U.S. Government
Securities Fund
service and guidance
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professional management
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goals
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1998
Annual
Report
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----------------------------
Philadelphia * London]
A TRADITION OF SOUND INVESTING
commitment
A Commitment To Our Investors
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LANDSCAPE]
Delaware Investments has a tradition of money management that dates back
to 1929. We have a long and distinguished history of helping individuals
and institutions - including some of America's largest pension funds -
reach their financial goals.
Headquartered in Philadelphia, a block from the nation's oldest
stock exchange, the Delaware organization established its first mutual
fund in 1938. Delaware International Advisers Ltd., our international
affiliate, was established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also
manage investments for variable annuity products and closed-end funds,
and offer retirement plan services for individuals and businesses.
Delaware manages more than $42 billion in mutual fund assets and
institutional advisory accounts for more than half-a-million investors.
We're part of a global financial service and investment management
business owned by Lincoln National Corporation, which manages more than
$125 billion in assets.
U.S. Government Securities Fund Objective
To provide shareholders with a high level of current income consistent
with prudent investment risk.
Table of Contents
Letter to Shareholders Page 1
Portfolio Manager's Review Page 3
Performance Summary Page 6
Statement of Net Assets Page 7
Financial Highlights Page 9
current income
November 9, 1998
Dear Shareholder:
INVESTORS SEEKING A SAFE HAVEN FROM global economic turmoil and uncertainty
in the stock market sparked a U.S. Treasury bond rally that started in the
winter of 1997 and continued throughout fiscal 1998. The safety of U.S.
government debt drew unprecedented numbers of investors to Treasuries,
leading to double-digit price gains. Thirty-year bond yields fell to their
lowest level since 1967.
Over the last 12 months, long-term Treasury bonds provided
investors with returns that approached the performance of equity
investments, an unusual event. For the one-year period ending October
31, 1998, long-term Treasuries returned +16.17% according to the Merrill
Lynch 30-year Treasury Bond Index, compared to the +21.99% return posted
by the stocks of the unmanaged Standard & Poor's 500 Index.
U.S. Government Securities Fund, which invests a substantial
percentage of its assets in Treasuries, benefited from strength in the
Treasury market. The Fund provided an attractive total return of +8.79%
(for A Class shares with distributions reinvested at net asset value)
for the 12 months ended October 31, 1988. This return, however, fell
short of the Fund's unmanaged benchmark, the Lehman Brothers Government
Bond Index, and the average return of a peer group of similarly managed
funds.
A strategic long-term focus on current income from mortgage
securities helps explain the Fund's performance. During fiscal 1998,
more than half of U.S. Government Securities Fund's assets were invested
in Government National Mortgage Association (GNMA) bonds. GNMA
securities offered higher income potential than U.S. Treasury bonds,
however, GNMA prices were affected by investor concern about potential
mortgage prepayments. This limited total returns for the Fund. Both the
index and the Fund's peers were more heavily weighted in Treasuries.
By most measures, the U.S. economy during the first half of fiscal
1998 was firing on all cylinders. This led to concern about the
potential for inflation and higher interest rates.
AVERAGE ANNUAL TOTAL RETURNS
12 Months Ended Five Years Ended
October 31, 1998 October 31, 1998
U.S. Government Securities Fund A
Class +8.79% +6.08%
Lipper General U.S. Government
Fund Average (193 funds) +9.06% +5.88%
Lehman Brothers Government Bond Index +11.28% +6.98%
U.S. Consumer Price Index (Inflation) +1.50% +2.80%
All performance shown above is based on net asset value and assumes
reinvestment of distributions. For Fund performance and expense
information for all Classes, see page 6. The Lehman Brothers Government
Bond Index is an unmanaged composite of several types of U.S. government
securities and assumes no fees or expenses. Past performance does not
guarantee future results.
Your Fund's portfolio manager, Mark L. Simenstad, responded to this
concern during the first half of the fiscal year with a slight reduction
of the average effective maturity of the portfolio. The Fund attempted
to mitigate the risk of rising interest rates by investing in
intermediate-length securities with an average weighted maturity of
approximately nine years. In our opinion, this defensive posture allowed
the Fund to provide an attractive level of current income without undue
exposure to interest rate volatility.
Economic growth during the second half of the fiscal year slowed
dramatically, as the Asian recessions began to affect U.S. corporate
earnings. As inflation concerns subsided, the Fund modestly extended the
average maturity of its securities to take advantage of the higher
yields offered by longer term investments.
We expect the economic fallout from recession in Russia, Brazil,
Japan and much of Asia to contribute to slower U.S. economic growth in
1999. In our opinion, these conditions, combined with benign inflation
and the potential for further cuts to short-term interest rates, should
create a favorable environment for government securities.
In the pages that follow, your Fund's portfolio manager, Mr.
Simenstad, provides an annual review of U.S. Government Securities Fund
for fiscal 1998. We encourage you to meet regularly with your financial
adviser to discuss your financial goals and review the performance of
your investment portfolio. Thank you for your continued confidence in
Delaware Investments.
Sincerely,
/S/WAYNE A. STORK
Wayne A. Stork
Chairman
/S/JEFFREY J. NICK
Jeffrey J. Nick
President and Chief Executive Officer
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Glossary
Coupon
Interest rate on a bond which the issuer promises to pay the holder
until maturity, expressed as an annual percentage of the bond's face
value. For instance, a bond with a 10% coupon will pay $10 for every
$100 of face amount per year.
Duration
The most common measure of a bond's sensitivity to interest rates. It
indicates the approximate change in a bond's price given a 1% movement
in interest rates.
Gross Domestic Product (GDP)
Market value of the goods and services produced in the U.S., as reported
quarterly by the U.S. Department of Commerce. GDP is made up of
consumer and government purchases, private domestic investments, and net
exports of goods and services.
STRIPS
Separate Trading of Registered Interest and Principal of Securities.
STRIPS are Treasury securities in which the coupon is separated from the
principal, leaving two separate securities, which may be held by
different investors.
Portfolio Manager's Review
By Mark L. Simenstad
Senior Portfolio Manager
Voyageur Asset Management
November 9, 1998
U.S. Government Securities Fund seeks to provide investors with an
attractive level of current income and relative stability of principal.
The Fund's assets are divided between U.S. Treasuries and Government
National Mortgage Association bonds. Both of these securities are backed
by the full faith and credit of the U.S. government and carry the
highest possible credit rating. Of course, the Fund itself is not
guaranteed.
In fiscal 1998, U.S. Government Securities Fund benefited from a
sustained rally in the Treasury market. As economic conditions in Asia,
Russia and other emerging nations continued to worsen, investors
worldwide attempted to shelter assets from global economic turmoil by
investing in U.S. government debt.
By the second quarter of 1998, declining demand for U.S. exports
began to affect the performance of U.S. corporations. Disappointing
corporate earnings and a slowing economy triggered volatility in equity
markets throughout the summer of 1998. This, combined with a U.S.
government budget surplus, added to the appeal of Treasury bonds.
Booming demand for Treasuries pushed the market yield on 30-year bonds
to 4.69% on October 5, 1998, the lowest yield on long-term government
bonds in more than 30 years.
WITH TREASURY BOND
YIELDS PLUMMETING
TO ALL-TIME LOWS,
WE INCREASED OUR
WEIGHTING IN GNMA
BONDS TO NEARLY
61%, DURING THE
SECOND HALF OF FISCAL
1998, IN ORDER TO
GENERATE HIGHER INCOME
FOR THE FUND.
With Treasury bond yields plummeting to all-time lows, we increased
our weighting in GNMA bonds to 61% during the second half of fiscal
1998, to generate higher income for the Fund. GNMA securities generally
yield more than Treasuries of comparable maturities. However, they are
also subject to the risk of mortgage prepayment when interest rates
fall. When homeowners prepay their mortgages, bondholders have to
reinvest the principal, often at a lower rate than when the bond was
issued. We attempted to reduce the risk of mortgage prepayment by
investing primarily in discount mortgages, which have interest rates
that are generally lower than current mortgages and provide little
incentive for homeowners to refinance.
[GRAPHIC OMITTED: pie chart PORTFOLIO HIGHLIGHTS AND ASSET MIX]
GNMA 61%
Treasuries 34%
Cash 5%
PORTFOLIO HIGHLIGHTS AND ASSET MIX
October 31, 1998
October 31, October 31,
1998 1997
Average Duration 5.4 years 5.8 years
Average Maturity 8.0 years 9.1 years
Average Quality AAA AAA
Thirty-Day Current SEC Yield* 4.64% 5.32%
Number of Bonds 18 39
*For A Class shares measured according to the Securities
and Exchange Commission guidelines. For B Class, C Class
and the Institutional Class shares, the 30-day SEC current
yields as of October 31, 1998, were 4.11%, 4.12% and 4.87%,
respectively.
During the first half of fiscal 1998, the Fund employed a barbell
approach for managing the average effective maturity of its holdings. By
barbell, we mean that the Fund's assets were strategically allocated to
both ends of the maturity spectrum rather than across the full range. We
chose long-term investments to take advantage of the additional yield
available and balanced that position with short-term investments to help
protect principal.
Throughout the second half of fiscal 1998, the margin of additional
yield provided by longer term investments narrowed. With longer
maturities offering minimal additional income for extended exposure to
the risk of interest rate volatility, we shifted from our barbell
strategy and began to invest in the middle portion of the yield curve.
We did this by adding a 4% weighting in STRIP (Separate Trading of
Registered Interest and Principal of Securities) bonds.
STRIP bonds separate the principal from the coupon of a Treasury
bond allowing it to be sold as two separate zero coupon securities. Over
the last six months, U.S. Government Securities Fund purchased STRIP
bonds which allowed the Fund to lock in attractive yields relative to
other intermediate-length securities with less investment risk than
long-term bonds. The yield for STRIP bonds is primarily determined by
the price paid for the security in relation to its face value. Like
other bonds, STRIPS become more attractive during periods of stable or
falling interest rates.
[GRAPHIC OMITTED: worm chart INFLATION AND MORTGAGE RATES FELL SHARPLY
IN FISCAL 1998]
INFLATION AND MORTGAGE RATES FELL SHARPLY IN FISCAL 1998
month and year Inflation Mortgage Rates
Oct.
97 2.1 7.34
Nov.
97 1.8 7.32
Dec.
97 1.7 7.22
Jan.
98 1.6 7.03
Feb.
98 1.4 7.16
Mar.
98 1.4 7.16
Apr.
98 1.4 7.16
May
98 1.7 7.01
Jun.
98 1.7 7.03
Jul.
98 1.7 7.01
Aug.
98 1.6 6.81
Sep.
98 1.5 6.48
Oct.
98 1.5 6.65
Footnote reads:
Source: Bloomberg Business News.
In addition to increasing the Fund's position in intermediate-length
investments, we also modestly extended the average duration of our
Treasury bond holdings by approximately 15%. We became somewhat more
aggressive in the Treasury market during the second half of the fiscal
year to capitalize on a strong Treasury bond rally. This approach was
consistent with our belief that U.S. economic growth had cooled
sufficiently to suppress any significant threat of inflation and higher
interest rates.
WE MODESTLY EXTENDED
THE AVERAGE EFFECTIVE
DURATION OF OUR
TREASURY BOND
HOLDINGS DURING
THE SECOND HALF OF
THE FISCAL YEAR TO
CAPITALIZE ON A STRONG
TREASURY BOND RALLY.
Outlook
The driving force behind the dynamic performance of U.S. Treasury bonds
throughout fiscal 1998 has been the fact that they have been one of the
safest investments available. Safety became a primary consideration for
investors over the last 12 months as the economic crisis in Asia spread
beyond the Pacific Rim and led to a rash of global currency
devaluations.
Adding to investor anxiety has been the volatile performance of
equity investments. During the summer, the Dow Jones Industrial Average
fell 21% from its July 20 high of 9367.84 before starting to recover.
Toward the end of the fiscal year, however, there were indications
that investors' behavior was starting to shift. These included:
[bullet] A recovery in the Dow Jones Industrial Average
[bullet] Reduced demand for 30-year Treasuries
[bullet] Narrowing yield spreads between government bonds and corporate
bonds.
While these conditions suggest that Treasuries may be starting to
lose their luster, we expect the market to remain strong in the coming
year. In our view, price gains for Treasury bonds are unlikely to match
their performance for the last 12 months, but we expect continued
healthy demand for U.S. government debt from investors both
in the U.S. and abroad.
In the coming year we also anticipate improved price performance
for our GNMA bond holdings. Falling interest rates throughout most of
fiscal 1998 led to an increase in mortgage prepayments. In our opinion,
with interest rates currently near historic lows, the potential for
further significant reductions has been reduced. This should lead to
fewer prepayments and increase the attractiveness of GNMA bonds.
outlook
[GRAPHIC OMITTED: worm chart U.S. GOVERNMENT SECURITIES FUND'S LONG-TERM
PERFORMANCE]
U.S. government securities Fund's Long-Term Performance
Growth of a $10,000 Investment
November 1, 1988 to October 31, 1998
U.S. Government Lehman Brothers Lipper General
Securities Government Bond U.S. Government Fund
month and year Fund A class Index Average (49 Funds)
Oct.
88 9,525 10,000 10,000
Oct.
89 10,403 11,703 10,979
Oct.
90 11,244 11,787 11,560
Oct.
91 13,122 13,947 13,239
Oct.
92 14,523 15,568 14,413
Oct.
93 16,525 19,315 16,154
Oct.
94 15,308 17,046 15,242
Oct.
95 17,970 21,650 17,525
Oct.
96 18,827 22,414 18,240
Oct.
97 20,403 25,259 19,705
Oct.
98 $22,194 $29,311 $21,490
Footnote reads:
Chart assumes a $10,000 investment made on November 1, 1988, and
includes the effect of a 4.75% sales charge and reinvestment of
distributions. Performance for other classes will differ due to
different charges and expenses. Past performance does not guarantee
future results.
U.S. GOVERNMENT SECURITIES FUND PERFORMANCE
Average Annual Returns Through October 31, 1998
Lifetime Ten Years Five Years One Year
Class A (Est. 11/2/87)
Excluding Sales Charge +8.92% +8.85% +6.08% +8.79%
Including Sales Charge +8.43% +8.33% +5.06% +3.60%
Class B (Est. 6/7/94)
Excluding Sales Charge +7.43% +7.97%
Including Sales Charge +7.08% +3.97%
Class C (Est. 1/10/95)
Excluding Sales Charge +9.33% +7.98%
Including Sales Charge +9.33% +6.98%
All performance includes reinvestment of distributions and applicable
sales charges as described below. Return and share value will fluctuate
so that shares, when redeemed, may be worth more or less than the
original cost. Past performance is not a guarantee of future results.
Performance for Class B and C shares excluding sales charge assumes
either contingent sales charges did not apply or the investment was not
redeemed. Returns reflect a voluntary expense limitation in effect at
the time. Returns would have been lower without the limitation.
Class A shares have a 4.75% maximum sales charge and a 12b-1 fee.
Class B shares do not carry a front-end sales charge, but are subject to
a 1% annual distribution and service fee. They are also subject to a
deferred sales charge of up to 4% if redeemed before the end of the
sixth year.
Class C shares have a 1% annual distribution and service fee. If shares
are redeemed within 12 months, a 1% contingent deferred sales charge
applies.
The average annual returns for the lifetime and one-year periods ending
October 31, 1998, for U.S. Government Securities Fund's Institutional
Class (Est. 6/7/94), which is available without sales or asset-based
distribution charges only to certain eligible institutional accounts,
were +8.16% and +8.79%, respectively.
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF NET ASSETS
OCTOBER 31, 1998
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OBLIGATIONS - 60.84%
GNMA 6.50% 1/15/13 to 8/20/28 $41,856,536 $42,227,543
GNMA 7.00% 7/20/28 8,393,548 8,569,288
GNMA 8.00% 1/15/17 25,095 26,311
GNMA 10.00% 3/15/16 27,627 30,330
GNMA II 6.00% 11/01/28 2,000,000 1,972,188
GNMA II 10.00% 12/20/02 25,817 27,116
------------
Total Government National Mortgage
Association Obligations (cost $52,290,910) 52,852,776
------------
U.S. TREASURY OBLIGATIONS - 33.84%
U.S. Treasury Bond 7.50% 11/15/16 8,190,000 10,210,966
U.S. Treasury Bond 7.875% 2/15/21 3,285,000 4,330,989
U.S. Treasury Note 4.50% 9/30/00 3,300,000 3,317,268
U.S. Treasury Note 5.25% 8/15/03 2,500,000 2,609,260
U.S. Treasury Note 5.50% 2/28/03 590,000 616,457
U.S. Treasury Note 5.50% 3/31/03 2,000,000 2,095,382
U.S. Treasury Note 5.625% 5/15/08 1,000,000 1,077,583
U.S. Treasury Note 6.375% 9/30/01 2,000,000 2,110,581
* U.S.Treasury Strip - Principal 6.11% 11/15/04 4,000,000 3,032,702
------------
Total U.S. Treasury Obligations
(cost $29,317,241) 29,401,188
------------
REPURCHASE AGREEMENTS - 4.14%
With Salomon Brothers 5.30% 11/2/98
(dated 10/30/98, collateralized by $3,545,000
U.S. Treasury Notes 5.625% due 11/30/99,
market value $3,681,261). 3,600,000 3,600,000
------------
Total Repurchase Agreements
(cost $3,600,000) 3,600,000
------------
TOTAL MARKET VALUE OF SECURITIES - 98.82%
(cost $85,208,151) $85,853,964
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 1.18% 1,029,060
------------
NET ASSETS APPLICABLE TO 7,941,049 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% $86,883,024
============
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND A CLASS
($44,819,245 / 4,097,884 SHARES) $10.94
======
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND B CLASS
($4,581,520 / 418,227 SHARES) $10.95
======
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND C CLASS
($384,760 / 35,195 SHARES) $10.93
======
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND
INSTITUTIONAL CLASS ($37,097,499 / 3,389,743 SHARES) $10.94
======
- -------------------
* Zero coupon security. The interest rate disclosed is the effective yield as of
the date of acquisition.
COMPONENTS OF NET ASSETS AT OCTOBER 31, 1998:
Common stock, $0.01 par value, 10,000,000,000 shares authorized
to the Fund with 1,000,000,000 shares allocated to the
U.S. Government Securities Fund A Class, 1,000,000,000 shares
allocated to the U.S. Government Securities Fund B Class,
1,000,000,000 shares allocated to the U.S. Government Securities
Fund C Class, and 1,000,000,000 shares allocated to the
U.S. Government Securities Fund Institutional Class $85,883,071
Accumulated net realized gain on investments 354,140
Net unrealized appreciation of investments 645,813
------------
Total Net Assets $86,883,024
============
NET ASSET VALUE AND OFFERING PRICE - U.S. GOVERNMENT
SECURITIES FUND A CLASS
Net asset value A class (A) $10.94
Sales charge (4.75% of offering price or 5.03% of the A Class
amount invested per share) (B) 0.55
------
Offering price $11.49
======
- -------------------
(A) Net asset value per share, as illustrated, is the estimated amount which would
be paid upon the redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more.
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1998
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 5,634,180
------------
EXPENSES:
Management fees $ 455,622
Distribution expense 250,712
Dividend disbursing and transfer agent fees
and expenses 83,326
Registration fees 43,432
Reports and statements to shareholders 39,449
Accounting and administration 35,716
Taxes (other than taxes on income) 25,575
Professional fees 12,702
Directors' fees 6,749
Custodian fees 4,254
Other 31,769
------------
989,306
Less expenses waived or absorbed (57,484)
------------
Total expenses 931,822
------------
NET INVESTMENT INCOME 4,702,358
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
NET REALIZED GAIN ON INVESTMENTS 3,881,172
NET CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION
OF INVESTMENTS (988,088)
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 2,893,084
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,595,442
============
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
10/31/98 10/31/97
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 4,702,358 $ 6,582,050
Net realized gain on investments 3,881,172 3,015,506
Net change in unrealized appreciation/depreciation
of investments (988,088) (621,669)
------------ ------------
Net increase in net assets resulting
from operations 7,595,442 8,975,887
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class (2,595,734) (3,691,516)
B Class (131,800) (117,294)
C Class (8,993) (10,330)
Institutional Class (2,047,835) (2,898,335)
------------ ------------
(4,784,362) (6,717,475)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class 4,805,092 7,487,475
B Class 2,925,008 593,541
C Class 359,733 5,505
Institutional Class 12,134,993 13,306,849
Net asset value of shares issued upon reinvestment
of distributions from net investment income
A Class 1,792,342 2,596,190
B Class 90,607 57,169
C Class 3,449 4,390
Institutional Class 1,756,212 2,237,082
------------ ------------
23,867,436 26,288,201
------------ ------------
Cost of shares repurchased:
A Class (15,496,863) (24,625,528)
B Class (796,621) (574,860)
C Class (125,998) (109,450)
Institutional Class (23,572,475) (20,996,519)
------------ ------------
(39,991,957) (46,306,357)
------------ ------------
Decrease in net assets derived from capital
share transactions (16,124,521) (20,018,156)
------------ ------------
NET DECREASE IN NET ASSETS (13,313,441) (17,759,744)
NET ASSETS:
Beginning of year 100,196,465 117,956,209
------------ ------------
End of year $ 86,883,024 $100,196,465
============ ============
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
Selected data for each share of the Fund outstanding throughout each period was as
follows:
U.S. GOVERNMENT SECURITIES FUND A CLASS
-------------------------------------------------------------------------------
FOUR
YEAR YEAR MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/971 10/31/962 6/30/96 6/30/95 6/30/94
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $10.600 $10.370 $10.160 $10.370 $ 9.760 $10.990
Income (loss)
from investment
operations:
Net
investment
income 0.555 0.590 0.210 0.630 0.620 0.550
Net realized
and
unrealized
gain (loss) on
investments 0.351 0.240 0.210 (0.230) 0.630 (0.940)
---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations 0.906 0.830 0.420 0.400 1.250 (0.390)
---------- ---------- ---------- ---------- ---------- ----------
Less dividends
and
distributions:
Dividends
from net
investment
income (0.566) (0.600) (0.210) (0.610) (0.620) (0.550)
Distributions
from net
realized gain
on investments -- -- -- -- (0.020) (0.290)
---------- ---------- ---------- ---------- ---------- ----------
Total
dividends and
distributions(0.566) (0.600) (0.210) (0.610) (0.640) (0.840)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.760
========== ========== ========== ========== ========== ==========
Total return3 8.79% 8.37% 4.18% 3.88% 13.45% (3.95%)
Ratios and
supplemental data
Net assets,
end of
period
(000
omitted) $44,819 $52,213 $65,516 $68,442 $75,886 $84,660
Ratio of
expenses
to average
net assets 1.00% 0.93% 0.98% 0.97% 0.95% 0.96%
Ratio of
expenses to
average net
assets prior
to expense
limitation 1.06% 1.01% 0.98% 0.97% 0.95% 0.96%
Ratio of net
investment
income to
average net
assets 5.21% 5.76% 6.03% 6.07% 6.38% 5.10%
Ratio of net
investment
income to
average net
assets prior
to expense
limitation 5.15% 5.68% 6.03% 6.07% 6.38% 5.10%
Portfolio
turnover 280% 202% 66% 145% 144% 124%
- ------------------------
1 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
2 Effective October 31, 1996, the Fund changed its fiscal year end from June 30 to
October 31; ratios have been annualized.
3 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset value and
does not reflect the impact of a sales charge. Total return for the period ended
October 31, 1996 has not been annualized.
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period was as
follows:
U.S. GOVERNMENT SECURITIES FUND B CLASS
-------------------------------------------------------------------------------
FOUR
YEAR YEAR MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/971 10/31/962 6/30/96 6/30/95 6/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $10.610 $10.380 $10.170 $10.380 $ 9.750 $10.050
Income (loss)
from investment
operations:
Net
investment
income 0.477 0.520 0.180 0.570 0.560 0.010
Net realized
and
unrealized
gain (loss)
on
investments 0.348 0.240 0.210 (0.230) 0.650 (0.280)
---------- ---------- ---------- ---------- ---------- ----------
Total
from
investment
operations 0.825 0.760 0.390 0.340 1.210 (0.270)
---------- ---------- ---------- ---------- ---------- ----------
Less dividends
and distributions:
Dividends
from net
investment
income (0.485) (0.530) (0.180) (0.550) (0.560) (0.010)
Distributions
from net
realized
gain on
investments -- -- -- -- (0.020) (0.020)
---------- ---------- ---------- ---------- ---------- ----------
Total
dividends
and
distributions(0.485) (0.530) (0.180) (0.550) (0.580) (0.030)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $10.950 $10.610 $10.380 $10.170 $10.380 $ 9.750
========== ========== ========== ========== ========== ==========
Total return4 7.97% 7.59% 3.91% 3.32% 12.90% (2.68%)
Ratios and
supplemental
data:
Net assets,
end of
period
(000
omitted) $4,582 $2,257 $2,139 $1,780 $139 $24
Ratio of
expenses to
average net
assets 1.75% 1.67% 1.73% 1.46% 1.54% 0.30%5
Ratio of
expenses to
average net
assets prior
to expense
limitation 1.81% 1.75% 1.73% 1.63% 1.69% 0.30%5
Ratio of net
investment
income to
average net
assets 4.46% 5.02% 5.24% 5.55% 5.56% 0.11%5
Ratio of net
investment
income to
average net
assets prior
to expense
limitation 4.40% 4.94% 5.24% 5.38% 5.41% 0.11%5
Portfolio
turnover 280% 202% 66% 145% 144% 124%
- ------------------------
1 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
2 Effective October 31, 1996, the Fund changed its fiscal year end from June 30 to
October 31; ratios have been annualized.
3 Commencement of operations.
4 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset value and
does not reflect the impact of a sales charge. Total return for periods less than
12 months have not been annualized.
5 Ratios presented for the period from June 7, 1994, to June 30, 1994, are not
annualized as they are not indicative of anticipated annual results.
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period was as
follows:
U.S. GOVERNMENT SECURITIES FUND C CLASS
-------------------------------------------------------------------------------
FOUR
YEAR YEAR MONTHS YEAR PERIOD FROM
ENDED ENDED ENDED ENDED 1/10/953
10/31/98 10/31/971 10/31/962 6/30/96 TO 6/30/95
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $10.590 $10.360 $10.150 $10.360 $ 9.480
Income from
investment
operations:
Net investment
income 0.477 0.520 0.180 0.550 0.270
Net realized
and unrealized
gain (loss) on
investments 0.348 0.240 0.210 (0.230) 0.880
---------- ---------- ---------- ---------- ----------
Total from
investment
operations 0.825 0.760 0.390 0.320 1.150
---------- ---------- ---------- ---------- ----------
Less dividends
and distributions:
Dividends
from net
investment
income (0.485) (0.530) (0.180) (0.530) (0.270)
Distributions
from net
realized
gain on
investments -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total
dividends
and
distributions (0.485) (0.530) (0.180) (0.530) (0.270)
---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $10.930 $10.590 $10.360 $10.150 $10.360
========== ========== ========== ========== ==========
Total return4 7.98% 7.60% 3.92% 3.11% 12.73%
Ratios and
supplemental
data:
Net assets,
end of period
(000 omitted) $385 $138 $234 $224 $221
Ratio of
expenses to
average net
assets 1.75% 1.68% 1.73% 1.70% 1.62%5
Ratio of
expenses to
average net
assets prior
to expense
limitation 1.81% 1.76% 1.73% 1.70% 1.65%5
Ratio of net
investment
income to
average net
assets 4.46% 5.02% 5.26% 5.33% 5.10%5
Ratio of net
investment
income to
average net
assets prior to
expense
limitation 4.40% 4.94% 5.26% 5.33% 5.07%5
Portfolio
turnover 280% 202% 66% 145% 144%
- ------------------------
1 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
2 Effective October 31, 1996, the Fund changed its fiscal year end from June 30 to
October 31; ratios have been annualized.
3 Commencement of operations.
4 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset value and
does not reflect the impact of a sales charge. Total return for periods less than
12 months have not been annualized.
5 Annualized.
See accompanying notes
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period was as
follows:
U.S. GOVERNMENT SECURITIES FUND INSTITUTIONAL CLASS
-------------------------------------------------------------------------------
FOUR
YEAR YEAR MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/98 10/31/971 10/31/962 6/30/96 6/30/95 6/30/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $10.600 $10.370 $10.160 $10.370 $ 9.750 $10.050
Income (loss)
from investment
operations:
Net
investment
income 0.555 0.600 0.210 0.630 0.620 0.010
Net realized
and
unrealized
gain (loss)
on
investments 0.351 0.240 0.210 (0.230) 0.640 (0.280)
---------- ---------- ---------- ---------- ---------- ----------
Total from
investment
operations 0.906 0.840 0.420 0.400 1.260 (0.270)
---------- ---------- ---------- ---------- ---------- ----------
Less dividends
and distributions:
Dividends
from net
investment
income (0.566) (0.610) (0.210) (0.610) (0.620) (0.010)
Distributions
from net
realized gain
on investments -- -- -- -- (0.020) (0.020)
---------- ---------- ---------- ---------- ---------- ----------
Total
dividends
and
distributions(0.566) (0.610) (0.210) (0.610) (0.640) (0.030)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value,
end of period $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.750
========== ========== ========== ========== ========== ==========
Total return4 8.79% 8.39% 4.17% 3.88% 13.57% (2.64%)
Ratios and
supplemental
data:
Net assets,
end of
period
(000
omitted) $37,097 $45,589 $50,066 $41,688 $54,445 $49,898
Ratio of
expenses to
average net
assets 1.00% 0.93% 0.99% 0.97% 0.94% 0.25%5
Ratio of
expenses to
average net
assets prior
to expense
limitation 1.06% 1.01% 0.99% 0.97% 0.94% 0.25%5
Ratio of net
investment
income to
average net
assets 5.21% 5.76% 6.00% 6.07% 6.39% 0.16%5
Ratio of net
investment
income to
average net
assets prior
to expense
limitation 5.15% 5.68% 6.00% 6.07% 6.39% 0.16%5
Portfolio
turnover 280% 202% 66% 145% 144% 124%
- ------------------------
1 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
2 Effective October 31, 1996, the Fund changed its fiscal year end from June 30 to
October 31, ratios have been annualized.
3 Commencement of operations.
4 Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset value and
does not reflect the impact of a sales charge. Total return for the periods ended
October 31, 1996, and June 30, 1994, have not been annualized.
5 Ratios presented for the period from June 7, 1994, to June 30, 1994, are not
annualized as they are not indicative of anticipated annual results.
See accompanying notes
</TABLE>
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1998
U.S. Government Securities Fund (the "Fund") is registered as a
diversified open-end investment company under the Investment Company Act
of 1940, as amended. The Fund is organized as a Maryland Corporation and
currently offers four classes of shares. The U.S. Government Securities
Fund A Class carries a front-end sales charge of 4.75%. The U.S.
Government Securities Fund B Class carries a back-end deferred sales
charge, the U.S. Government Securities Fund C Class carries a level load
deferred sales charge and the U.S. Government Securities Fund
Institutional Class has no sales charge.
The Fund's objective is to seek a high level of current income from
investments issued, guaranteed or otherwise backed by the full faith and
credit of the U.S. Government.
1. Fund Reorganization
On April 30, 1997, Lincoln National Corporation ("LNC") acquired
Voyageur Fund Managers, Inc.'s ("Voyageur") parent, Dougherty Financial
Group, Inc. ("DFG"), pursuant to an agreement and plan of merger dated
January 15, 1997, in which LNC acquired DFG including the mutual fund
investment advisory business of DFG conducted by Voyageur. Upon
completion of the acquisition, Delaware Management Company ("DMC")
became the investment advisor to the Fund, Delaware Distributors, L.P.
("DDLP") became the distributor for the Fund, and Delaware Service
Company, Inc. ("DSC") became the transfer, dividend-disbursing,
shareholder servicing and accounting and administration agent for the
Fund. DMC, DDLP, and DSC assumed these services under substantially
similar fee structures that were in effect prior to the acquisition.
2. Significant Accounting Policies
The following accounting policies are in accordance with generally
accepted accounting principles and are consistently followed by the
Fund.
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 Fund's Board of Directors.
Federal Income Taxes - The Fund intends to continue to qualify as a
regulated investment company and make the requisite distributions to
shareholders. Accordingly, no provision for federal income taxes has
been made in the financial statements. Income and capital gain
distributions are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting
principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various
classes of the Fund on the basis of daily net assets of each class.
Distribution expenses relating to a specific class are charged directly
to that class.
Repurchase Agreement - The Fund may invest in a pooled cash account
along with other members of the Delaware Investments Family of Funds.
The aggregate daily balance of the pooled cash account is invested in
repurchase agreements secured by obligations of the U.S. government. The
respective collateral is held by the Fund's custodian bank until the
maturity of the respective repurchase agreements. Each repurchase
agreement is at least 100% collateralized. However, in the event of
default or bankruptcy by the counterparty to the agreement, realization
of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 Fund declares dividends
daily from net investment income and pays such dividends monthly. Net
capital gains, if any, are distributed annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements
with brokers. The amount of these expenses is less than 0.01% of the
Fund's average net assets.
3. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the
Fund pays DMC, the Investment Manager of the Fund, an annual fee which
is calculated daily at the rate of 0.50% on the average daily net assets
of the Fund, less the fees paid to the unaffiliated directors. At
October 31, 1998, the Fund had a liability for Investment Management
fees and other expenses payable to DMC of $15,070.
DMC has entered into a sub-advisory agreement with Voyageur Asset
Management, Inc. with respect to the management of the U.S. Government
Securities Fund. The sub-advisor receives a sub-advisory fee from DMC
for their services. The U.S. Government Securities Fund does not pay any
fees to the sub-advisor.
DMC has elected to waive that portion of the management fee and
reimburse the Fund to the extent that annual operating expenses
exclusive of taxes, interest, brokerage commissions, distribution fees
and extraordinary expenses exceed 1.00% of the Fund's average daily net
assets. In addition, DMC may voluntarily absorb other Fund expenses.
The Fund has engaged DSC, an affiliate of DMC, to provide dividend
disbursing, transfer agent, and accounting and administration services.
The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions and average net assets, subject to
certain minimums. At October 31, 1998, the Fund had a liability for such
fees and other expenses payable to DSC of $13,287.
Pursuant to the Distribution Agreement, the Fund pays DDLP, the
Distributor and an affiliate of DMC, an annual fee not to exceed 0.25%
of the average daily net assets attributable to A Class and
Institutional Class shares and 1.00% of the average daily net assets
attributable to B Class and C Class shares.
For the year ended October 31, 1998, DDLP earned $11,782 for commissions
on sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid
no compensation by the Fund.
4. Investments
During the year ended October 31, 1998, the Fund had purchases of
$249,249,487 and sales of $272,721,366 of long-term U.S. government
securities.
At October 31, 1998, the aggregate cost of securities for federal income
tax purposes was $85,244,393.
At October 31, 1998, net unrealized appreciation for federal income tax
purposes aggregated $609,571 of which $746,331 related to unrealized
appreciation of securities and $136,760 related to unrealized
depreciation of securities.
5 Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
10/31/98 10/31/97
----------- -----------
Shares sold:
A Class 445,970 726,443
B Class 270,788 56,888
C Class 33,380 527
Institutional Class 1,131,934 1,286,857
Shares issued upon reinvestment of
distributions from net investment income
and net realized gains on investments:
A Class 167,314 251,626
B Class 8,424 5,528
C Class 319 427
Institutional Class 163,759 216,860
------------ ------------
2,221,888 2,545,156
------------ ------------
Shares repurchased:
A Class (1,441,622) (2,371,057)
B Class (73,641) (55,886)
C Class (11,526) (10,563)
Institutional Class (2,205,440) (2,030,915)
------------ ------------
(3,732,229) (4,468,421)
------------ ------------
Net Decrease (1,510,341) (1,923,265)
============ ============
6 Market and Credit Risk
The Fund may invest in securities whose value is derived from an
underlying pool of mortgages or consumer loans. Prepayment of these
loans may shorten the stated maturity of the respective obligation and
may result in a loss of premium, if any has been paid.
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
We have audited the accompanying statement of net assets of Voyageur
Funds, Inc. - Delaware-Voyageur U.S. Government Securities Fund (the
"Fund") as of October 31, 1998, and the related statement of operations
for the year then ended and the statements of changes in net assets and
the financial highlights for each of the two years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits. The financial highlights for the
periods ended June 30, 1994 through October 31, 1996 were audited by
other auditors whose report dated December 6, 1996 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of October 31,
1998, by correspondence with the Fund's 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 Voyageur Funds, Inc. - Delaware-Voyageur U.S.
Government Securities Fund at October 31, 1998, the results of its
operations for the year then ended and the changes in its net assets and
its financial highlights for each of the two years in the period then
ended, in conformity with generally accepted accounting principles.
/S/Ernst & Young LLP
Philadelphia, Pennsylvania
December 4, 1998
DELAWARE INVESTMENTS
FAMILY OF FUNDS
FOR GROWTH OF CAPITAL
Aggressive Growth Fund
Trend Fund
DelCap Fund
Small Cap Value Fund
U.S. Growth Fund
Growth Stock Fund
Tax-Efficient Equity Fund
FOR TOTAL RETURN
Social Awareness Fund
Blue Chip Fund
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
REIT Fund
Delaware Fund
FOR INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund
New Pacific Fund
Overseas Equity Fund
International Equity Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
High-Yield Opportunities Fund
Extended Duration Fund
Strategic Income Fund
Corporate Bond Fund
U.S. Government Fund
U.S. Government Securities Fund
Limited-Term Government Fund
FOR TAX-EXEMPT CURRENT INCOME
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
MONEY MARKET FUNDS
Delaware Cash Reserve
Tax-Free Money Fund
ASSET ALLOCATION FUNDS
Foundation Growth Portfolio
Foundation Balanced Portfolio
Foundation Income Portfolio
* Available for the following states: Arizona, California, Colorado,
Florida, Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New
Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Utah,
Washington, Wisconsin. Insured bond funds are available in selected
states.
[GRAPHIC OMITTED: ILLUSTRATION OF KEYBOARD]
funds
Complete information on any fund offered by Delaware Investments can be
found in each fund's current prospectus. Prospectuses for all funds
offered by Delaware Investments are available from your financial
adviser. Please read the prospectus carefully before you invest or send
money.
THIS ANNUAL REPORT IS FOR THE INFORMATION OF U.S. GOVERNMENT SECURITIES
FUND SHAREHOLDERS, BUT IT MAY BE USED with prospective investors when
preceded or accompanied by a current Prospectus for U.S. Government
Securities Fund, which sets forth details about charges, expenses,
investment objectives and operating policies of the Fund. You should
read the prospectus carefully before you invest. Summary investment
results are documented in the Fund's current Statement of Additional
Information. The figures in this report represent past results which are
not a guarantee of future results. The return and principal value of an
investment in the Fund will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost.
BOARD OF DIRECTORS
WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA
JEFFREY J. NICK
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA
WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
JOHN DURHAM
Partner, Complete Care Services
Horsham, Pa
ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY
ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC
W. THACHER LONGSTRETH
City Councilman
Philadelphia, PA
THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA
AFFILIATED OFFICERS
DAVID K. DOWNES
Executive Vice President, Chief Financial Officer
and Chief Operating Officer
Delaware Investments Family of Funds
Philadelphia, PA
GEORGE M. CHAMBERLAIN, JR.
Senior Vice President, Secretary
and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA
BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
[GRAPHIC OMITTED: PHOTO OF TWO GLOBES]
directors & officers
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
SUBADVISER
Voyageur Asset Management L.L.C.
Minneapolis, MN
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
This report must be preceded or accompanied by a current U.S. Government
Securities Fund prospectus and the Delaware Investments Fund
Performance Update for the most recently completed calendar quarter. For
a prospectus of any other Delaware Investments fund, contact your
financial adviser or Delaware Investments.
[GRAPHIC OMITTED: PHOTO OF SEVERAL GLOBES]
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawarefunds.com
Be sure to consult your financial adviser when making investments.
Mutual funds can be a valuable part of your financial plan; however,
shares of the Funds are not FDIC or NCUSIF insured, are not guaranteed
by any bank or any credit union, and involve investment risk, including
the possible loss of the principal amount invested. Shares of the Funds
are not bank or credit union deposits.
(copyright) Delaware Distributors, L.P.
[GRAPHIC OMITTED: LOGO OF DELAWARE INVESTMENTS
----------------------------
Philadelphia * London]
Printed in the USA
on recycled paper
(1275)
AR-404[10/98]TKO12/98
