents
LETTER TO SHAREHOLDERS Page 1
PORTFOLIO MANAGER'S REVIEW Page 3
PERFORMANCE SUMMARY Page 7
STATEMENTS OF NET ASSETS Page 8
FINANCIAL HIGHLIGHTS Page 13

current income

<PAGE>
August 4, 1999
for current
income
1

Dear Shareholder:

OVER THE COURSE OF DELAWARE Corporate Bond Fund's and Delaware Extended Duration
Bond Fund's first fiscal year, market conditions for fixed income securities
have varied widely. The Funds became available to investors on September 15,
1998, just after a large-scale disruption in global financial markets. Global
concerns spread to U.S. investors, prompting investors to sell their riskier
investments, including stocks and corporate bonds. This sell-off created
attractive buying opportunities for the newly founded Delaware Corporate Bond
Fund and Delaware Extended Duration Bond Fund, each of which invests primarily
in corporate bonds rated BB or higher by Moody's and Standard & Poor's.
Soon after we opened these funds, the Federal Reserve Board reduced the
federal funds rate (the rate charged between banks for overnight loans) three
times. Their goal was to alleviate investor concerns about a potential slow down
in the U.S. economy. This series of moves added necessary liquidity to U.S.
financial markets and strengthened investor confidence. The corporate bond
market followed suit, staging a strong but short-lived recovery in early winter.
Spring and early summer brought new concerns. With inflation appearing to
be on the rise, there was speculation that the Fed would reverse its strategy
and raise the federal funds rate. As a result, the difference between corporate
bond yields and U.S. Treasury bond yields widened significantly over the course
of the second quarter. Fears of higher interest rates were realized on June 30,
1999, when the Fed raised short-term interest rates by 0.25% to 5.00%.

DESPITE PRESSURES ON BANKS AND FINANCIAL COMPANIES CREATED BY THE FED'S MOVE TO
RAISE INTEREST RATES, CORPORATE BONDS HAVE OUTPERFORMED COMPARABLE TREASURIES SO
FAR FOR CALENDAR 1999.

LIFETIME CUMULATIVE RETURN
- --------------------------------------------------------------------------------
September 30, 1998
to July 31, 1999
- --------------------------------------------------------------------------------
Delaware Corporate Bond Fund A Class -2.82%
Delaware Extended Duration Bond Fund A Class -5.60%
- --------------------------------------------------------------------------------
Lipper Corporate Debt BBB Fund Average (126 funds) -1.40%
Salomon Smith Barney Large Pension Fund Index -4.05%
Lehman Brothers Corporate Bond Index -2.16%
- --------------------------------------------------------------------------------

Delaware Corporate Bond and Delaware Extended Duration Bond Funds began
operations 9/15/98. Because performance for the Lipper Corporate Debt BBB Fund
Average is not available mid-month, performance shown is as of 9/30/98.
Performance for Salomon Smith Barney Large Pension Fund Index was provided by
Bloomberg Business News. Performance for the Lehman Brothers Corporate Bond
Index was provided by Wiesenberger. Performance is calculated at net asset value
without effect of sales charges and assumes reinvestment of distributions.
Complete Fund performance for all classes can be found on page 7. Past
performance does not guarantee future results. During the period an expense
limitation of 0.55% was in effect. Performance would have been lower if the
limit were not in effect. A direct investment in the unmanaged Salomon Smith
Barney Large Pension Fund Index or the Lehman Brothers Corporate Bond Index is
not possible.

<PAGE>

for current
income
2

Despite these set backs, we believe the U.S. economy has set a healthy
backdrop for investing in corporate securities for the following reasons:

o Corporate profits have generally continued to be healthy; and,
o Despite pressures on banks and financial companies created by the Fed's
move to raise interest rates, corporate bonds have outperformed comparable
Treasuries so far for calendar 1999. (Source: Lehman Brothers)

Economic indicators appear to be pointing toward a slight inflationary
environment. A possible slight rise in future interest rates could make the
corporate bond market more attractive to investors than more conservative types
of securities. Performance of mortgage-backed securities, like GNMAs, tends to
suffer when interest rates change. This makes corporate bonds a more attractive
investment option, in our view.
On the pages that follow, Gary A. Reed, portfolio manager for Delaware
Corporate Bond Fund and Delaware Extended Duration Bond Fund, explains the
performance, strategy and selection process for the Funds. We urge you to review
his commentary.
Over the long term, fixed-income securities should continue to provide an
attractive level of risk when compared to equity securities. Both Delaware
Corporate Bond Fund and Delaware Extended Duration Bond Fund can be an
attractive component for investors who wish to maintain a well-diversified
portfolio.
Thank you for your continued confidence in Delaware Investments.

discipline
Sincerely,

/s/ Wayne A. Stork
- ------------------
WAYNE A. STORK
Chairman,
Delaware Investments Family of Funds

/s/ David K. Downes
- -------------------
DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds

<PAGE>
for current
income
3

Portfolio Manager's Review

GARY A. REED
Vice President and Senior Portfolio Manager
August 4, 1999
(photo of three people talking)

ECONOMIC OVERVIEW DELAWARE CORPORATE BOND FUND AND Delaware Extended Duration
Bond Fund were introduced about a year ago, on September 15, 1998. At this time,
the U.S. corporate climate was somewhat unsettled as several foreign countries
faced economic and financial problems. Adverse market conditions led to
generally poor performance from corporate bonds.
Later in the year, the Federal Reserve Board launched three consecutive
interest rate cuts. Corporate bonds, supported by healthy consumer confidence,
rebounded in early 1999. Unfortunately, the rebound and its positive impact on
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund, was
short-lived.
Moving into the second quarter, we saw a new bout of investor unease and
sluggish performance in the corporate bond arena. Spreads between corporate
bonds and Treasury securities widened significantly, which decreased total
returns for corporate bonds. We believe this happened for two reasons:

o Growing concerns that the Federal Reserve Board might raise interest rates,
which they did on June 30, 1999.
o Worries about Year 2000 technical and compliance issues created challenges
for both investors and corporate treasurers who finance bond issues. In
order to avoid pressures at the end of the year, many corporations chose to
finance their projects earlier in the summer. This pushed the corporate
bond supply to high levels, causing the difference between corporate bond
yields and Treasury yields to widen. This, in turn, hurt performance in the
corporate bond arena.

overview

PORTFOLIO HIGHLIGHTS AND CREDIT QUALITY
- --------------------------------------------------------------------------------
JULY 31, 1999
Delaware Delaware
Corporate Extended Duration
Bond Fund Bond Fund
- --------------------------------------------------------------------------------
AAA 19.3% 16.1%
AA 13.0% 7.2%
A 17.7% 22.0%
BBB 40.0% 45.0%
BB 9.1% 8.8%
- --------------------------------------------------------------------------------
Average Effective Duration 5.41 years 8.95 years
Average Effective Maturity 8.76 years 18.54 years
Average Quality A A
Current 30-Day SEC Yield* 6.34% 6.82%
Number of Bonds 54 56
- --------------------------------------------------------------------------------
* For A Class shares measured according to Securities and Exchange Commission
guidelines. For B, C and Institutional Class shares, the 30-day SEC current
yields as of July 31, 1999 were 5.89%, 5.89% and 6.91% for Delaware
Corporate Bond Fund and 6.43%, 6.41% and 7.43% for Delaware Extended
Duration Bond Fund.

<PAGE>
for current
income
4

For their lifetime periods, the Funds have not performed as well as the
average of funds with similar strategies, as tracked by Lipper Analytical (see
page 1 for further detail). Lipper Analytical Services averages the performance
of 126 mutual funds that invest in bonds with an average rating of BBB. It is
worth noting that Delaware Corporate Bond Fund and Delaware Extended Duration
Bond Fund have been operating for a very short period-less than one year.
Because economic conditions tend to vary over time, this short time frame may
not accurately reflect the Funds' long-term potential.

(photo of computer keyboard)

Delaware Extended Duration Bond Fund, in particular, has performed as we
would expect, given a rising interest-rate environment. The Fund is required to
hold securities that are long in duration (duration is a common measure of a
bond or bond fund's sensitivity to interest rates. The longer the duration, the
more the bond's price will change for a given increase or decrease in interest
rates), typically between 8 and 11 years. Because the Lipper category to which
these Funds are assigned does not place any restrictions on duration, the
universe that Delaware Extended Duration Bond Fund is measured against may have
very different durations. Currently, the average duration of the funds in this
category is shorter than this Fund. Because of this, when interest rates went
up, Delaware Extended Duration Bond Fund's bond prices declined more than mutual
funds with shorter durations. Funds with a longer average duration should, in
our opinion, perform well over the coming year, as we expect interest rates to
stabilize.

strategy

Delaware Corporate Bond Fund performed favorably compared to its unmanaged
benchmark, the Salomon Smith Barney Large Pension Fund Index and slightly
underperformed the Lehman Brothers Corporate Bond Index (see page 1). The Fund's
duration typically falls between 4 and 7 years. Because of the Fund's shorter
duration, its reaction to the recent movements in interest rates was less severe
than for funds with longer durations.

<PAGE>
for current
income
5

INVESTMENT STRATEGY
When selecting bonds for the Funds' portfolios, our careful selection process
includes economic, industry and company specific factors. We generally look for
bonds that exhibit the following characteristics:

o Quality. We generally focus on investment grade bonds-that is, bonds rated
BBB or higher. Compared to lower rated bonds, these bonds tend to involve
less risk that an issuer won't be able to pay interest or principal. At the
same time, they provide potential for higher income than the higher quality
securities.
o Liquidity. Purchasing bonds that can easily be bought and sold is a key
component of our selection process.
o Positive outlook for the industry and company. For each bond we consider,
we extensively research the issuing company as well as its respective
industry. We look for companies that exhibit quality management, strong
balance sheets, operating cash flows and plans for future growth.
o Relative value in the marketplace. Bonds that are inexpensively priced and
issued by good companies should, in our opinion, provide attractive total
return over time.

WE ARE CURRENTLY WORKING TO SLIGHTLY REPOSITION EACH FUND - SEEKING TO EMPHASIZE
BONDS WITH SHORTER MATURITIES IN THE DELAWARE CORPORATE BOND FUND AND LONGER
MATURITIES IN THE DELAWARE EXTENDED DURATION BOND FUND.

Delaware Extended Duration Bond Fund will typically have an average
duration between 8 and 11 years. This makes the Fund suitable for investors with
a long time horizon or greater tolerance for risk. The average duration of
Delaware Corporate Bond Fund will generally be between 4 and 7 years, suitable
for more conservative investors who desire less exposure to fluctuations in
principal.

CURRENT POSITIONING
Corporate bonds continue to make up the majority of each portfolio's holdings
(82% for Delaware Corporate Bond Fund and 84% for Delaware Extended Duration
Bond Fund.) Despite an interest rate increase, corporate bonds remain, in our
opinion, a very attractive asset class. In order to maintain an investment
portfolio that remains in line with our investment strategy, we are currently
working to slightly reposition each Fund - seeking to emphasize bonds with
shorter maturities in the Delaware Corporate Bond Fund and longer maturities in
the Delaware Extended Duration Bond Fund. Also, we are planning to reduce our
reliance on interest rate futures contracts, an agreement that requires us to
buy or sell a specific amount of Treasury securities at a particular price on a
pre-designated date. We used futures as a way to control the overall duration
profile of the Funds.

positioning

(Chart)
PORTFOLIO SELECTION PROCESS
- --------------------------------------------------------------------------------
Investment Grade Bonds
|
Liquidity Factors
|
Industry and Company Research
|
Relative Value Analysis
|
|---------------------------------|
| |
Delaware Corporate Delaware Extended Duration
Bond Fund Portfolio Bond Fund Portfolio

<PAGE>

for current
income
6

(photo of people on beach)

OUTLOOK
We currently consider corporate securities, in general, to be inexpensive
compared to their fair market value. This, coupled with a substantial volume of
new issues in the past few months, has given us an opportunity to buy what we
believe are attractively priced securities. Going forward, we will continue to
reposition both Funds' portfolios by employing the following strategies:

o Reducing the level of non corporate bonds held in the portfolio as more
corporate and longer duration securities (for Delaware Extended Duration
Bond Fund) and shorter duration securities (for Delaware Corporate Bond
Fund) become available;
o Increase corporate exposure as corporate issues that meet our length and
credit qualifications become available; and,
o Further shorten the duration for Delaware Corporate Bond Fund and further
lengthen the duration for Delaware Extended Duration Bond Fund.

outlook

PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------

(Pie Chart)

DELAWARE CORPORATE BOND FUND

Corporate Bonds 82.1%
U.S. Treasury Obligations 13.0%
Mortgage-Backed Securities 2.4%
CMOs 2.3%
Cash and Other Assets 0.2%

(Pie Chart)

DELAWARE EXTENDED DURATION BOND FUND

Corporate Bonds 83.6%
U.S. Treasury Obligations 13.2%
Mortgage-Backed Securities 2.6%
CMOs 0.6%

<PAGE>
for current
income
7

PERFORMANCE SUMMARY

(Line Graph)
DELAWARE CORPORATE BOND FUND
DELAWARE EXTENDED DURATION BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 15, 1998 (FUND INCEPTION) TO JULY 31, 1999

<TABLE>

Delaware Delaware
Corporate Bond Extended Duration Salomon Smith Barney Lehman Brothers
Fund A Bond Fund Large Pension Fund Index Corporate Bond Index
<S> <C> <C> <C> <C>
Sep. '98 $9,532 $9,532 $10,000 $10,000
Oct. '98 9,740 9,740 9,807 9,846
Nov. '98 9,757 9,792 10,091 10,031
Dec. '98 9,822 9,825 10,111 10,060
Jan. '99 9,936 9,957 10,239 10,160
Feb. '99 9,633 9,584 9,909 9,919
Mar. '99 9,712 9,626 9,963 9,995
Apr. '99 9,743 9,639 9,976 10,024
May. '99 9,596 9,439 9,800 9,889
Jun. '99 9,521 9,331 9,677 9,838
Jul. '99 $9,498 $9,273 $ 9,595 $ 9,784
</TABLE>

Chart assumes $10,000 invested on September 15, 1998, 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.

Please note that the Lehman Brothers Corporate Bond Index has been added as a
benchmark for Delaware Corporate Bond Fund and Delaware Extended Duration Bond
Fund. The index is based on all publicly issued intermediate investment-grade
domestic corporate debt. It is our opinion that this index more accurately
reflects the investment objectives of Delaware Corporate Bond Fund and Delaware
Extended Duration Bond Fund. This Index will be used as the primary benchmark
for the Funds in the future.

FUND PERFORMANCE
- --------------------------------------------------------------------------------
CUMULATIVE RETURNS THROUGH JULY 31, 1999

Delaware Corporate Delaware Extended
Bond Fund Duration Bond Fund
Lifetime Lifetime
- --------------------------------------------------------------------------------
A Class (Est. 9/15/98)
Excluding Sales Charge. -0.34% -2.68%
Including Sales Charge. -5.01% -7.24%
- --------------------------------------------------------------------------------
B Class (Est. 9/15/98)
Excluding Sales Charge. -0.88% -3.28%
Including Sales Charge. -4.72% -7.03%
- --------------------------------------------------------------------------------
C Class (Est. 9/15/98)
Excluding Sales Charge. -0.88% -3.15%
Including Sales Charge. -1.84% -4.09%

All performance includes reinvestment of distributions and applicable sales
charge as described below. Return and share value will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Past
performance is not a guarantee of future results. Performance for B Class and C
Class shares excluding sales charge assumes either contingent sales charges did
not apply or the investment was not redeemed.

A Class shares have a 4.75% front-end sales charge and a 12b-1 fee.
B Class shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year.
C Class shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.

Cumulative total returns for the lifetime period ended July 31, 1999 were -0.14%
for Delaware Corporate Bond Fund's Institutional Class and -2.52% for Delaware
Extended Duration Bond Fund's Institutional Class.

<PAGE>
8 for current income

FINANCIAL STATEMENTS

DELAWARE GROUP INCOME FUNDS, INC. - DELAWARE CORPORATE BOND FUND
STATEMENT OF NET ASSETS
JULY 31, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED
SECURITIES - 2.36%
Federal National Mortgage Association
5.375% 3/15/02* .................................... $1,400,000 $ 1,373,750
------------
Total Agency Mortgage-Backed Securities
(cost $1,402,436 ) 1,373,750
------------

COLLATERALIZED MORTGAGE
OBLIGATIONS (CMO'S) - 2.28%
Government National Mortgage Association
6.85% 12/20/25...................................... 1,000,000 974,178
Mortgage Capital Funding 7.224% 9/20/06 .............. 355,000 352,227
------------
Total Collateralized Mortgage Obligations
(cost $1,367,239 ) 1,326,405
------------
CORPORATE BONDS - 82.10%
Automobile & Automotive Parts - 6.10%
Federal Mogul 7.50% 1/15/09 .......................... 500,000 464,375
Lear 8.11% 5/15/09.................................... 500,000 495,625
Meritor Auto 6.80% 2/15/09............................ 655,000 616,519
TRW 6.875% 6/1/04 .................................... 2,000,000 1,970,000
------------
3,546,519
------------
BANKING - 11.95%
Banco Sud Americano 7.60% 3/15/07 .................... 500,000 362,500
Bank One 6.40% 8/1/02 ................................ 2,225,000 2,216,656
Capital One Bank 6.15% 6/1/01 ........................ 1,000,000 987,480
Chase Manhattan 6.75% 8/15/08 ........................ 1,600,000 1,556,000
JP Morgan 6.00% 1/15/09 .............................. 2,000,000 1,822,500
------------
6,945,136
------------
CABLE, MEDIA & PUBLISHING - 7.92%
News America Holdings 7.75% 12/1/45 .................. 900,000 839,250
Time Warner 9.125% 1/15/13............................ 1,125,000 1,286,719
Viacom 7.625% 1/15/16 ................................ 2,500,000 2,475,000
------------
4,600,969
------------
CHEMICALS - 1.72%
Equistar Chemicals 8.75% 2/15/09...................... 1,000,000 1,002,500
------------
1,002,500
------------
COMPUTERS & TECHNOLOGY - 2.23%
Seagate Technology 7.45% 3/1/37 ...................... 880,000 799,700
Sun Microsystems 7.35% 8/15/04........................ 500,000 499,177
------------
1,298,877
------------
CONSUMER PRODUCTS - 4.57%
Protection One 8.125% 1/15/09 ........................ 550,000 503,250
Tommy Hilfiger 6.85% 6/1/08 .......................... 2,300,000 2,153,375
------------
2,656,625
------------
CORPORATE BONDS (CONTINUED)
ELECTRONICS & ELECTRICAL EQUIPMENT - 3.42%
Israel Electric 7.75% 3/1/09.......................... $2,000,000 $ 1,987,500
------------
1,987,500
------------
ENERGY - 0.89%
RBF Finance 11.00% 3/15/06............................ 500,000 520,000
------------
520,000
------------
FINANCE - 19.46%
Commercial Credit 6.50% 8/1/04........................ 1,250,000 1,232,813
Conseco Finance 8.80% 4/1/27.......................... 1,000,000 906,250
Fairfax Financial Holdings 7.375% 3/15/06 ............ 600,000 574,500
Ford Motor Credit 5.80% 1/12/09 ...................... 1,500,000 1,351,875
General Electric Capital 8.85% 3/1/07 ................ 1,000,000 1,111,250
Goldman Sachs Group 6.65% 5/15/09 .................... 500,000 476,250
Heller Financial 6.00% 3/19/04........................ 1,000,000 960,000
Lehman Brothers 6.625% 2/5/06 ........................ 890,000 846,613
Meditrust 7.82% 9/10/26 .............................. 650,000 586,625
Morgan Stanley Dean Witter 5.625% 1/20/04 ............ 1,000,000 948,750
Pemex Finance 9.69% 8/15/09 .......................... 1,360,000 1,336,200
Popular 6.63% 1/15/04 ................................ 1,000,000 972,500
------------
11,303,626
------------
HEALTHCARE & PHARMACEUTICALS - 1.07%
Tenet Healthcare 8.00% 1/15/05........................ 500,000 482,500
United Health Care 6.60% 12/1/03...................... 145,000 140,469
------------
622,969
------------
INDUSTRIAL MACHINERY - 1.73%
Rohm & Haas 6.95% 7/15/04 ............................ 1,000,000 1,006,250
------------
1,006,250
------------
LEISURE, LODGING & ENTERTAINMENT - 2.73%
HMH Properties 8.45% 12/1/08.......................... 625,000 593,750
Park Place Entertainment 7.95% 8/1/03 ................ 1,000,000 990,000
------------
1,583,750
------------
METALS & MINING - 0.92%
AK Steel Corp 7.88% 2/15/09 .......................... 550,000 536,250
------------
536,250
------------
MISCELLANEOUS - 6.04%
Residential Reinsurance 8.71% 6/1/00.................. 500,000 500,000
Qatar State 9.50% 5/21/09 ............................ 1,000,000 1,017,500
Republic of Korea 8.875% 4/15/08...................... 1,200,000 1,227,000
Republic of South Africa 9.13% 5/19/09................ 775,000 765,313
------------
3,509,813
------------
PACKAGING & CONTAINERS - 1.06%
Owens-Illinois 8.10% 5/15/07.......................... 625,000 617,969
------------
617,969
------------

<PAGE>
for current income 9

DELAWARE CORPORATE BOND FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
RETAIL - 5.38%
K Mart 7.95% 2/1/23 .................................. $ 550,000 $ 521,125
Saks 8.25% 11/15/08 .................................. 2,500,000 2,603,125
------------
3,124,250
------------
TELECOMMUNICATIONS - 3.85%
A T & T 6.50% 3/15/29 ................................ 1,500,000 1,344,375
Cox Communications 6.15% 8/1/03 ...................... 250,000 243,750
MCI Worldcom 7.55% 4/1/04 ............................ 630,000 647,325
------------
2,235,450
------------
TRANSPORTATION & SHIPPING - 1.06%
Atlas Air Lines 8.77% 1/2/11.......................... 625,000 614,547
------------
614,547
------------
Total Corporate Bonds (cost $49,876,669) 47,713,000
------------

U.S. TREASURY OBLIGATIONS - 13.04%
U.S. Treasury Notes 5.00% 4/30/01 .................... 6,350,000 6,291,102
U.S. Treasury Notes 5.50% 5/15/09 .................... 1,325,000 1,284,936
------------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $7,574,918 ) 7,576,038
------------

TOTAL MARKET VALUE OF SECURITIES - 99.78%
(cost $60,221,262)........................................... $57,989,193
Receivables and other assets net of liabilities - 0.22%........ 127,946
------------
NET ASSETS APPLICABLE TO 11,010,683 SHARES
($1 par value) Outstanding - 100.0%.......................... $58,117,139
============

NET ASSET VALUE - DELAWARE CORPORATE BOND FUND A CLASS
($1,377,068 / 260,888 shares)...................................... $5.28
======
NET ASSET VALUE - DELAWARE CORPORATE BOND FUND B CLASS
($1,235,731 / 234,116 shares)...................................... $5.28
======
NET ASSET VALUE - DELAWARE CORPORATE BOND FUND C CLASS
($302,843 / 57,378 shares)......................................... $5.28
======
NET ASSET VALUE - DELAWARE CORPORATE BOND FUND
INSTITUTIONAL CLASS
($55,201,497 / 10,458,301 shares).................................. $5.28
======

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 Delaware
Corporate Bond Fund A Class, 25,000,000 shares allocated to
Delaware Corporate Bond Fund B Class, 25,000,000 shares
allocated to Delaware Corporate Bond Fund C Class and
50,000,000 shares allocated to Delaware Corporate Bond
Fund Institutional Class....................................... $61,940,081
Accumulated net realized loss on investments and
futures contracts ............................................. (1,676,186)
Net unrealized depreciation of investments and
futures contracts.............................................. (2,146,756)
------------
Total net assets................................................. $58,117,139
============

NET ASSET VALUE AND OFFERING PRICE PER SHARE -
DELAWARE CORPORATE BOND FUND
Net asset value A Class (A)........................................... $5.28
Sales charge (4.75% of offering price or 4.92% of amount
invested per share) (B)............................................. 0.26
------
Offering price........................................................ $5.54
======
- ----------------------
(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.

* Fully or partially pledged as collateral for financial futures contracts.

See accompanying notes

<PAGE>
10 for current income

DELAWARE GROUP INCOME FUNDS, INC. -
DELAWARE EXTENDED DURATION BOND FUND
STATEMENT OF NET ASSETS
JULY 31, 1999
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
AGENCY MORTGAGE-BACKED
SECURITIES - 2.59%
Federal National Mortgage Association
5.375% 3/15/02* .................................... $ 1,500,000 $ 1,471,875
------------
Total Agency Mortgage-Backed Securities
(cost $1,479,270) .................................. 1,471,875
------------

COLLATERALIZED MORTGAGE
OBLIGATIONS (CMO'S) - 0.63%
Mortgage Capital Funding 7.224% 9/20/06 .............. 360,000 357,188
------------
Total Collateralized Mortgage Obligations
(cost $369,591) .................................... 357,188
------------

CORPORATE BONDS - 83.60%
Automobile & Automotive Parts - 9.60%
Federal Mogul 7.50% 1/15/09 .......................... 500,000 464,375
Ford Motor 6.625% 10/1/28 ............................ 1,000,000 887,500
General Motors 6.75% 5/1/28 .......................... 1,250,000 1,125,000
Lear 8.11% 5/15/09.................................... 500,000 495,625
Meritor Auto 6.80% 2/15/09............................ 570,000 536,512
TRW 7.75% 6/1/29...................................... 2,000,000 1,947,500
------------
5,456,512
------------
BANKING - 6.23%
Banco Sud Americano 7.60% 3/15/07 .................... 500,000 362,500
Chase Manhattan 6.75% 8/15/08 ........................ 1,400,000 1,361,500
JP Morgan 6.00% 1/15/09 .............................. 2,000,000 1,822,500
------------
3,546,500
------------
CABLE, MEDIA & PUBLISHING - 8.68%
News America Holdings 7.75% 12/1/45 .................. 1,681,000 1,567,532
Time Warner 9.125% 1/15/13............................ 1,125,000 1,286,719
Viacom 7.625% 1/15/16 ................................ 2,100,000 2,079,000
------------
4,933,251
------------
CHEMICALS - 1.76%
Equistar Chemicals 8.75% 2/15/09...................... 1,000,000 1,002,500
------------
1,002,500
------------
COMPUTERS & TECHNOLOGY - 1.31%
Seagate Technology 7.45% 3/1/37 ...................... 820,000 745,175
------------
745,175
------------
CONSUMER PRODUCTS - 7.28%
Penzoil-Quaker State 7.375% 4/1/29.................... 2,000,000 1,870,000
Protection One 8.125% 1/15/09 ........................ 450,000 411,750
Tommy Hilfiger 6.85% 6/1/08 .......................... 1,985,000 1,858,456
------------
4,140,206
------------
ELECTRONICS & ELECTRICAL EQUIPMENT - 3.50%
Israel Electric 7.75% 3/1/09.......................... 2,000,000 1,987,500
------------
1,987,500
------------
ENERGY - 3.36%
Conoco 6.95% 4/15/29.................................. 1,500,000 1,387,500
RBF Finance 11.00% 3/15/06............................ 500,000 520,000
------------
1,907,500
------------

PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
FINANCE - 19.07%
Conseco Finance 8.80% 4/1/27.......................... $ 1,000,000 $ 906,250
Fairfax Financial 7.375% 4/15/18...................... 1,000,000 878,750
Fairfax Financial 7.375% 3/15/06...................... 650,000 622,375
Fidelity Investments 7.57% 6/15/29.................... 1,000,000 975,000
Florida Windstorm 7.125% 2/25/19...................... 500,000 476,250
Ford Motor Credit 5.80% 1/12/09 ...................... 1,500,000 1,351,875
Goldman Sachs Group 6.65% 5/15/09 .................... 500,000 476,250
Heller Financial 6.00% 3/19/04........................ 1,000,000 960,000
Keycorp Capital III 7.75% 7/15/29 .................... 1,000,000 961,250
KN Capital Trust III 7.63% 4/15/28.................... 1,000,000 917,500
Lehman Brothers 6.625% 2/5/06 ........................ 770,000 732,462
Meditrust 7.82% 9/10/26 .............................. 650,000 586,625
Pemex Finance 10.61% 8/15/17.......................... 1,000,000 993,750
------------
10,838,337
------------
HEALTHCARE & PHARMACEUTICALS - 0.85%
Tenet Healthcare 8.00% 1/15/05........................ 500,000 482,500
------------
482,500
------------
INDUSTRIAL MACHINERY - 1.78%
Rohm & Haas 7.85% 7/15/29 ............................ 1,000,000 1,008,750
------------
1,008,750
------------
LEISURE, LODGING & ENTERTAINMENT - 1.04%
HMH Properties 8.45% 12/1/08.......................... 625,000 593,750
------------
593,750
------------
METALS & MINING - 0.77%
AK Steel Corp 7.875% 2/15/09.......................... 450,000 438,750
------------
438,750
------------
MISCELLANEOUS - 5.87%
Qatar State 9.50% 5/21/09 ............................ 1,000,000 1,017,500
Republic of Columbia 9.75% 4/23/09.................... 700,000 582,750
Republic of Korea 8.875% 4/15/08...................... 1,000,000 1,022,500
Republic of South Africa 9.125% 5/19/09 .............. 725,000 715,938
------------
3,338,688
------------
PACKAGING & CONTAINERS - 1.09%
Owens-Illinois 8.10% 5/15/07.......................... 625,000 617,969
------------
617,969
------------
RETAIL - 6.20%
Federated Department Stores 7.00% 2/15/28 ............ 1,000,000 911,800
K Mart 7.95% 2/1/23 .................................. 450,000 426,375
Saks 8.25% 11/15/08 .................................. 2,100,000 2,186,625
------------
3,524,800
------------
TELECOMMUNICATIONS - 4.13%
AT&T 6.50% 3/15/29.................................... 1,500,000 1,344,375
Liberty Media 8.50% 7/15/29 .......................... 1,000,000 1,003,750
------------
2,348,125
------------
TRANSPORTATION & SHIPPING - 1.08%
Atlas Air Lines 8.77% 1/2/11.......................... 625,000 614,547
------------
614,547
------------

Total Corporate Bonds (cost $50,201,612).............. 47,525,360
------------

<PAGE>
for current income 11

DELAWARE EXTENDED DURATION BOND FUND (CONTINUED)
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
- --------------------------------------------------------------------------------
CORPORATE BONDS (CONTINUED)
U.S. Treasury Obligations - 13.20%
U.S. Treasury Notes 6.375% 8/15/27.................... $5,400,000 $5,467,079
U.S. Treasury Strip
0.00% 2/15/27 ...................................... 7,000,000 1,299,449
0.00% 2/15/27 ...................................... 1,500,000 278,453
0.00% 5/15/27 ...................................... 2,500,000 457,064
------------
Total U.S. Treasury Obligations (cost $7,827,987) .... 7,502,045
------------

TOTAL MARKET VALUE OF SECURITIES - 100.02%
(cost $59,878,460)............................................ $56,856,468
Liabilities net of receivables and other assets - (0.02%)....... (10,871)
------------
NET ASSETS APPLICABLE TO 11,034,591 SHARES
($1 par value) Outstanding - 100.00%.......................... $56,845,597
============

NET ASSET VALUE - DELAWARE EXTENDED DURATION BOND FUND
A CLASS
($1,042,206 / 202,312 shares)...................................... $5.15
======
NET ASSET VALUE - DELAWARE EXTENDED DURATION BOND FUND
B CLASS
($113,694 / 22,070 shares)......................................... $5.15
======
NET ASSET VALUE - DELAWARE EXTENDED DURATION BOND FUND
C CLASS
($58,310 / 11,319 shares).......................................... $5.15
======
NET ASSET VALUE - DELAWARE EXTENDED DURATION BOND FUND
INSTITUTIONAL CLASS
($55,631,387 / 10,798,890 Shares).................................. $5.15
======

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 Delaware
Extended Duration Bond Fund A Class, 25,000,000 shares
allocated to Delaware Extended Duration Bond Fund B Class,
25,000,000 shares allocated to Delaware Extended Duration
Bond Fund C Class and 50,000,000 shares allocated to Delaware
Extended Duration Bond Fund Institutional Class............... $61,749,300
Accumulated net realized loss on investments and
futures contracts............................................. (1,864,211)
Net unrealized depreciation of investments and
futures contracts............................................. (3,039,492)
------------
Total net assets................................................ $56,845,597
============

NET ASSET VALUE AND OFFERING PER SHARE -
DELAWARE EXTENDED DURATION BOND FUND
Net asset value A Class (A).......................................... $5.15
Sales charge (4.75% of offering price or 5.05% of the amount
invested per share) (B)............................................ 0.26
------
Offering price....................................................... $5.41
======
- ----------------------
(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.

* Fully or partially pledged as collateral for financial futures contracts.

See accompanying notes

DELAWARE GROUP INCOME FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JULY 31, 1999

- --------------------------------------------------------------------------------
Delaware
Delaware Extended
Corporate Duration
Bond Fund Bond Fund
- --------------------------------------------------------------------------------
ASSETS:
Investments at market (cost $60,221,262
and $59,878,460, respectively) ....... $57,989,193 $56,856,468
Receivables for securities sold......... 2,765,017 1,915,318
Interest receivable..................... 877,982 1,111,243
Cash ................................... 16,051 (774,760)
Subscriptions receivable ............... 70,472 99,015
Other assets ........................... 48,562 -
----------- ------------

Total assets ........................... 61,767,277 59,207,284
----------- ------------

LIABILITIES:
Payables for securities purchased....... 3,244,492 1,853,710
Accrued expenses ....................... 200,133 180,236
Liquidations payable ................... 88,026 217,365
Distributions payable................... 117,487 95,063
Other liabilities....................... - 15,313
----------- ------------
Total liabilities....................... 3,650,138 2,361,687
----------- ------------

TOTAL NET ASSETS ....................... $58,117,139 $56,845,597
=========== ============

See accompanying notes

<PAGE>
12 for current income

DELAWARE GROUP INCOME FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE PERIOD SEPTEMBER 15, 1998*
THROUGH JULY 31, 1999
- --------------------------------------------------------------------------------
Delaware
Delaware Extended
Corporate Duration
Bond Fund Bond Fund
------------ ------------
INVESTMENT INCOME:
Interest........................................... $ 2,310,860 $ 2,181,653
------------ ------------

2,310,860 2,181,653
------------ ------------

EXPENSES:
Management fees ................................... 175,448 178,398
Registration fees ................................. 93,992 71,155
Dividend disbursing and transfer agent fees
and expenses..................................... 59,281 57,987
Accounting and administration ..................... 13,789 11,532
Distribution expense............................... 7,474 1,970
Reports and statements to shareholders............. 6,060 5,220
Custodian fees..................................... 2,310 6,224
Professional fees ................................. 1,697 1,433
Directors' fees ................................... 1,450 1,311
Taxes (other than taxes on income)................. 93 48
Other ............................................. 4,494 3,928
------------ ------------
366,088 339,206

Less expenses absorbed by Delaware
Management Company............................... (164,598) (154,108)
Less fees paid indirectly ......................... (1,357) (4,862)
------------ ------------
Total expenses..................................... 200,133 180,236

NET INVESTMENT INCOME ............................. 2,110,727 2,001,417
------------ ------------

NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS AND FUTURES CONTRACTS:
Net realized loss on investments................... (1,652,452) (1,849,437)
Net change in unrealized appreciation/depreciation
of investments and futures contracts............. (2,146,756) (3,039,492)
------------ ------------

NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS AND FUTURES CONTRACTS............. (3,799,208) (4,888,929)
------------ ------------

NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................. $(1,688,481) $(2,887,512)
============ ============
- ----------------------
* Date of commencement of operations.

See accompanying notes

<TABLE>
<CAPTION>
DELAWARE GROUP INCOME FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Delaware
Delaware Extended
Corporate Duration
Bond Fund Bond Fund
---------------- ----------------
For the period For the period
9/15/98* 9/15/98*
through through
7/31/99 7/31/99
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ............................. $ 2,110,727 $ 2,001,417
Net realized loss on investments................... (1,652,452) (1,849,437)
Net change in unrealized appreciation/depreciation
of investments and futures contracts............. (2,146,756) (3,039,492)
---------------- ----------------
Net decrease in net assets resulting
from operations ................................. (1,688,481) (2,887,512)
---------------- ----------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ......................................... (45,318) (31,630)
B Class ......................................... (20,299) (1,275)
C Class ......................................... (7,907) (1,261)
Institutional Class ............................. (2,037,203) (1,967,251)
Net realized gain on investments:
A Class ......................................... (649) (403)
B Class ......................................... (26) (3)
C Class ......................................... (37) (13)
Institutional Class ............................. (23,022) (14,355)
---------------- ----------------
(2,134,461) (2,016,191)
---------------- ----------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ......................................... 1,919,685 1,303,923
B Class ......................................... 1,413,525 172,849
C Class ......................................... 446,292 62,451
Institutional Class ............................. 70,556,107 70,284,574
Net asset value of shares issued upon reinvestment
of distributions from net investment income and
net realized gain on investments:
A Class ......................................... 39,760 29,500
B Class ......................................... 9,222 1,068
C Class ......................................... 6,038 469
Institutional Class ............................. 1,788,078 1,718,312
---------------- ----------------
76,178,707 73,573,146
---------------- ----------------

Cost of shares repurchased:
A Class ......................................... (508,014) (220,356)
B Class ......................................... (132,179) (54,753)
C Class ......................................... (130,682) (187)
Institutional Class ............................. (13,467,751) (11,548,550)
---------------- ----------------
(14,238,626) (11,823,846)
---------------- ----------------
Increase in net assets derived from capital
share transactions............................... 61,940,081 61,749,300
---------------- ----------------

NET INCREASE IN NET ASSETS......................... 58,117,139 56,845,597

NET ASSETS:
Beginning of period ............................... - -
---------------- ----------------
End of period ..................................... $ 58,117,139 $ 56,845,597
================ ================
</TABLE>
- ----------------------
* Date of commencement of operations.

See accompanying notes

<PAGE>
for current income 13

DELAWARE GROUP INCOME FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period was
as follows:

<TABLE>
<CAPTION>
Delaware Corporate Bond Fund
A B C Institutional
Class Class Class Class
- ----------------------------------------------------------------------------------------------------------------------------
9/15/98(1) 9/15/98(1) 9/15/98(1) 9/15/98(1)
to to to to
7/31/99 7/31/99 7/31/99 7/31/99
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................... $ 5.500 $ 5.500 $ 5.500 $ 5.500

Income (loss) from investment operations:
Net investment income................................................. 0.201 0.171 0.171 0.212
Net realized and unrealized loss on investments and futures contracts. (0.216) (0.216) (0.216) (0.216)
---------- ---------- ---------- ---------------
Total from investment operations ..................................... (0.015) (0.045) (0.045) (0.004)
---------- ---------- ---------- ---------------

Less dividends and distributions:
Dividends from net investment income ................................. (0.201) (0.171) (0.171) (0.212)
Distributions from net realized gain on investments................... (0.004) (0.004) (0.004) (0.004)
---------- ---------- ---------- ---------------
Total dividends and distributions..................................... (0.205) (0.175) (0.175) (0.216)
---------- ---------- ---------- ---------------
Net asset value, end of period ......................................... $ 5.280 $ 5.280 $ 5.280 $ 5.280
========== ========== ========== ===============

Total return2........................................................... (0.34%) (0.88%) (0.88%) (0.14%)

Ratios and supplemental data:
Net assets, end of period (000 omitted)............................... $ 1,377 $ 1,236 $ 303 $ 55,201
Ratio of expenses to average net assets............................... 0.80% 1.55% 1.55% 0.55%
Ratio of expenses to average net assets prior to
expense limitation and fees paid indirectly......................... 1.26% 2.01% 2.01% 1.01%
Ratio of net investment income to average net assets ................. 5.75% 5.00% 5.00% 6.00%
Ratio of net investment income to average net assets
prior to expense limitation and fees paid indirectly ............... 5.29% 4.54% 4.54% 5.54%
Portfolio turnover ................................................... 175% 175% 175% 175%
</TABLE>

<TABLE>
<CAPTION>
Delaware Extended Duration Bond Fund
A B C Institutional
Class Class Class Class
- --------------------------------------------------------------------------------------------------------------------------------
9/15/98(1) 9/15/98(1) 9/15/98(1) 9/15/98(1)
to to to to
7/31/99 7/31/99 7/31/99 7/31/99
<S> <C> <C> <C> <C>
Net asset value, beginning of period ................................... $ 5.500 $ 5.500 $ 5.500 $ 5.500

Income (loss) from investment operations:
Net investment income................................................. 0.206 0.172 0.180 0.215
Net realized and unrealized loss on investments and futures contracts. (0.347) (0.347) (0.347) (0.347)
----------- ----------- ----------- -----------
Total from investment operations ..................................... (0.141) (0.175) (0.167) (0.132)
----------- ----------- ----------- -----------

Less dividends and distributions:
Dividends from net investment income ................................. (0.206) (0.172) (0.180) (0.215)
Distributions from net realized gain on investments................... (0.003) (0.003) (0.003) (0.003)
----------- ----------- ----------- -----------
Total dividends and distributions..................................... (0.209) (0.175) (0.183) (0.218)
----------- ----------- ----------- -----------
Net asset value, end of period ......................................... $ 5.150 $ 5.150 $ 5.150 $ 5.150
=========== =========== =========== ===========

Total return(2)......................................................... (2.68%) (3.28%) (3.15%) (2.52%)

Ratios and supplemental data:
Net assets, end of period (000 omitted)............................... $ 1,042 $ 114 $ 58 $ 55,631
Ratio of expenses to average net assets............................... 0.80% 1.55% 1.55% 0.55%
Ratio of expenses to average net assets prior
to expense limitation and fees paid indirectly ..................... 1.27% 2.02% 2.02% 1.02%
Ratio of net investment income to average net assets ................. 5.88% 5.13% 5.13% 6.13%
Ratio of net investment income to average net
assets prior to expense limitation and fees paid indirectly......... 5.41% 4.66% 4.66% 5.66%
Portfolio turnover ................................................... 201% 201% 201% 201%
- ----------------------
1 Date of commencement of operations; ratios and portfolio turnover have been
annualized and total return has not been annualized. 2 Total investment return
is based on the change in net asset value of a share during the period and
assumes reinvestment of
distributions at net asset value and does not reflect the impact of a sales charge.
</TABLE>

See accompanying notes

<PAGE>
14 for current income

DELAWARE GROUP INCOME FUNDS, INC.
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 Delaware Business Trust and offers five series: the
Delaware Corporate Bond Fund, the Delaware Delchester Fund, the Delaware
Extended Duration Bond Fund, the Delaware High-Yield Opportunities Fund and the
Strategic Income Fund. These financial statements and related notes pertain to
the Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund (each
referred to as a "Fund" or collectively as the "Funds"). The Funds offer 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 Funds is to provide investors with total return.

1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.

Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Funds' Board
of Directors.

Federal Income Taxes - Each Fund intends 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
each 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 - Each 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 each
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.

Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts are
accreted to interest income over the lives of the respective securities. The
Funds declare dividends daily from net investment income and pay such dividends
monthly and declare and pay distributions form net realized gain on investments,
if any, annually.

Certain expenses of the Funds are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses were approximately $811 for the Delaware Corporate Bond
Fund and $752 for the Delaware Extended Duration Bond Fund for the period ended
July 31, 1999. In addition, the Funds receive earnings credits from their
custodian when positive balances are maintained, which are used to offset
custody fees. These credits were $546 and $4,110 respectively for the period
ended July 31, 1999. The expenses paid under the above arrangements are included
in their respective expense captions on the Statement of Operations with the
corresponding offset shown as "Fees paid indirectly".

2. Investment Management and Other Transactions with Affiliates In accordance
with the terms of the Investment Management Agreement, the Funds pay Delaware
Management Company (DMC), the Investment Manager, an annual fee based on their
average daily net assets at the following rates:

Delaware Corporate Delaware Extended Duration
Bond Fund Bond Fund
- --------------------------------- ---------------------------------
On the first $500 million...0.500% On the first $500 million.. 0.550%
On the next $500 million... 0.475% On the next $500 million... 0.500%
On the next $1.5 billion... 0.450% On the next $1.5 billion... 0.450%
In excess of $2.5 billion.. 0.425% In excess of $2.5 billion.. 0.425%

At July 31, 1999 the liability for Investment Management Fees and other expenses
payable to DMC were as follows:

Delaware Corporate Delaware Extended Duration
Bond Fund Bond Fund
- --------------------------------- ---------------------------------
$18,001 $30,200

DMC has elected to waive that portion of the management fee and reimburse each
Fund to the extent that annual operating expenses, exclusive of taxes, interest,
brokerage commissions, distribution and extraordinary expenses, exceed 0.55% of
average daily net assets for each Fund through October 31, 1999.

The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services. The
Funds pay 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 Funds had payables for such fees and other expenses payable
to DSC as follows:

Delaware Corporate Delaware Extended Duration
Bond Fund Bond Fund
- --------------------------------- ---------------------------------
$77,701 $77,231

Pursuant to the Distribution Agreement, the Funds pay Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.25% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Class for each Fund. No distribution
expenses are paid by the Institutional Class. At July 31, 1999, the Funds had
payables for distribution fees and other expenses payable to DDLP as follows:

Delaware Corporate Delaware Extended Duration
Bond Fund Bond Fund
- --------------------------------- ---------------------------------
$122,864 $110,033

For the period ended July 31, 1999, DDLP earned $1,227 for commissions on the
sales of the Fund A Class shares for the Delaware Corporate Bond Fund and $86
for commissions on the sale of Fund A Class shares for the Delaware Extended
Duration Bond Fund.

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

<PAGE>
for current income 15

NOTES TO FINANCIAL STATEMENTS

3. Investments
For the period ended July 31, 1999, the Funds made purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments for each Fund as follows:

Delaware
Delaware Extended
Corporate Duration
Bond Fund Bond Fund
------------ ------------
Purchases........................ $129,796,795 $136,149,873
Sales ........................... $ 67,949,974 $ 74,483,313

At July 31, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:

Delaware
Delaware Extended
Corporate Duration
Bond Fund Bond Fund
------------ ------------
Cost of investments ................ $60,221,262 $59,952,770
============ ============
Aggregate unrealized appreciation... $ 39,462 $ 47,540
Aggregate unrealized depreciation... (2,271,531) (3,143,842)
------------ ------------
Net unrealized depreciation ........ $(2,232,069) $(3,096,302)
============ ============

4. Capital Stock
Transactions in capital stock shares were as follows:

Delaware
Delaware Extended
Corporate Duration
Bond Fund Bond Fund
----------- -----------
9/15/98* 9/15/98*
to to
7/31/99 7/31/99
Shares sold:
A Class................................. 344,744 236,728
B Class................................. 256,938 31,768
C Class................................. 79,951 11,269
Institutional Class..................... 12,583,775 12,605,679

Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class................................. 7,270 5,456
B Class................................. 1,718 203
C Class................................. 1,106 86
Institutional Class..................... 327,043 318,397
----------- -----------
13,602,545 13,209,586
----------- -----------

Shares repurchased:
A Class................................. (91,126) (39,872)
B Class................................. (24,540) (9,901)
C Class................................. (23,679) (36)
Institutional Class..................... (2,452,517) (2,125,186)
----------- -----------
(2,591,862) (2,174,995)
----------- -----------

Net increase ............................. 11,010,683 11,034,591
=========== ===========

5. Futures Contracts
The Funds invest in financial futures contracts for the purpose of hedging their
existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market rates. Upon entering into a futures contract, the
Funds deposit cash or pledge 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 Funds as unrealized gains or losses until the contracts are closed. When the
contracts are closed, the Funds record a realized gain or loss

Financial futures contracts open at July 31, 1999 were as follows:

<TABLE>
<CAPTION>
Delaware Corporate Bond Fund
Notional Unrealized
Contracts Cost Amount Expiration Date Gain
- --------------------------------------- ------------- --------------- ----------
<S> <C> <C> <C>
42 U.S. 10 Year Treasury note contracts $ (4,718,438) September 1999 $ 85,313
</TABLE>

<TABLE>
<CAPTION>
Delaware Extended Duration Bond Fund
Notional Unrealized
Contracts Cost Amount Expiration Date Loss
- --------------------------------------- ------------ --------------- ----------
<S> <C> <C> <C>
70 U.S. 10 Year Treasury note contracts $ 7,739,375 September 1999 $ (17,500)
</TABLE>

6. Market and Credit Risk
Each 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.

Each 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.

Each 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 Funds' ability
to dispose of such securities in a timely manner and at a fair price when it is
necessary to liquidate such securities.

<PAGE>
16 for current income

DELAWARE GROUP INCOME FUNDS, INC.
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
DELAWARE GROUP INCOME FUNDS, INC. - DELAWARE CORPORATE BOND FUND
DELAWARE GROUP INCOME FUNDS, INC. - DELAWARE EXTENDED DURATION BOND FUND

We have audited the accompanying statements of net assets and the statements of
assets and liabilities of Delaware Group Income Funds, Inc - Delaware Corporate
Bond Fund and Delaware Group Income Funds, Inc - Delaware Extended Duration Bond
Fund (the "Funds") as of July 31, 1999, and the related statements of
operations, statements of changes in net assets and financial highlights for the
period September 15, 1998 (commencement of operations) through July 31, 1999.
These financial statements and financial highlights are the responsibility of
the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds at July 31, 1999, and the results of their operations,
changes in their net assets and their financial highlights for the period
September 15, 1998 (commencement of operations) through July 31, 1999, in
conformity with generally accepted accounting principles.

/s/ Ernst & Young LLP
---------------------
Ernst & Young LLP

Philadelphia, Pennsylvania
September 6, 1999
- --------------------------------------------------------------------------------
PROXY RESULTS
(UNAUDITED)

- --------------------------------------------------------------------------------
The Delaware Group Income Funds, Inc. shareholders voted on the following
proposal at the annual meeting of shareholders on March 17, 1999 or as
adjourned. The description of the proposal and number of shares voted were as
follows:

1. To elect the Delaware Group Income Funds, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority
---------------------------
Jeffery 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 14,159,239
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 a new investment management agreement with Delaware Management
Company for the Fund.

For Against Abstain
---------------------------
Corporate Bond Fund... 3,367,912 15,114 163,994
Extended Duration Fund 3,075,371 22,491 193,262

3. To ratify the selection of Ernst & Young LLP, as the independent auditors for
the Delaware Group Income Funds, Inc.

For Against Abstain
-----------------------------------
170,342,196 1,709,355 10,183,195

4. 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 DELAWARE CORPORATE BOND FUND AND
DELAWARE EXTENDED Duration Bond Fund shareholders, but it may be used with
prospective investors when preceded or accompanied by a current Prospectus for
Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The Prospectus sets forth details about charges, expenses, investment
objectives and operating policies of the Funds. 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 Funds 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

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 of the Funds
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>
When used with prospective investors, this report must be preceded or
accompanied by a current Delaware Corporate Bond Fund and Delaware Extended
Duration Bond 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

(photo of globes)

www.delawareinvestments.com

DELAWARE(SM)
INVESTMENTS
- ---------------------
PHILADELPHIA - LONDON

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 Funds 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 Funds are not bank or credit union deposits.

Printed in the USA
on recycled paper

(2110)
AR-460[7/99]PPL9/99