DELAWARE GROUP INCOME FUNDS, N-30D, 2000-09-29

DELAWARE GROUP INCOME FUNDS
N-30D, 2000-09-29

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<PAGE>
DELAWARE(SM)
INVESTMENTS
------------

Delaware Corporate Bond Fund

Delaware Extended Duration Bond Fund

Current Income

2000 ANNUAL REPORT

(Current Income Artwork)

<PAGE>

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

Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary
Delaware Corporate
Bond Fund 6
Delaware Extended
Duration Bond Fund 7
Financial Statements
Statements of Net Assets 8
Statements of Assets and Liabilities 12
Statements of Operations 13
Statements of Changes in
Net Assets 14
Financial Highlights 15
Notes to Financial
Statements 23
Report of Independent
Auditors 27

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

A Commitment To Our Investors

Experienced

[ ] Our seasoned investment professionals average more than 15 years'
experience.

[ ] We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.

Disciplined

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

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

Consistent

[ ] We clearly articulate our investment policies and follow them consistently.

[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage
approximately $45 billion in assets as of June 30, 2000.

Comprehensive

[ ] We offer more than 70 mutual funds in these asset classes.

o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced

[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.

Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.

<PAGE>

"IN OUR OPINION, ECONOMIC FUNDAMENTALS REMAIN STRONG IN THE U.S. AND IN MANY
OTHER PARTS OF THE WORLD."

Dear Shareholder

September 11, 2000

Recap of Events - When we last reported to you in February of this year, the
U.S. was about to complete its record 107th consecutive month of growth, the
domestic stock market was booming, and the Federal Reserve Board had just
announced another in a series of interest rate hikes intended to stem inflation.
That period of monetary tightening lasted throughout our entire fiscal year,
with the Fed bumping up rates five separate times between July 31, 1999 and July
31, 2000. This made for challenging times in domestic bond markets, where more
often than not during the year demand fell short of supply.

In January 2000, the U.S. Treasury announced that it would buy back some of its
long-term debt issues and reduce the issuance of new debt over time in light of
the U.S. budget surplus. As a result of market reactions to the announcement,
bond traders, for the first time since 1990, found themselves facing an inverted
yield curve (Source: Bloomberg) -- a somewhat uncommon environment in which
yields on longer term bonds are lower than those for shorter term securities.
Historically, such a scenario has been a precursor to recession in the U.S., yet
many economists believe that in this case, the lower yields on long bonds are a
product of the Treasury's buyback program (Source: Bloomberg), not an imminent
recession. With the Treasury buying back long-term bonds, some Wall Street
analysts have predicted the eventual demise of the 30-year bond altogether, or
at least as a barometer for fixed-income markets.

During your Fund's fiscal year, the yield on 30-year U.S. Treasury bonds
decreased from 6.12% on July 31, 1999 to 5.78% on July 31, 2000. Two-year
Treasury notes, meanwhile, were yielding 6.28% on July 31, 2000 (Source:
Bloomberg).

Total Returns
For Period Ended July 31, 2000 One Year
--------------------------------------------------------------------------------
Delaware Corporate Bond Fund Class A +2.85%
--------------------------------------------------------------------------------
Lehman Brothers U.S. Credit Index +4.83%
--------------------------------------------------------------------------------
Lehman Brothers Corporate Bond Index +4.85%
--------------------------------------------------------------------------------
Delaware Extended Duration Bond Fund Class A +2.08%
--------------------------------------------------------------------------------
Lehman Brothers Long U.S. Credit Index +4.62%
--------------------------------------------------------------------------------
Lehman Brothers Long Term Corporate Bond Index +4.71%
--------------------------------------------------------------------------------
Lipper Corporate Debt BBB Funds Average (138 funds) +3.64%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of dividends and capital gains. Performance
information for all Fund classes can be found on pages 6 and 7. The Lehman
Brothers U.S. Credit Index is an unmanaged composite of U.S. corporate bonds,
foreign bonds and secured notes. The Lehman Brothers Long U.S. Credit Index is
an unmanaged composite of long-term U.S. corporate bonds, foreign bonds and
secured notes. In the past, the benchmark used for both Funds was the Lehman
Brothers Corporate Bond Index. However, this index is no longer an appropriate
benchmark for both Funds because, unlike Delaware Corporate Bond Fund and
Delaware Extended Duration Bond Fund, the Lehman Brothers Corporate Bond Index
is comprised strictly of corporate bonds. The Lipper category represents the
average returns of all active corporate bond funds with similar credit ratings
and investment objectives tracked by Lipper (Source: Lipper). You cannot invest
directly in an index. Past performance does not guarantee future results.

<PAGE>

(Current Income Artwork)

Delaware Corporate Bond Fund provided a total return of +2.85% (Class A shares
at net asset value with distributions reinvested) for the 12-month period ended
July 31, 2000.

Delaware Extended Duration Bond Fund earned a total return of +2.08% (Class A
shares at net asset value with distributions reinvested) for the same period.
Unfortunately, both Funds underperformed their benchmarks -- the Lehman Brothers
U.S. Credit Index and the Lehman Brothers Long U.S. Credit Index -- which
returned +4.83% and +4.62%, respectively. The Funds' disappointing performance
was primarily due to their relatively high exposure to the BBB bond sector,
which was affected to a greater degree by credit quality-related market upheaval
during April and May, and to negative issues of several companies whose
securities the Funds own.

Market Outlook - Fixed-income investors fought an uphill battle during the Fed's
extended campaign of interest rate hikes. The impression on Wall Street as of
this writing is that the U.S. economy is approaching a more moderate growth
rate, without inflation, as desired by the Fed (Source: Wall Street Journal).
However, a "soft landing" for the domestic economy and an autumn stock market
rally would likely keep bond markets in the shadow of equity investments.
Regardless of whether the Fed steps to the sidelines, we believe that the
current landscape is easier to read than it was six months ago. In our opinion,
economic fundamentals remain strong in the U.S. and in many other parts of the
world. In addition, we would not be surprised to see U.S. interest rates decline
over the next eighteen months.

We believe that fixed-income funds like Delaware Corporate Bond Fund and
Delaware Extended Duration Bond Fund can play an important role in a
well-diversified investment portfolio. On the pages that follow, Stuart
Hosansky, the portfolio manager for both Funds, explains their positioning
during the fiscal year and provides an outlook for investment opportunities in
the coming months.

We thank you for your continued confidence, and your commitment to Delaware
Investments.

Sincerely,

/s/ Wayne A. Stork /s/ David K. Downes

Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds

<PAGE>

Stuart N. Hosansky
Portfolio Manager

September 11, 2000

Portfolio Characteristics
Delaware Corporate Bond Fund

As of July 31, 2000
-------------------------------------------
Current 30-Day SEC Yield* 7.45%
-------------------------------------------
Average Effective Duration** 5.4 years
-------------------------------------------
Average Quality A
-------------------------------------------

* For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 7/31/00 for both Class B and
C shares was 7.07%. The Institutional Class yield was 8.08%.

Delaware Extended Duration
Bond Fund

As of July 31, 2000
-------------------------------------------
Current 30-Day SEC Yield* 7.74%
-------------------------------------------
Average Effective Duration** 8.9 years
-------------------------------------------
Average Quality A
-------------------------------------------

* For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 7/31/00 for both Class B and
C shares was 7.34%. The Institutional Class yield was 8.39%.

**Duration is a common measure of a bond or bond fund's sensitivity to interest
rates.

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

The Funds' Results
The corporate bond market has faced several challenges over the past 12 months.
The Federal Reserve raised interest rates a total of five times since the start
of the Funds' fiscal year on August 1, 1999. Compounding the uncertainty created
by these rate increases, the U.S. Treasury began an aggressive program of buying
back 30-year Treasury bonds using the government's budget surplus. As a result
of the buyback, the supply of 30-year Treasury bonds, an important benchmark,
has been reduced, causing liquidity problems. With fewer Treasuries available,
traders have been less able to hedge on interest rates.

In our opinion, concerns about Y2K weighed heavily on the bond market in the
second half of 1999, and bond liquidity, in many areas of the market, was
lacking as investors seemed to become increasingly attracted by the lure of
strong stock market gains in late 1999 and early 2000. The buyback program and
the rise in short-term rates also helped create an inverted yield curve, in
which yields on longer bonds were uncharacteristically lower than yields on
bonds with shorter maturities. The scarcity of long-term bonds was one factor
leading to a dramatic widening in yield spreads (the difference between yields
on bonds of different maturities).

In April and May 2000, the investment environment for bonds became even more
unfavorable. Concerns began to arise regarding credit quality in the corporate
bond market as economic data occasionally pointed toward the start of an
economic slowdown (Source: Bloomberg).

In this challenging environment, Delaware Corporate Bond Fund had a total return
of +2.85% (Class A shares at net asset value with distributions reinvested) and
Delaware Extended Duration Bond Fund earned +2.08% (Class A shares at net asset
value with distributions reinvested) for the year ended July 31, 2000. Both
Funds underperformed their benchmarks. The Lehman Brothers U.S. Credit Index
(the benchmark for Delaware Corporate Bond Fund) had a return of +4.83% for the
year ended July 31, 2000 and the Lehman Brothers Long U.S. Credit Index (the
benchmark for Delaware Extended Duration Bond Fund) posted a total return of
+4.62% during the same period. While this performance has been below our
expectations, it is largely attributable to the impact of the above factors, as
well as the Funds' holdings of high-yield (lower credit quality) bonds during a
period in which credit conditions were deteriorating. The Funds' benchmark
indexes do not hold any high-yield bonds.

<PAGE>

Delaware Corporate Bond Fund
Sector Allocation
As of July 31, 2000

Corporate Bonds 84.67%

U.S. Treasury Obligations 5.70%

Asset-Backed Securities 3.33%

Agency Mortgage-Backed Securities 3.05%

Commercial Mortgage-Backed Securities 1.60%

Cash and Other Assets 1.65%

Delaware Extended Duration Bond Fund
Sector Allocation
As of July 31, 2000

Corporate Bonds 83.16%

U.S. Treasury Obligations 6.90%

Agency Mortgage-Backed Securities 4.44%

Asset-Backed Securities 3.11%

Cash and Other Assets 2.39%

Investment Strategy

Our selection process for the Funds' portfolios includes economic, industry and
company-specific criteria. We look for bonds that have the following
characteristics:

[ ] Quality: We generally focus on investment grade bonds, those rated BBB or
higher by credit ratings agencies such as Moody's and Standard & Poor's.
Compared to lower-rated bonds, these bonds tend to involve less risk that an
issuer will not be able to pay interest or principal. They also provide
potential for higher income than the highest quality securities.

[ ] Liquidity: We select bonds that, we believe, can easily be bought and sold.

[ ] Positive Outlook: For each bond we consider, we extensively research the
issuing company and its industry. We look for companies with quality
management, strong balance sheets, operating cash flows and plans for future
growth.

[ ] Relative Value in the Marketplace: Bonds that are inexpensively priced and
issued by good companies should, in our opinion, provide attractive returns
over time.

Delaware Extended Duration Bond Fund typically has an average duration of
somewhere between eight to 11 years. Duration is a common measure of a bond or
bond fund's sensitivity to interest rates. The Fund's higher than average
duration makes it suitable for investors with a long time horizon or greater
risk tolerance. The average duration of Delaware Corporate Bond Fund is
generally four to seven years, more suitable for conservative investors who
desire less exposure to fluctuations in principal.

Portfolio Highlights

With the early signs of weakening credit this spring, the market became
sensitive to reports of deteriorating credit quality. This hurt the performance
of bonds rated below investment grade (those rated BB or lower).

While we don't anticipate a recession during the next 12-18 months, we do expect
the economy to slow down. As a result, we're moving up the quality spectrum, and
increasing our holdings in those sectors that traditionally perform well late in
the economic cycle.

We've increased the percentage of our holdings in the telecommunications sector,
which has an average overall rating of A and has recently offered relatively
attractive yields. We have increased our holdings in certain securities issued
by banks domiciled outside the U.S., as many of these securities offer yields
higher than those offered by U.S. banks. We've also increased our weightings
somewhat in bonds issued by energy companies, in hopes that exposure to this
sector would increase our average credit quality.

<PAGE>

"OVERALL, WE ARE OPTIMISTIC ABOUT PROSPECTS FOR CORPORATE BOND PERFORMANCE,
DESPITE SOME SIGNS OF ECONOMIC SLOWDOWN."

We've reduced our exposure to the retail sector in anticipation of weak
near-term earnings and fundamentals, and we maintained about the same weighting
in financial issues as our benchmarks. Among our financial industry debt
holdings, we've emphasized bonds within the insurance industry, which we believe
is poised for improvement during the coming 12 months.

We also generally see new issues as being very attractively priced. An important
component of our investment strategy is to buy new issues and profit from the
eventual tightening in yield spreads between these and older issues.

During 2000, we increased the duration of the Corporate Bond Fund by increasing
the proportion of longer-dated assets to take advantage of the yield-curve
inversion. However, the duration of the Extended Duration Bond Fund has been
relatively constant. As of July 31, 2000, Delaware Corporate Bond Fund's
duration is 5.4 years, while Delaware Extended Duration Bond Fund's duration is
currently 8.9 years.

Outlook

Overall, we are optimistic about prospects for corporate bond performance,
despite some signs of economic slowdown. Going forward, we expect to improve the
average credit quality of both Funds, without sacrificing the total returns or
the yields of the portfolios. We currently see opportunities in the energy,
aerospace and defense sectors. We also expect to see continued favorable yields
within the telecommunications and cable sectors. Because these are high-growth
sectors, demand for their services should generally hold up well in the event of
any economic slowing in the coming months.

We feel that recent economic reports indicate that the Federal Reserve may have
succeeded in slowing down the economy without risking a recession. The Funds are
defensively positioned and should suffer less than their respective benchmarks
if economic conditions weaken further. For example, the Funds have strong
weightings in sectors that we believe would be somewhat recession-resistant.

For both Delaware Corporate Bond Fund and Delaware Extended Duration Bond Fund,
we remain cautiously optimistic that the coming year will be favorable for
fixed-income investors. We will continue to watch for any signs of changing
economic conditions and will be poised to consider any adjustments that will
improve our performance over the next year.

<PAGE>

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

Fund Objective
The Fund seeks to provide total return.

Total Fund Assets
$60.23 million

Number of Holdings
63

Fund Start Date
September 15, 1998

Your Fund Manager
Stuart N. Hosansky holds a bachelor's degree in Business Administration from
Ohio State University and an MBA in Finance from Drexel University. Mr. Hosansky
began his investment career at PNC Financial Corp. as an Assistant Vice
President and Credit Officer. He subsequently held various positions at
Corestates Financial Corp. doing both trading and credit analysis. Most
recently, Mr. Hosansky worked for Corestates Investment Advisers as a Portfolio
Manager doing extensive fixed-income research. He is a Chartered Financial
Analyst and a member of the Financial Analysts of Philadelphia.

Nasdaq Symbols
Class A DCGAX
Class B DGCBX
Class C DGCCX

DELAWARE CORPORATE BOND FUND PERFORMANCE
----------------------------------------

Growth of a $10,000 Investment
September 15, 1998 through July 31, 2000

Delaware Corporate Lehman Brothers Delaware Corporate
Bond Fund Corporate Bond Index Bond Fund Class A

Sep-98 $9,532 $10,000 $10,000.00
Oct-98 $9,740 $ 9,841 $ 9,846.00
Jan-99 $9,936 $10,155 $10,160.00
Apr-99 $9,743 $10,013 $10,108.00
Jul-99 $9,498 $ 9,774 $ 9,778.00
Oct-99 $9,510 $ 9,902 $ 9,906.00
Jan-00 $9,602 $ 9,826 $ 9,829.00
Apr-00 $9,521 $ 9,913 $ 9,917.00
Jul-00 $9,767 $10,247 $10,251.00

Chart assumes $10,000 invested in Delaware Corporate Bond Fund on September 15,
1998 and includes the effect of a 4.75% front-end sales charge and the
reinvestment of all dividends and capital gains. Performance of other Fund
classes will vary due to differing charges and expenses. Chart also assumes
$10,000 invested in the Lehman Brothers Corporate Bond Index and the Lehman
Brothers U.S. Credit Index at closest month's end, September 30, 1998. After
September 30, 1998, returns plotted were as of the last day of each successive
month. You cannot invest directly in an index. Past performance does not
guarantee future results.

<PAGE>

Average Annual Total Returns
Through July 31, 2000 Lifetime One Year
--------------------------------------------------------------------------------
Class A (Est. 9/15/98)
Excluding Sales Charge +1.32% +2.85%
Including Sales Charge -1.23% -1.98%
--------------------------------------------------------------------------------
Class B (Est. 9/15/98)
Excluding Sales Charge +0.63% +2.09%
Including Sales Charge -1.34% -1.75%
--------------------------------------------------------------------------------
Class C (Est. 9/15/98)
Excluding Sales Charge +0.64% +2.10%
Including Sales Charge +0.64% +1.14%
--------------------------------------------------------------------------------

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

Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.

Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.

Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.

The average annual total returns for the lifetime and one-year periods ended
July 31, 2000 for Delaware Corporate Bond Fund Institutional Class (Est.
9/15/98) were +1.57% and +3.12%, respectively. The Institutional Class shares
are available without sales or asset-based distribution charges only to certain
eligible institutional accounts.

An expense limitation was in effect for all classes of Delaware Corporate Bond
Fund during the period. Performance would have been lower if the expense
limitation was not in effect.

Nasdaq Symbol Institutional Class: DGCIX

<PAGE>

FUND BASICS

Fund Objective
The Fund seeks to provide total return.

Total Fund Assets
$64.47 million

Number of Holdings
61

Fund Start Date
September 15, 1998

Your Fund Manager
Stuart N. Hosansky

Nasdaq Symbols
Class A DEEAX
Class B DEEBX
Class C DEECX

DELAWARE EXTENDED
DURATION BOND FUND PERFORMANCE
------------------------------

Growth of a $10,000 Investment
September 15, 1998 through July 31, 2000

Lehman Brothers Lehman Brothers
Delaware Extended Long Term Corporate Long U.S. Credit
Duration Bond Fund Bond Index Index

Sep-98 $9,532 $10,000 $10,000.00
Oct-98 $9,740 $ 9,729 $ 9,729.00
Jan-99 $9,957 $10,223 $10,224.00
Apr-99 $9,639 $ 9,908 $ 9,905.00
Jul-99 $9,273 $ 9,526 $ 9,508.00
Oct-99 $9,292 $ 9,641 $ 9,612.00
Jan-00 $9,312 $ 9,517 $ 9,490.00
Apr-00 $9,195 $ 9,559 $ 9,533.00
Jul-00 $9,465 $ 9,974 $ 9,947.00

Chart assumes $10,000 invested in Delaware Extended Duration Bond Fund on
September 15, 1998 and includes the effect of a 4.75% front-end sales charge and
the reinvestment of all dividends and capital gains. Performance of other Fund
classes will vary due to differing charges and expenses. Chart also assumes
$10,000 invested in the Lehman Brothers Long Term Corporate Bond Index and the
Lehman Brothers Long U.S. Credit Index at closest month's end, September 30,
1998. After September 30, 1998, returns plotted were as of the last day of each
successive month. You cannot invest directly in an index. Past performance does
not guarantee future results.

<PAGE>

Average Annual Total Returns
Through July 31, 2000 Lifetime One Year
--------------------------------------------------------------------------------
Class A (Est. 9/15/98)
Excluding Sales Charge -0.35% +2.08%
Including Sales Charge -2.86% -2.83%
--------------------------------------------------------------------------------
Class B (Est. 9/15/98)
Excluding Sales Charge -1.08% +1.32%
Including Sales Charge -3.00% -2.48%
--------------------------------------------------------------------------------
Class C (Est. 9/15/98)
Excluding Sales Charge -1.00% +1.32%
Including Sales Charge -1.00% +0.37%
--------------------------------------------------------------------------------

Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.

Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.

The average annual total returns for the lifetime and one-year periods ended
July 31, 2000 for Delaware Extended Duration Bond Fund Institutional Class (Est.
9/15/98) were -0.13% and +2.34%, respectively. The Institutional Class shares
are available without sales or asset-based distribution charges only to certain
eligible institutional accounts.

An expense limitation was in effect for all classes of Delaware Extended
Duration Bond Fund during the period. Performance would have been lower if the
expense limitation was not in effect.

Nasdaq Symbol Institutional Class: DEEIX

7
<PAGE>

Statements of Net Assets

DELAWARE CORPORATE BOND FUND

Principal Market
July 31, 2000 Amount Value
--------------------------------------------------------------------------------
Agency Mortgage-Backed Securities - 3.05%
Federal National Mortgage Association
7.125% 2/15/05 .................................. $ 355,000 $ 357,098
7.00% 12/1/29 ................................... 1,529,592 1,479,402
----------
Total Agency Mortgage-Backed
Securities (cost $1,826,903) .................... 1,836,500
----------
Asset-Backed Securities - 3.33%
Chase Credit Card
Master Trust 6.78% 9/15/06 ...................... 1,000,000 1,001,690
First USA Credit Card
Master 6.77% 10/19/06 ........................... 1,000,000 1,002,260
----------
Total Asset-Backed Securities
(cost $2,002,461) ............................... 2,003,950
----------
Commercial Mortgage-Backed Securities - 1.60%
Government National Mortgage Association
6.85% 12/20/25 .................................. 1,000,000 964,240
----------
Total Commercial Mortgage-Backed
Securities (cost $1,002,773) .................... 964,240
----------
Corporate Bonds - 84.67%
Aerospace & Defense - 3.38%
Lockheed Martin 8.20% 12/1/09 ..................... 2,000,000 2,035,296
----------
2,035,296
----------
Automobile & Automotive Parts - 7.86%
Daimler Chrysler 6.90% 9/1/04 ..................... 1,000,000 981,250
Federal Mogul 7.50% 1/15/09 ....................... 500,000 378,772
Ford Motor 7.45% 7/16/31 .......................... 1,050,000 991,810
Lear 8.11% 5/15/09 ................................ 500,000 471,249
TRW 6.625% 6/1/04 ................................. 2,000,000 1,909,020
----------
4,732,101
----------
Banking - 5.97%
Bank of America 6.625% 6/15/04 .................... 1,000,000 973,170
Capital One Bank 8.25% 6/15/05 .................... 1,000,000 996,404
HSBC Capital Funding 10.176% 12/29/49 ............. 1,500,000 1,624,608
----------
3,594,182
----------
Building & Materials - 1.53%
Masco 7.75% 8/1/29 ................................ 1,000,000 919,738
----------
919,738
----------
Computers & Technology - 4.46%
Computer Associates 6.50% 4/15/08 ................. 1,000,000 863,843
Seagate Technology 7.45% 3/1/37 ................... 880,000 827,889
Sun Microsystems 7.65% 8/15/09 .................... 1,000,000 996,755
----------
2,688,487
----------
Consumer Products - 4.29%
Abitibi-Consolidated 8.55% 8/1/10 ................. 1,000,000 1,003,179
Tommy Hilfiger 6.85% 6/1/08 ....................... 2,300,000 1,581,020
----------
2,584,199
----------

<PAGE>

Principal Market
Amount Value
--------------------------------------------------------------------------------
Corporate Bonds (continued)
Energy - 6.13%
Osprey Trust 144A 8.31% 1/15/03 ................... $1,700,000 $ 1,712,436
Pemex Finance 9.69% 8/15/09 ....................... 1,360,000 1,443,110
RBF Finance 11.00% 3/15/06 ........................ 500,000 542,500
----------
3,698,046
----------
Finance & Insurance - 17.64%
Alpha Wind 11.38% 5/23/01 ......................... 500,000 500,000
Aon 8.65% 5/15/05 ................................. 1,500,000 1,544,993
Finova Capital 7.25% 11/8/04 ...................... 750,000 672,459
General Electric Capital
7.375% 1/19/10 .................................. 1,100,000 1,108,929
8.85% 3/1/07 .................................... 1,000,000 1,084,792
Goldman Sachs Group 6.65% 5/15/09 ................. 500,000 462,643
Liberty Mutual 7.70% 10/15/97 ..................... 1,500,000 1,104,498
Meditrust 7.82% 9/10/26 ........................... 650,000 497,250
MONY Group 8.35% 3/15/10 .......................... 1,000,000 996,285
Morgan Stanley Dean Witter
7.75% 6/15/05 ................................... 1,000,000 1,009,756
Principal Financial Global 7.95% 8/15/04 .......... 1,000,000 1,003,468
Residential Reinsurance 10.94% 6/1/01 ............. 500,000 498,750
United Health Care 6.60% 12/1/03 .................. 145,000 138,775
----------
10,622,598
----------
Food, Beverage & Tobacco - 5.57%
Earthgrains 8.50% 8/1/05 .......................... 1,500,000 1,497,906
Philip Morris 7.20% 2/1/07 ........................ 2,000,000 1,857,460
----------
3,355,366
----------
Healthcare & Pharmaceuticals - 0.81%
Tenet Healthcare 8.00% 1/15/05 .................... 500,000 488,750
----------
488,750
----------
Leisure, Lodging & Entertainment - 4.82%
HMH Properties 8.45% 12/1/08 ...................... 625,000 590,625
Park Place Entertainment 7.95% 8/1/03 ............. 1,000,000 995,000
Royal Caribbean 6.75% 3/15/08 ..................... 1,000,000 852,562
Starwood Hotels & Resorts 6.75% 11/15/05 .......... 500,000 467,571
----------
2,905,758
----------
Metals & Mining - 0.84%
AK Steel 7.875% 2/15/09 ........................... 550,000 507,375
----------
507,375
----------
Miscellaneous - 1.14%
Philippines Republic 9.875% 3/16/10 ............... 750,000 686,250
----------
686,250
----------
Packaging & Containers - 3.14%
Crown Cork & Seal 7.00% 12/15/06 .................. 1,500,000 1,322,202
Owens-Illinois 8.10% 5/15/07 ...................... 625,000 566,326
----------
1,888,528
----------
Retail - 3.34%
Saks 8.25% 11/15/08 ............................... 2,500,000 2,013,928
----------
2,013,928
----------

8
<PAGE>

Principal Market
Delaware Corporate Bond Fund Amount Value
--------------------------------------------------------------------------------
Corporate Bonds (continued)
Telecommunications - 7.28%
Bellsouth Capital Funding 7.875% 2/15/30 .......... $1,500,000 $ 1,501,574
Cox Communications 6.15% 8/1/03 ................... 250,000 240,316
Deutsche Telekom Finance 8.25% 6/15/30 ............ 1,250,000 1,275,373
Global Crossing 9.625% 5/15/08 .................... 750,000 736,875
MCI Worldcom 7.55% 4/1/04 ......................... 630,000 631,672
----------
4,385,810
----------
Transportation & Shipping - 2.39%
Atlas Air Lines 8.77% 1/2/11 ...................... 564,732 553,081
Stagecoach Holdings 8.63% 11/15/09 ................ 1,000,000 885,721
----------
1,438,802
----------
Utilities - 4.08%
Israel Electric 7.75% 12/15/27 .................... 2,000,000 1,786,640
PSEG Energy 10.00% 10/1/09 ........................ 625,000 667,658
----------
2,454,298
----------
Total Corporate Bonds
(cost $52,834,274) ............................... 50,999,512
----------
U.S. Treasury Obligations - 5.70%
U.S. Treasury Bond 8.875% 8/15/17 ................. 1,400,000 1,800,312
U.S. Treasury Note 6.50% 2/15/10 .................. 1,580,000 1,632,338
----------
Total U.S. Treasury Obligations
(cost $3,405,875) ................................ 3,432,650
----------
Repurchase Agreements - 3.60%
With Chase Manhattan 6.54% 8/1/00
(dated 7/31/00, collateralized by
$758,000 U.S. Treasury Notes
5.875% due 11/15/04,
market value $757,375) ........................... 738,000 738,000
With PaineWebber 6.54% 8/1/00
(dated 7/31/00, collateralized by
$470,000 U.S. Treasury Notes
6.50% due 8/31/01, market value
$482,606 and $235,000 U.S. Treasury
Notes 6.625% due 3/31/02, market
value $240,467 and $20,000
U.S. Treasury Notes 5.875% due 11/30/01,
market value $19,923) ............................ 728,000 728,000
With Prudential Securities 6.54% 8/1/00
(dated 7/31/00, collateralized by
$470,000 U.S. Treasury Notes 7.25%
due 2/15/01, market value $489,918
and $229,000 U.S. Treasury Notes
5.00% due 4/30/01,
market value $229,135) ........................... 705,000 705,000
----------
Total Repurchase Agreements
(cost $2,171,000) ................................ 2,171,000
----------

<PAGE>

--------------------------------------------------------------------------------
Total Market Value of Securities - 101.95%
(cost $63,243,286) ............................... $61,407,852
Liabilities Net of Receivables and
Other Assets - (1.95%) ........................... (1,175,487)
-----------
Net Assets Applicable to 11,879,573
Shares Outstanding - 100.00% ..................... $60,232,365
===========
Net Asset Value - Delaware Corporate
Bond Fund A Class
($2,790,365 / 550,309 shares) .................... $5.07
-----------
Net Asset Value - Delaware Corporate
Bond Fund B Class
($2,057,424 / 405,781 shares) .................... $5.07
-----------
Net Asset Value - Delaware Corporate
Bond Fund C Class
($296,371 / 58,454 shares) ....................... $5.07
-----------
Net Asset Value - Delaware Corporate
Bond Fund Institutional Class
($55,088,205 / 10,865,029 shares) ................ $5.07
-----------

Components of Net Assets at July 31, 2000:
Shares of beneficial interest
(unlimited authorization - no par) ............... $66,508,449
Accumulated net realized loss
on investments ................................... (4,440,650)
Net unrealized depreciation of investments ........ (1,835,434)
-----------
Total net assets .................................. $60,232,365
===========

Net Asset Value and Offering Price Per
Share Delaware Corporate Bond Fund
Net asset value A Class (A) ....................... $5.07
Sales charge (4.75 % of offering price
or 4.93% of amount invested
per share (B) .................................... 0.25
-----------
Offering price .................................... $5.32
===========

----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.

(B) See the current prospectus for purchases of $100,000 or more.

See accompanying notes

9
<PAGE>

Statements of Net Assets (continued)

DELAWARE EXTENDED DURATION BOND FUND

Principal Market
July 31, 2000 Amount Value
--------------------------------------------------------------------------------
Agency Mortgage-Backed Securities - 4.44%
Federal National Mortgage Association
7.13% 1/15/30 .................................... $2,820,000 $ 2,861,516
-----------
Total Agency Mortgage-Backed
Securities (cost $2,819,746) ..................... 2,861,516
-----------
Asset-Backed Securities - 3.11%
Chase Credit Card 6.778% 9/15/06 .................. 1,000,000 1,001,690
First Usa Credit Card 6.77% 10/19/06 .............. 1,000,000 1,002,260
-----------
Total Asset-Backed Securities
(cost $2,002,461) ................................ 2,003,950
-----------
Corporate Bonds - 83.16%
Aerospace & Defense - 1.61%
Lockheed Martin 8.50% 12/1/29 ..................... 1,000,000 1,037,496
-----------
1,037,496
-----------
Automobile & Auto Parts - 8.46%
Federal Mogul 7.50% 1/15/09 ....................... 500,000 378,772
Ford Motor 7.45% 7/16/31 .......................... 1,750,000 1,653,017
General Motors 6.75% 5/1/28 ....................... 1,250,000 1,100,745
Lear 8.11% 5/15/09 ................................ 500,000 471,249
TRW 7.75% 6/1/29 .................................. 2,000,000 1,851,318
-----------
5,455,101
-----------
Banking, Finance & Insurance - 16.66%
Abbey National 8.963% 12/29/49 .................... 1,500,000 1,504,580
Aon Capital Trust a 8.205% 1/1/27 ................. 1,500,000 1,414,062
Fairfax Financial 7.38% 4/15/18 ................... 1,000,000 704,074
Fidelity Investments 7.57% 6/15/29 ................ 1,000,000 968,056
Florida Windstorm 7.13% 2/25/19 ................... 500,000 462,636
General Electric Capital Corp 7.38% 1/19/10 ....... 1,100,000 1,108,929
Goldman Sachs Group 6.65% 5/15/09 ................. 500,000 462,643
HSBC Capital 10.18% 12/29/49 ...................... 1,500,000 1,624,608
Keycorp Capital III 7.75% 7/15/29 ................. 1,000,000 887,263
Liberty Mutual Insurance 7.70% 10/15/97 ........... 1,500,000 1,104,498
Meditrust 7.82% 9/10/26 ........................... 650,000 497,250
-----------
10,738,599
-----------
Buildings & Materials - 1.43%
Masco 7.75% 8/1/29 ................................ 1,000,000 919,738
-----------
919,738
-----------
Cable, Media & Publishing - 7.07%
Liberty Media 8.50% 7/15/29 ....................... 1,000,000 983,867
News America Holdings 7.75% 12/1/45 ............... 1,681,000 1,517,852
Viacom 7.63% 1/15/16 .............................. 2,100,000 2,053,829
-----------
4,555,548
-----------
Computers & Technology - 2.54%
Computer Associates 6.50% 4/15/08 ................. 1,000,000 863,843
Seagate Technology 7.45% 3/1/37 ................... 820,000 771,442
-----------
1,635,285
-----------

<PAGE>

Principal Market
Amount Value
--------------------------------------------------------------------------------
Corporate Bonds (continued)
Chemicals - 1.58%
Rohm & Haas 7.85% 7/15/29 ......................... $1,000,000 $ 1,019,257
-----------
1,019,257
-----------
Consumer Products - 5.98%
Abitibi Consolidated 8.55% 8/1/10 ................. 1,000,000 1,003,179
Penzoil-Quaker State 7.38% 4/1/29 ................. 2,000,000 1,487,870
Tommy Hilfiger 6.85% 6/1/08 ....................... 1,985,000 1,364,489
-----------
3,855,538
-----------
Energy - 2.19%
KN Capital Trust III 7.63% 4/15/28 ................ 1,000,000 871,353
RBF Finance 11.00% 3/15/06 ........................ 500,000 542,500
-----------
1,413,853
-----------
Food, Beverage & Tobacco - 2.16%
Phillip Morris 7.20% 2/1/07 ....................... 1,500,000 1,390,725
-----------
1,390,725
-----------
Healthcare & Pharmaceuticals - 0.76%
Tenet Healthcare 8.00% 1/15/05 .................... 500,000 488,750
-----------
488,750
-----------
Leisure, Lodging & Entertainment - 2.93%
HMH Properties 8.45% 12/1/08 ...................... 625,000 590,625
ITT 7.38% 11/15/15 ................................ 500,000 443,280
Royal Caribbean 6.75% 3/15/08 ..................... 1,000,000 852,562
-----------
1,886,467
-----------
Metals & Mining - 0.64%
AK Steel 7.88% 2/15/09 ............................ 450,000 415,125
-----------
415,125
-----------
Miscellaneous - 3.58%
Republic of Columbia 9.75% 4/23/09 ................ 700,000 568,750
Republic of Phillipines 9.88% 3/16/10 ............. 750,000 686,250
United Mexican States 9.875% 2/1/10 ............... 1,000,000 1,055,500
-----------
2,310,500
-----------
Packaging & Containers - 2.63%
Crown Cork & Seal 7.38% 12/15/26 .................. 1,500,000 1,130,478
Owens-Illinois 8.1% 5/15/07 ....................... 625,000 566,326
-----------
1,696,804
-----------
Retail - 7.07%
Federated Department Stores
7.00% 2/15/28 ................................... 1,000,000 827,410
Food Lion 8.05% 4/15/27 ........................... 1,500,000 1,290,045
K Mart 7.95% 2/1/23 ............................... 1,000,000 754,073
SAKS 8.25% 11/15/08 ............................... 2,100,000 1,691,699
-----------
4,563,227
-----------
Telecommunications - 7.11%
Bellsouth Capital Funding 7.88% 2/15/30 ........... 1,500,000 1,501,574
Deutsche Telekom 8.25% 6/15/30 .................... 2,300,000 2,346,685
Global Crossing 9.63% 5/15/08 ..................... 750,000 736,875
-----------
4,585,134
-----------

10
<PAGE>

Statements of Net Assets (continued)

Principal Market
Delaware Extended Duration Bond Fund Amount Value
--------------------------------------------------------------------------------
Corporate Bonds (continued)
Transportation & Shipping - 4.95%
Atlas Air Lines 8.77% 1/2/11 ...................... $ 564,732 $ 553,081
CSX 6.80% 12/1/28 ................................. 1,000,000 846,795
Delta Air Lines 8.30% 12/15/29 .................... 1,000,000 905,959
Stagecoach 8.625% 11/15/09 ........................ 1,000,000 885,721
-----------
3,191,556
-----------
Utilities - 3.81%
Israel Electric 7.75% 12/15/27 .................... 2,000,000 1,786,640
PSEG Energy 10.00% 10/1/09 ........................ 625,000 667,658
-----------
2,454,298
-----------
Total Corporate Bonds
(cost $57,478,795) ............................... 53,613,001
-----------
U.S. Treasury Obligations - 6.90%
U S Treasury Bond 8.88% 8/15/17 ................... 1,200,000 1,543,124
U.S. Treasury Note 6.50% 2/15/10 .................. 555,000 573,384
*U.S. Treasury Strip
5.56% 2/15/27 .................................... 7,000,000 1,484,448
5.262% 2/15/27 ................................... 1,500,000 319,737
5.519% 5/15/27 ................................... 2,500,000 523,860
-----------
Total U.S. Treasury Obligations
(cost $4,514,537) ................................ 4,444,553
-----------
Repurchase Agreements - 0.29%
With Chase Manhattan 6.54% 8/1/00
(dated 7/31/00, collateralized by $65,000
U.S. Treasury Notes 5.875%
due 11/15/04, market value $65,257) .............. 64,000 64,000
With PaineWebber 6.50% 8/1/00 (dated
7/31/00, collateralized by $42,000
U.S. Treasury Notes 6.50% due 8/31/01,
market value $42,236 and $21,000
U.S. Treasury Notes 6.625% due 3/31/02,
market value $21,045 and $2,000
U.S. Treasury Notes 5.875%
due 11/30/01, market value $1,957 ................ 64,000 64,000
With Prudential Securities 6.54% 8/1/00
(dated 7/31/00, collateralized by $42,000
U.S. Treasury Notes 7.75% due 2/15/01,
market value $42,876 and $20,000
U.S.Treasury Notes 5.00% due 4/30/01,
market value $20,053) ............................ 62,000 62,000
-----------
Total Repurchase Agreements
(cost $190,000) .................................. 190,000
-----------

<PAGE>

--------------------------------------------------------------------------------
Total Market Value of Securities - 97.90%
(cost $67,005,539) ............................... $63,113,020
Receivables and Other Assets
Net of Liabilities -2.10% ........................ 1,353,433
-----------
Net Assets Applicable To 13,185,493
Shares Outstanding - 100.00% ..................... $64,466,453
===========
-----------------------
*Zero coupon security. The interest rate disclosed is the effective yield as of
the date of acquisition.

Net Asset Value - Delaware Extended
Duration Bond Fund A Class
($1,948,391 / 398,500 Shares) .................... $4.89
-----------
Net Asset Value - Delaware Extended
Duration Bond Fund B Class
($475,576 / 97,269 Shares) ....................... $4.89
-----------
Net Asset Value - Delaware Extended
Duration Bond Fund C Class
($86,868 / 17,767 Shares) ........................ $4.89
-----------
Net Asset Value - Delaware Extended
Duration Bond Fund Institutional Class
($61,955,618 / 12,671,957 Shares) ................ $4.89
-----------

Components of Net Assets at July 31, 2000:
Shares of beneficial interest
(unlimited authorization - no par) ............... $72,314,830
Accumulated net realized loss
on investments ................................... (3,955,858)
Net unrealized depreciation of investments ........ (3,892,519)
-----------
Total net assets .................................. $64,466,453
===========

Net Asset Value and Offering Price Per Share -
Delaware Extended Duration Bond Fund
Net asset value A Class (A) ....................... $4.89
Sales charge (4.75% of offering price or
4.91% of the amount invested per share) (B) ...... 0.24
-----------
Offering price .................................... $5.13
===========

----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.

(B) See the current prospectus for purchases of $100,000 or more.

See accompanying notes

<PAGE>

Statement of Assets and Liabilities

Delaware Corporate Delaware Extended
July 31, 2000 Bond Fund Duration Bond Fund
--------------------------------------------------------------------------------

Assets:
Investments at market (cost $63,243,286
and $67,005,539, respectively) .......... $61,407,852 $63,113,020
Receivables for securities sold ........... 5,035,580 6,118,281
Interest receivable ....................... 1,123,003 1,086,706
Subscriptions receivable .................. 22,438 63,634
----------- -----------
Total assets .............................. 67,588,873 70,381,641
----------- -----------

Liabilities:
Payables for securities purchased ......... 5,460,086 4,072,192
Cash overdraft ............................ 1,630,128 1,662,536
Accrued expenses .......................... 83,639 39,492
Distributions payable ..................... 105,431 119,524
Liquidations payable ...................... 77,224 21,444
----------- -----------
Total liabilities ......................... 7,356,508 5,915,188
----------- -----------

Total Net Assets .......................... $60,232,365 $64,466,453
=========== ===========

See accompanying notes

<PAGE>

Statements of Operations

Delaware
Delaware Extended
Corporate Duration
Year Ended July 31, 2000 Bond Fund Bond Fund
--------------------------------------------------------------------------------

Investment Income:
Interest .................................. $4,587,539 $4,885,814
---------- ----------

Expenses:
Management fees ........................... 298,016 333,632
Dividend disbursing and transfer agent
fees and expenses ........................ 101,775 85,201
Registration fees ......................... 82,305 80,702
Reports and statements to shareholders .... 52,500 37,600
Distribution expense ...................... 27,003 8,509
Accounting and administration ............. 25,500 20,100
Custodian fees ............................ 18,949 16,424
Professional fees ......................... 11,225 12,098
Taxes (other than taxes on income) ........ 9,250 4,015
Trustees' fees ............................ 1,050 550
Other ..................................... 8,287 8,652
---------- ----------
635,860 607,483

Less expenses absorbed or waived .......... (278,685) (262,899)
Less expenses paid indirectly ............. (1,572) (1,821)
---------- ----------
Total expenses ............................ 355,603 342,763
---------- ----------

Net Investment Income ..................... 4,231,936 4,543,051
---------- ----------

Net Realized and Unrealized Gain (Loss)
On Investments:
Net realized loss on investments .......... (2,915,017) (2,078,769)
Net realized gain (loss) on futures
contracts ................................ 150,553 (12,878)
Net change in unrealized appreciation /
depreciation of investments ............ 311,322 (853,027)
---------- ----------

Net Realized and Unrealized Loss
on Investments ........................... (2,453,142) (2,944,674)
---------- ----------
Net Increase In Net Assets Resulting
from Operations .......................... $1,778,794 $1,598,377
========== ==========

See accompanying notes

<PAGE>

Statements of Changes in Net Assets

<TABLE>
<CAPTION>
Delaware Corporate Delaware Extended Duration
Bond Fund Bond Fund
------------------------------------------------------------------------------------------------------------------------------------

Period Period
9/15/98* 9/15/98*
Year Ended through Year Ended through
7/31/00 7/31/99 7/31/00 7/31/99

Increase (Decrease) in Net Assets from Operations:
<S> <C> <C> <C> <C>
Net investment income ....................................... $4,231,936 $2,110,727 $4,543,051 $2,001,417
Net realized loss on investments ............................ (2,764,464) (1,652,452) (2,091,647) (1,849,437)
Net change in unrealized appreciation / depreciation
of investments ............................................. 311,322 (2,146,756) (853,027) (3,039,492)
---------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ............................................ 1,778,794 (1,688,481) 1,598,377 (2,887,512)
---------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
A Class .................................................. (149,699) (45,318) (114,954) (31,630)
B Class .................................................. (113,310) (20,299) (22,948) (1,275)
C Class .................................................. (19,421) (7,907) (6,891) (1,261)
Institutional Class ...................................... (3,949,506) (2,037,203) (4,398,258) (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)
---------------------------------------------------------------
(4,231,936) (2,134,461) (4,543,051) (2,016,191)
---------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class .................................................. 2,546,662 1,919,685 1,553,843 1,303,923
B Class .................................................. 1,576,585 1,413,525 467,890 172,849
C Class .................................................. 316,311 446,292 157,626 62,451
Institutional Class ...................................... 19,705,274 70,556,107 32,632,330 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 .................................................. 113,499 39,760 84,324 29,500
B Class .................................................. 73,984 9,222 18,759 1,068
C Class .................................................. 13,478 6,038 4,974 469
Institutional Class ...................................... 3,488,489 1,788,078 3,897,020 1,718,312
---------------------------------------------------------------
27,834,282 76,178,707 38,816,766 73,573,146
---------------------------------------------------------------
Cost of shares repurchased:
A Class .................................................. (1,158,839) (508,014) (654,592) (220,356)
B Class .................................................. (753,392) (132,179) (110,038) (54,753)
C Class (320,195) (130,682) (128,629) (187)
Institutional Class ...................................... (21,033,488) (13,467,751) (27,357,977) (11,548,550)
---------------------------------------------------------------
(23,265,914) (14,238,626) (28,251,236) (11,823,846)
---------------------------------------------------------------
Increase in net assets derived from capital share
transactions ............................................... 4,568,368 61,940,081 10,565,530 61,749,300
---------------------------------------------------------------
Net Increase in Net Assets .................................. 2,115,226 58,117,139 7,620,856 56,845,597

Net Assets:
Beginning of period ......................................... 58,117,139 -- 56,845,597 --
---------------------------------------------------------------
End of period ............................................... $60,232,365 $58,117,139 $64,466,453 $56,845,597
===============================================================
</TABLE>

* Date of commencement of operations.

See accompanying notes

<PAGE>

Financial Highlights

Selected data for each share of the Fund outstanding Delaware Corporate
throughout each period were as follows: Bond Fund A Class
--------------------------------------------------------------------------------

Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ....................... $5.280 $5.500
Income (loss) from investment operations:
Net investment income ................................... 0.353 0.201
Net realized and unrealized loss on investments ......... (0.210) (0.216)
-----------------
Total from investment operations ........................ 0.143 (0.015)
-----------------
Less dividends and distributions:
Dividends from net investment income .................... (0.353) (0.201)
Distributions from net realized gain on investments ..... -- (0.004)
-----------------
Total dividends and distributions ....................... (0.353) (0.205)
-----------------

Net asset value, end of period ............................. $5.070 $5.280
=================
Total return(2) ............................................ 2.85% (0.34%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $2,790 $1,377
Ratio of expenses to average net assets ................. 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 1.27% 1.26%
Ratio of net investment income to average net assets .... 6.84% 5.75%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly ............................................. 6.37% 5.29%
Portfolio turnover ...................................... 118% 175%
------------

(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.

See accompanying notes

<PAGE>

Financial Highlights (continued)

Selected data for each share of the Fund outstanding Delaware Corporate
throughout each period were as follows: Bond Fund B Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ....................... $5.280 $5.500

Income (loss) from investment operations:
Net investment income ................................... 0.315 0.171
Net realized and unrealized loss on investments ......... (0.210) (0.216)
-----------------
Total from investment operations ........................ 0.105 (0.045)
-----------------
Less dividends and distributions:
Dividends from net investment income .................... (0.315) (0.171)
Distributions from net realized gain on investments ..... -- (0.004)
-----------------
Total dividends and distributions ....................... (0.315) (0.175)
-----------------

Net asset value, end of period ............................. $5.070 $5.280
=================
Total return(2) ............................................ 2.09% (0.88%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $2,057 $1,236
Ratio of expenses to average net assets ................. 1.55% 1.55%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 2.02% 2.01%
Ratio of net investment income to average net assets .... 6.09% 5.00%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly .... 5.62% 4.54%
Portfolio turnover ...................................... 118% 175%

------------

See accompanying notes

<PAGE>

Financial Highlights (continued)

Selected data for each share of the Fund outstanding Delaware Corporate
throughout each period were as follows: Bond Fund C Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ....................... $5.280 $5.500

Income (loss) from investment operations:
Net investment income ................................... 0.316 0.171
Net realized and unrealized loss on investments ......... (0.210) (0.216)
----------------
Total from investment operations ........................ 0.106 (0.045)
----------------

Less dividends and distributions:
Dividends from net investment income .................... (0.316) (0.171)
Distributions from net realized gain on investments ..... -- (0.004)
----------------
Total dividends and distributions ....................... (0.316) (0.175)
----------------

Net asset value, end of period ............................. $5.070 $5.280
================
Total return(2) ............................................ 2.10% (0.88%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $296 $303
Ratio of expenses to average net assets ................. 1.55% 1.55%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 2.02% 2.01%
Ratio of net investment income to average net assets .... 6.09% 5.00%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ..... 5.62% 4.54%
Portfolio turnover ......................................... 118% 175%

------------

See accompanying notes

17
<PAGE>

Financial Highlights (continued)

Delaware Corporate
Selected data for each share of the Fund outstanding Bond Fund
throughout each period were as follows: Institutional Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ...................... $ 5.280 $ 5.500

Income (loss) from investment operations:
Net investment income ..................................... 0.367 0.212
Net realized and unrealized loss on investments ........... (0.210) (0.216)
-----------------
Total from investment operations .......................... 0.157 (0.004)
-----------------
Less dividends and distributions:
Dividends from net investment income ...................... (0.367) (0.212)
Distributions from net realized gain on investments ....... -- (0.004)
-----------------
Total dividends and distributions ......................... (0.367) (0.216)
-----------------

Net asset value, end of period ............................ $5.070 $5.280
=================
Total return(2) ........................................... 3.12% (0.14%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $55,088 $55,201
Ratio of expenses to average net assets ................ 0.55% 0.55%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ............... 1.02% 1.01%
Ratio of net investment income to average net assets ... 7.09% 6.00%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly ............................................ 6.62% 5.54%
Portfolio turnover ..................................... 118% 175%

-----------
(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.

See accompanying notes

<PAGE>

Financial Highlights (continued)

Delaware Extended
Selected data for each share of the Fund outstanding Duration Bond
throughout each period were as follows: Fund A Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ........................ $5.150 $ 5.500

Income (loss) from investment operations:
Net investment income .................................... 0.360 0.206
Net realized and unrealized loss on investments .......... (0.260) (0.347)
----------------
Total from investment operations ......................... 0.100 (0.141)
----------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.360) (0.206)
Distributions from net realized gain on investments ...... -- (0.003)
----------------
Total dividends and distributions ........................ (0.360) (0.209)
----------------

Net asset value, end of period .............................. $4.890 $ 5.150
================

Total return(2) ............................................. 2.08% (2.68%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $1,948 $ 1,042
Ratio of expenses to average net assets .................. 0.80% 0.80%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................. 1.23% 1.27%
Ratio of net investment income to average net assets ..... 7.24% 5.88%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 6.81% 5.41%
Portfolio turnover ....................................... 115% 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.

See accompanying notes

<PAGE>

Financial Highlights (continued)

Delaware Extended
Selected data for each share of the Fund outstanding Duration Bond
throughout each period were as follows: Fund B Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ........................ $5.150 $5.500

Income (loss) from investment operations:
Net investment income .................................... 0.323 0.172
Net realized and unrealized loss on investments .......... (0.260) (0.347)
----------------
Total from investment operations ......................... 0.063 (0.175)
----------------

Less dividends and distributions:
Dividends from net investment income ..................... (0.323) (0.172)
Distributions from net realized gain on investments ...... -- (0.003)
----------------
Total dividends and distributions ........................ (0.323) (0.175)
----------------

Net asset value, end of period .............................. $4.890 $5.150
================

Total return(2) ............................................. 1.32% (3.28%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $476 $114
Ratio of expenses to average net assets .................. 1.55% 1.55%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................. 1.98% 2.02%
Ratio of net investment income to average net assets ..... 6.49% 5.13%
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ...... 6.06% 4.66%
Portfolio turnover ....................................... 115% 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.

See accompanying notes

<PAGE>

Financial Highlights (continued)

Delaware Extended
Selected data for each share of the Fund outstanding Duration Bond
throughout each period were as follows: Fund C Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ........................ $5.150 $5.500

Income (loss) from investment operations:
Net investment income .................................... 0.323 0.180
Net realized and unrealized loss on investments .......... (0.260) (0.347)
----------------
Total from investment operations ......................... 0.063 (0.167)
----------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.323) (0.180)
Distributions from net realized gain on investments ...... -- (0.003)
----------------
Total dividends and distributions ........................ (0.323) (0.183)
----------------

Net asset value, end of period .............................. $4.890 $5.150
================

Total return(2) ............................................. 1.32% (3.15%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $ 87 $ 58
Ratio of expenses to average net assets .................. 1.55% 1.55%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................. 1.98% 2.02%
Ratio of net investment income to average net assets ..... 6.49% 5.13%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly .............................................. 6.06% 4.66%
Portfolio turnover ....................................... 115% 201%

See accompanying notes

21
<PAGE>

Financial Highlights (continued)

Delaware Extended
Selected data for each share of the Fund outstanding Duration Bond Fund
throughout each period were as follows: Institutional Class
--------------------------------------------------------------------------------
Year 9/15/98(1)
Ended to
7/31/00 7/31/99

Net asset value, beginning of period ....................... $ 5.150 $ 5.500

Income (loss) from investment operations:
Net investment income ................................... 0.372 0.215
Net realized and unrealized loss on investments ......... (0.260) (0.347)
-----------------
Total from investment operations ........................ 0.112 (0.132)
-----------------

Less dividends and distributions:
Dividends from net investment income .................... (0.372) (0.215)
Distributions from net realized gain on investments ..... -- (0.003)
-----------------
Total dividends and distributions ....................... (0.372) (0.218)
-----------------

Net asset value, end of period ............................. $4.890 $5.150
=================

Total return(2) ............................................ 2.34% (2.52%)

Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $61,955 $55,631
Ratio of expenses to average net assets ................. 0.55% 0.55%
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................ 0.98% 1.02%
Ratio of net investment income to average net assets .... 7.49% 6.13%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly ............................................. 7.06% 5.66%
Portfolio turnover ...................................... 115% 201%

See accompanying notes

22
<PAGE>

Notes to Financial Statements

July 31, 2000
--------------------------------------------------------------------------------
Delaware Group Income Funds ("the Company") is organized as a Delaware business
trust and offers five funds: Delaware Corporate Bond Fund, Delaware Delchester
Fund, Delaware Extended Duration Bond Fund, Delaware High-Yield Opportunities
Fund and Delaware 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 are diversified open-end investment companies under the Investment Company
Act of 1940, as amended. 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 seek to provide investors with high
total return.

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

Federal Income Taxes - Each 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 accounting
principles generally accepted in the United States.

Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
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 102% collateralized. However, in the
event of default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
<PAGE>

--------------------------------------------------------------------------------
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
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 from net realized gain on investments,
if any, annually.

Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses were approximately $1,373 for the Delaware Corporate Bond Fund
and $1,397 for the Delaware Extended Duration Bond Fund for the year ended July
31, 2000. 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 $199 for the Delaware Corporate Bond Fund and $424 for the
Delaware Extended Duration Bond Fund for the year ended July 31, 2000. The
expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding offset
shown as "Expenses paid indirectly".

2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the investment management agreement, each Fund
pays Delaware Management Company (DMC), the Investment Manager, an annual fee
based on its average daily net assets at the following rates:

Delaware Delaware
Corporate 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, 2000, the liability for Investment Management Fees and other
expenses payable to DMC were as follows:

Delaware Delaware
Corporate Extended Duration
Bond Fund Bond Fund

$25,969 $30,605

23
<PAGE>

Notes to Financial Statements (continued)

--------------------------------------------------------------------------------
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 September 30, 2000.

The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administrative 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, 2000, the Funds had payables for such fees and
other expenses payable to DSC as follows:

Delaware Delaware
Corporate Extended Duration
Bond Fund Bond Fund

$9,686 $10,111

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. At July 31, 2000,
the Funds had payables for distribution fees and other expenses payable to DDLP
as follows:

Delaware Delaware
Corporate Extended Duration
Bond Fund Bond Fund

$25,975 $24,378

For the period ended July 31, 2000, DDLP earned $18,172 for commissions on the
sales of the Fund A Class shares for the Delaware Corporate Bond Fund and $5,958
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, trustees and/or employees of
the Funds. These officers, trustees and employees are paid no compensation by
the Funds.

3. Investments
For the year ended July 31, 2000, 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
Corporate Extended Duration
Bond Fund Bond Fund

Purchases ........... $73,708,343 $77,713,579
Sales ............... $68,534,366 $68,828,355

At July 31, 2000, the aggregate cost of securities and unrealized
appreciation\depreciation for federal income tax purposes for each Fund were as
follows:
<PAGE>

--------------------------------------------------------------------------------
Delaware Delaware
Corporate Extended Duration
Bond Fund Bond Fund

Cost of investments ........... $63,243,286 $67,079,849
============================================
Aggregate unrealized
appreciation ................ $568,911 $566,073
Aggregate unrealized
depreciation ................ (2,404,345) (4,533,312)
--------------------------------------------
Net unrealized depreciation.... ($1,835,434) ($3,967,239)
============================================

For federal income tax purposes, the Funds had accumulated capital losses at
July 31, 2000, of $1,704,753 for the Corporate Bond Fund and $2,232,330 for the
Extended Duration Bond Fund, which may be carried forward and applied against
future capital gains. The capital loss carry forwards expire in 2008.

4. Capital Shares

Transactions in capital shares were as follows:

Delaware Corporate
Bond Fund

Year 9/15/98*
Ended to
7/31/00 7/31/99
Shares sold:
A Class ........................................... 497,128 344,744
B Class ........................................... 303,492 256,938
C Class ........................................... 60,872 79,951
Institutional Class ............................... 3,815,065 12,583,775

Shares issued upon reinvestment
of distributions from net investment
income and net realized gain
on investments:
A Class ........................................... 22,182 7,270
B Class ........................................... 14,522 1,718
C Class ........................................... 2,628 1,106
Institutional Class ............................... 679,486 327,043
-----------------------
5,395,375 13,602,545
-----------------------

Shares repurchased:
A Class ........................................... (229,889) (91,126)
B Class ........................................... (146,349) (24,540)
C Class ........................................... (62,424) (23,679)
Institutional Class ............................... (4,087,823) (2,452,517)
------------------------
(4,526,485) (2,591,862)
------------------------

Net increase ........................................ 868,890 11,010,683
========================
* Date of commencement of operations.

24
<PAGE>

Notes to Financial Statements (continued)

--------------------------------------------------------------------------------
Delaware
Extended Duration
Bond Fund

Year 9/15/98*
Ended to
7/31/00 7/31/99
Shares sold:
A Class ........................................... 311,638 236,728
B Class ........................................... 93,709 31,768
C Class ........................................... 31,164 11,269
Institutional Class ............................... 6,542,530 12,605,679

Shares issued upon reinvestment
of distributions from net investment
income and net realized gain
on investments:
A Class ........................................... 17,011 5,456
B Class ........................................... 3,805 203
C Class ........................................... 1,007 86
Institutional Class ............................... 785,117 318,397
-----------------------
7,785,981 13,209,586
-----------------------

Shares repurchased:
A Class ........................................... (132,461) (39,872)
B Class ........................................... (22,315) (9,901)
C Class ........................................... (25,723) (36)
Institutional Class ............................... (5,454,580) (2,125,186)
-----------------------
(5,635,079) (2,174,995)
-----------------------

Net increase ........................................ 2,150,902 11,034,591
=======================
* Date of commencement of operations.

5. Line of Credit
Effective October 8, 1999, the Fund, along with certain other funds in the
Delaware Investments Family of Funds (the "Participants"), participate in a
$683,500,000 revolving line of credit facility to be used for temporary or
emergency purposes as an additional source of liquidity to fund redemptions of
investor shares. The Participants are charged an annual commitment fee, which is
allocated across the Participants on the basis of each Funds' allocation of the
entire facility. The Participants may borrow up to a maximum of one third of
their net assets under the agreement. The Funds had no amounts outstanding at
July 31, 2000 or at any time during the fiscal year.
<PAGE>

--------------------------------------------------------------------------------
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.

25
<PAGE>

Notes to Financial Statements (continued)

--------------------------------------------------------------------------------
7. Swap Agreements
During the period ended July 31, 2000, the Delaware Corporate Bond Fund and the
Delaware Extended Duration Bond Fund entered into total return swap agreements
in accordance with their investment objectives. A swap is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. Total return swaps involve commitments to pay interest in
exchange for a market linked return based on a notional amount. To the extent
the total return of the security instrument or basket of instruments underlying
the transaction exceeds the offsetting interest obligation, the Funds will
receive a payment from the counterparty. To the extent the total return of the
security, instrument or basket of instruments underlying the transaction falls
short of the offsetting interest obligation, the Funds will make a payment to
the counterparty. Total return swaps are marked-to-market daily based upon the
fair valuation methodology established by the Funds' Board of Trustees. The
change, if any, is recorded as unrealized appreciation or depreciation in the
Statement of Operations. A realized gain or loss is recorded on maturity or
termination of the swap agreements.

At July 31, 2000, the Delaware Corporate Bond Fund had the following total
return swap agreement outstanding:
<TABLE>
<CAPTION>
Notional Expiration Net Unrealized
Amount Date Description Appreciation
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
$3,000,000 10/1/2000 Agreement with Morgan Guaranty $4,101
Trust Company to receive (pay)
the notional amount multiplied
by the return on the Lehman
Aggregate Index and to pay the
notional amount multiplied by
3 month LIBOR adjusted by
a spread of minus 0.30%.
</TABLE>
At July 31, 2000, the Delaware Extended Duration Bond Fund had the following
total return swap agreement outstanding:

<TABLE>
<CAPTION>
Notional Expiration Net Unrealized
Amount Date Description Appreciation
-----------------------------------------------------------------------------------------
<S> <C> <C> <C>
$3,000,000 10/1/2000 Agreement with Morgan Guaranty $4,101
Trust Company to receive (pay)
the notional amount multiplied
by the return on the Lehman
Aggregate Index and to pay the
notional amount multiplied by
3 month LIBOR adjusted by
a spread of minus 0.30%.
</TABLE>

Because there is no organized market for these swap agreements, the value of
open swaps may differ from that which would be realized in the event the Funds
terminated their position in the agreement. Risks may arise upon entering into
these agreements from the potential inability of the counterparties to meet the
terms of the agreements and are generally limited to the amount of favorable
movements in the value of the underlying security, instrument or basket of
instruments, if any, at the day of default. Risks also arise from potential
losses from adverse market movements, and such losses could exceed the related
amounts shown above.
<PAGE>

--------------------------------------------------------------------------------
8. 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 interest 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. (In some cases, due to the form of the futures
agreement, initial margin is held in a segregated account with the Funds'
custodian, rather than directly with the broker.) Subsequent payments are
received from the broker or paid to the broker (or added to the segregated
account) 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 Funds record a realized gain or loss
equal to the difference between the value of the contract at the time it was
opened and the value of the contract at the time it is closed. Risk may arise
upon entering into futures contracts from potential imperfect correlation
between the futures contracts and the underlying securities and from the
possibility of an illiquid secondary market for these instruments.

No financial futures contracts were outstanding at July 31, 2000.

9. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2001. Please
consult your tax advisor for proper treatment of this information.

For the fiscal year ended July 31, 2000, each Fund designates as long-term
capital gains and ordinary income distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
Long-Term Ordinary (C)
Capital Gains Income Total (D)
Distributions Distributions Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Delaware Extended
Duration Bond Fund -- 100% 100% --

Delaware Corporate
Bond Fund -- 100% 100% --
</TABLE>
(A) and (B) are based on a percentage of each Fund's total distributions.
(D) is based on a percentage of ordinary income of the Fund.

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

26
<PAGE>

Report of Independent Auditors

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

We have audited the accompanying statements of net assets and statements of
assets and liabilities of Delaware Group Income Funds (Delaware Corporate Bond
Fund and Delaware Extended Duration Bond Fund) (the "Funds") as of July 31,
2000, and the related statements of operations for the year then ended, and the
statements of changes in net assets and financial highlights for the year then
ended and 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
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of July 31, 2000, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the above listed funds of Delaware Group Income Funds at July 31, 2000, and
the results of their operations for the year then ended, and the changes in
their net assets and their financial highlights for the year then ended and for
the period September 15, 1998 (commencement of operations) through July 31,
1999, in conformity with accounting principles generally accepted in the United
States.

Ernst & Young LLP

Philadelphia, Pennsylvania
September 6, 2000

27
<PAGE>

DELAWARE INVESTMENTS FAMILY OF FUNDS

More information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.

BUILDING BLOCKS
OF A DIVERSIFIED PORTFOLIO

--------------------------------------------------------------------------------
AGGRESSIVE GROWTH EQUITY FUNDS
-----------------------------------------------

GROWTH EQUITY FUNDS

-----------------------------------------------

TAX- INTERNATIONAL ASSET
TAXABLE EXEMPT AND GLOBAL ALLOCATION
MODERATE GROWTH BOND BOND FUNDS FUNDS
EQUITY FUNDS FUNDS FUNDS

--------------------------------------------------------------------------------
STABILITY OF PRINCIPAL

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

* Formerly known as DelCap Fund.

** Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.

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

For Shareholders
1.800.523.1918

For Securities Dealers
1.800.362.7500

For Financial Institutions
Representatives Only
1.800.659.2265

www.delawareinvestments.com

This annual report is for the information of Delaware 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 each Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in each Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
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BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman National Distributor
Citadel Constructors, Inc. AFFILIATED OFFICERS Delaware Distributors, L.P.
King of Prussia, PA Philadelphia, PA
Charles E. Haldeman, Jr.
David K. Downes President and Chief Executive Officer Shareholder Servicing, Dividend
President and Chief Executive Officer Delaware Management Holdings, Inc. Disbursing and Transfer Agent
Delaware Investments Family of Funds Philadelphia, PA Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA
Richard J. Flannery
John H. Durham Executive Vice President 1818 Market Street
Private Investor and General Counsel Philadelphia, PA 19103-3682
Horsham, PA Delaware Investments Family of Funds
Philadelphia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates Bruce D. Barton
New York, NY President and Chief Executive Officer
Delaware Distributors, L.P.
Ann R. Leven Philadelphia, PA
Former Treasurer, National Gallery of Art
Washington, DC

Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
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(3686) Printed in the USA
AR-460 [7/00] PPL 9/00 (J6282)