<PAGE>
For Current Income
U.S. Government
Securities Fund
(photo of illustration from
Current Income brochure)
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
for current June 18, 1999
income
2
Dear Shareholder:
LOW INTEREST RATES, CONTINUED GROWTH of the U.S. economy and a favorable
inflation rate helped restore investor confidence in the equity markets during
the past six months. The favorable scenario for stocks put a damper on the
strong performance of U.S. government securities, which had benefited from a
global flight to quality in the fall of last year.
U.S. Treasury bonds, particularly 30-year Treasuries, were hit hardest as
investors demonstrated a strong appetite for stocks. The U.S. Government
Securities Fund provided a total return of -0.15% (for Class A shares with
distributions reinvested at net asset value) for the six months ended April 30,
1999. Although we were certainly affected by the shifting investment
environment, your Fund outperformed its principal benchmark, the unmanaged
Lehman Brothers Government Bond Index. Two management strategies were key
factors in your Fund's short-term results:
o We consciously focused on income rather than maximizing price appreciation.
o We allocated a significantly smaller percentage of our portfolio to U.S.
Treasury bonds than the Lehman Brothers Government Bond Index.
During the first half of fiscal 1999, the majority of your Fund's net assets
were invested in GNMAs, securities issued by the Government National Mortgage
Association. These securities provided higher income and declined less in value
than U.S. Treasuries with comparable maturities (Source: Salomon Smith Barney).
The Federal Reserve Board's interest rate cuts last fall provided much needed
DURING THE FIRST HALF OF FISCAL 1999, THE MAJORITY OF YOUR FUND'S NET ASSETS
WERE INVESTED IN GNMAS, SECURITIES ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION.
CUMULATIVE RETURN
- --------------------------------------------------------------------------------
Six Months Ended
April 30, 1999
- --------------------------------------------------------------------------------
U.S Government Securities Fund A Class -0.15%
Lehman Brothers Government Bond Index -0.95%
Lipper General U.S. Government Fund Average (190 funds) -0.60%
U.S. Consumer Price Index +1.03%
- --------------------------------------------------------------------------------
All performance shown above is based on net asset value and assumes reinvestment
of all distributions. For Fund performance and expense information for all
classes, see page 7. 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.
<PAGE>
for current
income
3
liquidity to the stock and bond markets. Although many stock prices subsequently
rebounded, we believe many fixed income securities have yet to experience a full
recovery. However, we also anticipate that one market condition could raise
Treasury prices as we near the third and fourth quarters of 1999:
o Year 2000 (Y2K) concerns may create an increasing appetite for relatively high
credit quality.
The taxable fixed income arena endured a great deal of turbulence throughout
1998. We expect 1999 to be a little less exciting, based on two key factors:
o Although U.S. economic growth has continued, it appears to us that weaker
growth outside U.S. borders has offset it somewhat, preventing our economy
from overheating. As a consequence, the Federal Reserve has been able to keep
interest rates steady.
o Immediately following the Russian crisis, virtually all taxable fixed-income
markets suffered. In contrast, the response to the subsequent difficulties in
South America was much more subdued (Source: Salomon Smith Barney). We think
investors are reacting more judiciously to situations in foreign countries.
We don't think the Federal Reserve will change its interest rate policy for
the rest of 1999. If they do adjust policy, our view is that any actions would
constitute fine-tuning, rather than fundamental changes.
In the report that follows, Mr. Simenstad outlines the U.S. Government
Securities Fund's approach and provides an outlook for the coming months.
Although equity markets have taken center stage among investors with
long-term financial goals, fixed-income investments still play an important role
in most well-balanced investment portfolios, particularly for investors who are
seeking a degree of safety and the potential for steady current income. We thank
you for your commitment to Delaware Investments.
Sincerely,
/s/ Wayne A. Stork
- ---------------------
WAYNE A. STORK
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
- ---------------------
DAVID K. DOWNES
President and Chief Executive Officer,
Delaware Investments Family of Funds
<PAGE>
for current
income
4
Portfolio Manager's Review
MARK L. SIMENSTAD
Senior Portfolio Manager
Voyageur Asset Management
May 15, 1999
TREASURIES AND GNMAS DOMINATE PORTFOLIO HOLDINGS
Three Federal Reserve interest rate cuts provided the key economic backdrop for
the fourth quarter of 1998 and the first quarter of 1999. In order to maximize
U.S. Government Securities Fund's income stream in a lower rate environment, we
invested 64% of your Fund's net assets in Government National Mortgage
Association Bonds (GNMAs), a slight increase from October 31, 1998. This GNMA
allocation is up 8.5 percentage points since April 30, 1998.
Complementing the GNMA holdings in your Fund's portfolio were U.S. Treasury
bonds. This combination allowed us to strike a balance between income and safety
of principal. Both GNMAs and Treasuries are backed by the full faith and credit
of the U.S. government. Thus, the average credit quality of your Fund's holdings
continues to be the highest available.
GNMA securities generally yield more than Treasuries of comparable maturity.
However, when interest rates fall, GNMAs carry the risk that homeowners will
refinance their mortgages, requiring bondholders like us to reinvest principal
at lower current rates. During this time period we believed the risk of
prepayment was minimal and that the incremental yield of Ginnie Maes was
attractive relative to this risk. To take advantage of this environment, we have
also made some investments in premium coupon mortgages. Premium coupon mortgages
are GNMAs that have higher underlying coupon rates than current mortgage rates.
Consequently, they carry a greater risk of prepayment. Currently, we believe
these bonds won't experience excessive prepayments.
<PAGE>
for current
income
5
At the end of our fiscal period, the yield curve remained relatively flat.
That means there is little difference between the yields on short-term bonds and
the yields on intermediate or long-term bonds. We are currently not being
rewarded for taking on the added risk related to longer term securities.
Therefore, instead of investing at both ends of the maturity spectrum, we have
invested primarily in bonds in the middle maturity range.
Because we don't anticipate a significant decline in interest rates, we have
sold most of the portfolio's position in STRIP securities (Separate Trading of
Registered Interest or Principal of Securities), which represented about 4% of
the Fund's net assets as of October 31, 1998. STRIPs are U.S. Treasuries in
which the coupon is separated from the principal, leaving two separate
securities. STRIPs generally perform better than traditional Treasury bonds in a
declining interest rate environment. STRIPs lock in a particular yield, which
would become more attractive the more interest rates fell. They also, however,
decline in value faster when interest rates rise. We don't think these
securities are an attractive option given our current outlook for interest rates
and the bond market.
OUTLOOK
We believe we have positioned U.S. Government Securities Fund's portfolio to
provide attractive income potential and relative stability of principal for the
remainder of the 1999 fiscal year.
In our opinion, interest rates are likely to remain unchanged in the coming
months. We believe foreign markets are still in a fairly fragile state and that
raising U.S. interest rates could hinder the tenuous rebuilding of global
economies. We also think the Federal Reserve is in a reactive mode and won't
take action unless absolutely necessary.
We intend to keep a watchful eye on changes in consumer and producer prices
to gauge their potential effects on markets, monetary policy and your Fund's
performance for the remainder of the year.
WE INTEND TO KEEP A WATCHFUL EYE ON CHANGES IN CONSUMER AND PRODUCER PRICES TO
GUAGE THEIR POTENTIAL EFFECTS ON YOUR FUND'S PERFORMANCE.
PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION
- --------------------------------------------------------------------------------
APRIL 30, 1999
Treasuries 36.0%
GNMA 64.0%
April 30, October 31,
1999 1998
------------------------------------------------------------------
Average Effective Duration 5.0 years 5.4 years
Average Quality AAA AAA
Thirty-Day Current SEC Yield* 4.30% 4.64%
Number of Bonds 31 18
*For Class A shares measured according to the Securities and Exchange Commission
guidelines. For B Class, C Class and the Institutional Class shares, the 30-day
current SEC yields as of April 30, 1999 were 3.75%, 3.76% and 4.51%,
respectively.
<PAGE>
for current
income
6
Performance Summary
U.S. GOVERNMENT SECURITIES FUND'S LONG-TERM PERFORMANCE
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
MAY 1, 1989 TO APRIL 30, 1999
<TABLE>
<CAPTION>
5/01/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94
<S> <C> <C> <C> <C> <C> <C>
Lehman Brothers Government Bond Index $10,831.56 $12,425.56 $13,715.35 $15,666.42 $15,839.33 $16,870.83
U.S. Government Securities Fund A Class $10,307.00 $11,916.00 $13,230.00 $15,277.00 $15,175.00 $16,251.00
Lipper General U.S. Government Fund Average (49 Funds) $10,692.30 $12,206.87 $13,397.87 $14,997.26 $14,932.96 $15,716.92
4/30/95 4/30/96 4/30/97 4/30/98
$18,279.00 $19,463.09 $21,614.33 $23,006.24
$17,556.00 $18,663.00 $20,640.00 $21,755.00
$16,841.35 $17,871.19 $19,696.02 $20,707.65
</TABLE>
Chart assumes a $10,000 investment made on May 1, 1989, 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. Source: Lipper, Inc.
U.S. GOVERNMENT SECURITIES FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH APRIL 30, 1999
Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 11/2/87)
Excluding Sales Charge +8.50% +8.64% +7.47% +5.40%
Including Sales Charge +8.04% +8.11% +6.42% +0.40%
- --------------------------------------------------------------------------------
Class B (Est. 6/7/94)
Excluding Sales Charge +6.56% +4.70%
Including Sales Charge +6.24% +0.71%
- --------------------------------------------------------------------------------
Class C (Est. 1/10/95)
Excluding Sales Charge +8.08% +4.61%
Including Sales Charge +8.08% +3.61%
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 .25% 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 total returns for the lifetime and one-year periods and the
six-month cumulative total return through 4/30/99 for U.S. Government Securities
Fund's Institutional Class were +7.41%, +5.09% and -0.15%. Institutional Class
shares are available without sales or asset-based distribution charges only to
certain eligible institutional accounts.
<PAGE>
for current income 7
Financial Statements
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF NET ASSETS
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
OBLIGATIONS - 64.48%
GNMA 6.00% 1/15/29 to 4/15/29 .................... $ 8,923,493 $ 8,650,211
GNMA 6.50% 1/15/13 to 4/15/29 .................... 31,385,794 31,335,410
GNMA 7.50% 3/15/27 to 4/15/29 .................... 14,099,621 14,548,249
GNMA 8.00% 1/15/17 ............................... 18,638 19,628
GNMA 10.00% 3/15/16 .............................. 27,299 30,029
GNMA II 6.00% 11/20/28 ........................... 2,002,196 1,929,616
GNMA II 10.00% 12/20/02 .......................... 22,925 24,057
-----------
Total Government National Mortgage
Association Obligations
(cost $56,599,413) .............................. 56,537,200
-----------
U.S. TREASURY OBLIGATIONS - 36.10%
U.S. Treasury Bond 5.25% 11/15/28 ................ 2,000,000 1,850,646
U.S. Treasury Bond 7.50% 11/15/16 ................ 2,000,000 2,344,209
U.S. Treasury Bond 8.125% 8/15/21 ................ 2,915,000 3,695,955
U.S. Treasury Note 4.25% 11/15/03 ................ 3,000,000 2,881,479
U.S. Treasury Note 4.75% 11/15/08 ................ 1,000,000 955,628
U.S. Treasury Note 5.25% 8/15/03 ................. 3,000,000 2,999,751
U.S. Treasury Note 5.25% 2/15/29 ................. 1,500,000 1,409,760
U.S. Treasury Note 6.125% 8/15/07 ................ 1,750,000 1,828,944
U.S. Treasury Note 6.375% 8/15/02 ................ 500,000 516,884
U.S. Treasury Note 6.625% 5/15/07 ................ 2,000,000 2,153,882
U.S. Treasury Note 7.00% 7/15/06 ................. 9,325,000 10,192,847
*U.S.Treasury STRIP-Principal 6.11% 11/15/04 ...... 1,100,000 817,803
-----------
Total U.S. Treasury Obligations
(cost $32,430,298) ............................. 31,647,788
-----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 100.58%
(COST $89,029,711)........................................... $88,184,988
LIABILITIES NET OF RECEIVABLES AND
OTHER ASSETS - (0.58%)...................................... (510,427)
-----------
NET ASSETS APPLICABLE TO 8,262,170 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00%..................... $87,674,561
===========
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND
A CLASS ($40,771,353 / 3,843,658 SHARES) ................... $10.61
======
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND
B CLASS ($5,763,250 / 542,402 SHARES) ...................... $10.63
======
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND
C CLASS ($1,129,580 / 106,538 SHARES)....................... $10.60
======
NET ASSET VALUE - U.S. GOVERNMENT SECURITIES FUND
INSTITUTIONAL CLASS ($40,010,378 /
3,769,572 SHARES) .......................................... $10.61
======
- --------------
*Zero coupon security. The interest rate disclosed is the effective yield as of
the date of acquisition.
<PAGE>
- --------------------------------------------------------------------------------
MARKET
VALUE
-------------------------
COMPONENTS OF NET ASSETS AT APRIL 30, 1999:
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........... $89,340,437
Distributions in excess of net investment income ................ (16,353)
Accumulated net realized loss on investments..................... (804,800)
Net unrealized depreciation of investments ...................... (844,723)
-----------
Total Net Assets ................................................ $87,674,561
===========
NET ASSET VALUE AND OFFERING PRICE - U.S. GOVERNMENT
SECURITIES FUND CLASS A
Net Asset Value per share (A) ................................... $10.61
Sales charge (4.75% of offering price or 5.00% of the A Class
amount invested per share) (B) ............................... 0.53
------
Offering price................................................... $11.14
======
(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
<PAGE>
8 for current income
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ...................................... $2,492,330
EXPENSES:
Management fees ................................ $217,606
Distribution expense ........................... 130,157
Dividend disbursing and transfer agent
fees and expenses ........................... 52,234
Registration fees .............................. 22,000
Accounting and administration .................. 16,118
Professional fees .............................. 10,755
Reports and statements to shareholders ......... 8,293
Custodian fees ................................. 3,650
Taxes (other than taxes on income) ............. 2,750
Directors' fees................................. 2,607
Other........................................... 11,728
-------- -----------
477,898
Less expenses waived or absorbed by
Delaware Management Company ................. (7,970)
Less expenses paid indirectly .................. (1,003)
-----------
Total operating expenses ....................... 468,925
Interest Expense ............................... 132
-----------
Total expenses ................................. 469,057
-----------
NET INVESTMENT INCOME .......................... 2,023,273
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments ............... (686,756)
Net change in unrealized appreciation/
depreciation of investments.................. (1,490,536)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS .............................. (2,177,292)
-----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................. $ (154,019)
===========
See accompanying notes
<PAGE>
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR
U.S. GOVERNMENT SECURITIES FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS YEAR
ENDED 4/30/99 ENDED
(UNAUDITED) 10/31/9
------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income ............................. $ 2,023,273 $ 4,702,358
Net realized gain (loss) on investments ........... (686,756) 3,881,172
Net change in unrealized appreciation/
depreciation of investments .................... (1,490,536) (988,088)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ...................... (154,019) 7,595,442
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class ........................................ (1,006,203)
B Class ........................................ (104,351) (131,800)
C Class ........................................ (13,143) (8,993)
Institutional Class ............................ (915,929)
Net realized gain on investment transactions
A Class ........................................ (242,646) --
B Class ........................................ (26,084) --
C Class ........................................ (2,085) --
Institutional Class ............................ (201,369) --
------------ ------------
(2,511,810) (4,784,362)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ........................................ 3,443,481 4,805,092
B Class ........................................ 2,192,932 2,925,008
C Class ........................................ 940,585 359,733
Institutional Class ............................ 7,024,953 12,134,993
Net asset value of shares issued upon reinvestment
of dividends from net investment income
and net realized gain on investment transactions
A Class ........................................ 864,381 1,792,342
B Class ........................................ 104,940 90,607
C Class ........................................ 11,300 3,449
Institutional Class ............................ 1,049,058 1,756,212
------------ ------------
15,631,630 23,867,436
------------ ------------
Cost of shares repurchased:
A Class ........................................ (7,062,917)
B Class ........................................ (955,977) (796,621)
C Class ........................................ (186,884) (125,998)
Institutional Class ............................ (3,968,486)
------------ ------------
(12,174,264) (39,991,957)
------------ ------------
Increase (decrease) in net assets derived
from capital share transactions ................ 3,457,366 (16,124,521)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ............. 791,537 (13,313,441)
NET ASSETS:
Beginning of period ............................... 86,883,024 100,196,465
------------ ------------
End of period ..................................... $ 87,674,561 $ 86,883,024
============ ============
See accompanying notes
<PAGE>
for current income 9
VOYAGEUR FUNDS, INC. -
DELAWARE - VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND CLASS A
-------------------------------------------------------------------------------
SIX MONTHS YEAR YEAR FOUR MONTHS YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
4/30/99(4) 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 6/30/95 6/30/94
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $10.940 $10.600 $10.370 $10.160 $10.370 $9.760 $10.990
Income from investment operations:
Net investment income ........................ 0.252 0.555 0.590 0.210 0.630 0.620 0.550
Net realized and unrealized gain (loss)
on investments.............................. (0.267) 0.351 0.240 0.210 (0.230) 0.630 (0.940)
------- ------- ------- ------- ------- ------ -------
Total from investment operations ............. (0.015) 0.906 0.830 0.420 0.400 1.250 (0.390)
------- ------- ------- ------- ------- ------ -------
Less dividends and distributions:
Dividends from net investment income ......... (0.255) (0.566) (0.600) (0.210) (0.610) (0.620) (0.550)
Distributions from net realized gain
on investments ............................. (0.060) -- -- -- -- (0.020) (0.290)
------- ------- ------- ------- ------- ------ -------
Total dividends and distributions ............ (0.315) (0.566) (0.600) (0.210) (0.610) (0.640) (0.840)
------- ------- ------- ------- ------- ------ -------
Net asset value, end of period .................. $10.610 $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.760
======= ======= ======= ======= ======= ======= =======
Total return(3) ................................. (0.15%) 8.79% 8.37% 4.18% 3.88% 13.45% (3.95%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)....... $40,772 $44,819 $52,213 $65,516 $68,442 $75,886 $84,660
Ratio of expenses to average net assets ...... 1.10% 1.00% 0.93% 0.98% 0.97% 0.95% 0.96%
Ratio of expenses to average net assets prior
to expense limitation and expenses paid
indirectly ................................. 1.12% 1.06% 1.01% 0.98% 0.97% 0.95% 0.96%
Ratio of net investment income to average
net assets ................................. 4.73% 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
and expenses paid indirectly ............... 4.71% 5.15% 5.68% 6.03% 6.07% 6.38% 5.10%
Portfolio turnover ........................... 240% 280% 202% 66% 145% 144% 124%
</TABLE>
- ----------
(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 and total return has not 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.
(4) Ratios have been annualized and total return has not been annualized
See accompanying notes
<PAGE>
10 for current income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND CLASS B
-----------------------------------------------------------------------------------
Six Months Year Year Four Months Year Year Period From
Ended Ended Ended Ended Ended Ended 6/7/94(3)
4/30/99(6) 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 6/30/95 to 6/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $10.950 $10.610 $10.380 $10.170 $10.380 $ 9.750 $10.050
Income from investment operations:
Net investment income ...................... 0.213 0.477 0.520 0.180 0.570 0.560 0.010
Net realized and unrealized gain (loss)
on investments ............................ (0.259) 0.348 0.240 0.210 (0.230) 0.650 (0.280)
------- ------- ------- ------- ------- ------- -------
Total from investment operations ........... (0.046) 0.825 0.760 0.390 0.340 1.210 (0.270)
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.214) (0.485) (0.530) (0.180) (0.550) (0.560) (0.010)
Distributions from net realized gain
on investments ............................ (0.060) - - - - (0.020) (0.020)
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.274) (0.485) (0.530) (0.180) (0.550) (0.580) (0.030)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ................ $10.630 $10.950 $10.610 $10.380 $10.170 $10.380 $ 9.750
======= ======= ======= ======= ======= ======= =======
Total return(4) ............................... (0.43%) 7.97% 7.59% 3.91% 3.32% 12.90% (2.68%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $5,763 $4,582 $2,257 $2,139 $1,780 $139 $24
Ratio of expenses to average net assets .... 1.85% 1.75% 1.67% 1.73% 1.46% 1.54% 0.30%(5)
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ........................... 1.87% 1.81% 1.75% 1.73% 1.63% 1.69% 0.30%(5)
Ratio of net investment income to average
net assets ................................ 3.98% 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
and expenses paid indirectly .............. 3.96% 4.40% 4.94% 5.24% 5.38% 5.41% 0.11%(5)
Portfolio turnover ......................... 240% 280% 202% 66% 145% 144% 124%
</TABLE>
- ---------------------
(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 and total return has not 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.
(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.
(6) Ratios have been annualized and total return has not been annualized
See accompanying notes
<PAGE>
for current income 11
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND CLASS C
------------------------------------------------------------------------
Six Months Year Year Four Months Year Period From
Ended Ended Ended Ended Ended 1/10/95(3)
4/30/99(5) 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 to 6/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $10.930 $10.590 $10.360 $10.150 $10.360 $ 9.480
Income from investment operations:
Net investment income ...................... 0.211 0.477 0.520 0.180 0.550 0.270
Net realized and unrealized gain
(loss) on investments ..................... (0.267) 0.348 0.240 0.210 (0.230) 0.880
------- ------- ------- ------- ------- -------
Total from investment operations ........... (0.056) 0.825 0.760 0.390 0.320 1.150
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.214) (0.485) (0.530) (0.180) (0.530) (0.270)
Distributions from net realized gain
on investments ............................ (0.060) - - - - -
------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.274) (0.485) (0.530) (0.180) (0.530) (0.270)
------- ------- ------- ------- ------- -------
Net asset value, end of period ................ $10.600 $10.930 $10.590 $10.360 $10.150 $10.360
======= ======= ======= ======= ======= =======
Total return(4) ............................... (0.52%) 7.98% 7.60% 3.92% 3.11% 12.73%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $1,130 $385 $138 $234 $224 $221
Ratio of expenses to average net assets .... 1.85% 1.75% 1.68% 1.73% 1.70% 1.62%(6)
Ratio of expenses to average net assets
prior to expense limitation
and expenses paid indirectly .............. 1.87% 1.81% 1.76% 1.73% 1.70% 1.65%(6)
Ratio of net investment income to
average net assets ........................ 3.98% 4.46% 5.02% 5.26% 5.33% 5.10%(6)
Ratio of net investment income to
average net assets prior to
expense limitation and
expenses paid indirectly .................. 3.96% 4.40% 4.94% 5.26% 5.33% 5.07%(6)
Portfolio turnover ......................... 240% 280% 202% 66% 145% 144%
</TABLE>
- --------------------
(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 and total return has not 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.
(5) Ratios have been annualized and total return has not been annualized
(6) Annualized
<PAGE>
12 for current income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES FUND INSTITUTIONAL CLASS
-----------------------------------------------------------------------------------
Six Months Year Year Four Months Year Year Period From
Ended Ended Ended Ended Ended Ended 6/7/94(3)
4/30/99(6) 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 6/30/95 to 6/30/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .......... $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.750 $10.050
Income from investment operations:
Net investment income ...................... 0.253 0.555 0.600 0.210 0.630 0.620 0.010
Net realized and unrealized gain (loss)
on investments ............................ (0.269) 0.351 0.240 0.210 (0.230) 0.640 (0.280)
------- ------- ------- ------- ------- ------- -------
Total from investment operations ........... (0.016) 0.906 0.840 0.420 0.400 1.260 (0.270)
------- ------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ....... (0.254) (0.566) (0.610) (0.210) (0.610) (0.620) (0.010)
Distributions from net realized gain
on investments ............................ (0.060) - - - - (0.020) (0.020)
------- ------- ------- ------- ------- ------- -------
Total dividends and distributions .......... (0.314) (0.566) (0.610) (0.210) (0.610) (0.640) (0.030)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period ................ $10.610 $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.750
======= ======= ======= ======= ======= ======= =======
Total return(4) ............................... (0.15%) 8.79% 8.39% 4.17% 3.88% 13.57% (2.64%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) .... $40,010 $37,097 $45,589 $50,066 $41,688 $54,445 $49,898
Ratio of expenses to average net assets(6).. 1.10% 1.00% 0.93% 0.99% 0.97% 0.94% 0.25%(5)
Ratio of expenses to average net assets
prior to expense limitation and expenses
paid indirectly ........................... 1.12% 1.06% 1.01% 0.99% 0.97% 0.94% 0.25%(5)
Ratio of net investment income to average
net asset ................................. 4.73% 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
and expenses paid indirectly .............. 4.71% 5.15% 5.68% 6.00% 6.07% 6.39% 0.16%(5)
Portfolio turnover ......................... 240% 280% 202% 66% 145% 144% 124%
</TABLE>
- -----------------
(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 and total return has not 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.
(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.
(6) Ratios have been annualized and total return has not been annualized
See accompanying notes
<PAGE>
for current income 13
VOYAGEUR FUNDS, INC. - DELAWARE - VOYAGEUR U.S. GOVERNMENT SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Voyageur Funds, Inc. is registered as an investment company under the Investment
Company Act of 1940, as amended. U.S. Government Securities Fund ("The Fund"), a
series of Voyageur Funds, Inc., is a diversified investment company. Voyageur
Funds, Inc. is organized as a Delaware Business Trust, which 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
Institutional Class has no sales charge.
The Fund's objective is to seek a high level of current income consistent with
prudent investment risk 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
Fund's custodian bank until the maturity of the respective repurchase
agreements. Each repurchase agreement is at least 100% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
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. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $1,003 for the period ended April 30,
1999.
3. Investment Management and Other Transactions with Affiliates
Commencing April 15, 1999 and 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 0.55% on the first $500
million of average daily net assets of the Fund, 0.50% on the next $500 million,
0.45% on the next $1,500 million, and 0.425% on the net assets over $2,500
million, less fees paid to the unaffiliated directors. Prior to April 15, 1999,
the Fund paid DMC an annual fee which was calculated at the rate of 0.50% on the
average daily net assets of the fund.
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.
<PAGE>
14 for current income
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 and service fees and extraordinary expenses
exceed 0.85% of the Fund's average daily net assets through June 30, 1999.
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 number of shareholder accounts, shareholder transactions
and average net assets, subject to certain minimums. At April 30, 1999, the Fund
had a liability for such fees and other expenses payable to DSC of $14,540.
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 six months ended April 30, 1999, DDLP earned $ 8,016 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 six months ended April 30, 1999, the Fund had purchases of
$109,527,105 and sales of $101,361,124 of long term U.S. government securities.
At April 30, 1999, the aggregate cost of securities for federal income tax
purposes was $89,029,711.
At April 30, 1999, net unrealized depreciation for federal income tax purposes
aggregated $844,723 of which $79,644 related to unrealized appreciation of
securities and $924,367 related to unrealized depreciation of securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. Capital Stock
SIX MONTHS YEAR
ENDED ENDED
4/30/99 9/30/98
(UNAUDITED)
----------- -------
Shares sold:
A Class ........................................... 321,051 445,970
B Class ........................................... 203,379 270,788
C Class ........................................... 87,814 33,380
Institutional Class ............................... 651,636 1,131,934
Shares issued upon reinvestment of dividends
from net investment income and net
realized gains on investments:
A Class .......................................... 80,182 167,314
B Class .......................................... 9,724 8,424
C Class .......................................... 1,053 319
Institutional Class .............................. 97,326 163,759
---------- ----------
1,452,165 2,221,888
---------- ----------
Shares repurchased:
A Class .......................................... (655,459) (1,441,622)
B Class .......................................... (88,928) (73,641)
C Class .......................................... (17,524) (11,526)
Institutional Class .............................. (369,133) (2,205,440)
---------- ----------
(1,131,044) (3,732,229)
---------- ----------
Net Increase (Decrease) ............................. 321,121 (1,510,341)
========== ==========
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.
<PAGE>
for current income 15
PROXY RESULTS
(UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 1999, Voyageur Funds, Inc. Delaware-Voyageur U.S.
Government Securities Fund shareholders voted on the following proposals at the
annual meeting of shareholders on March 17, 1999. The description of each
proposal and number of shares voted are as follows.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1. To elect the Fund's Board of Directors:
Jeffrey J. Nick ............................. 6,293,279 - 156,443
Walter P. Babich ............................ 6,293,279 - 156,443
Anthony D. Knerr ............................ 6,293,279 - 156,443
Ann R. Leven ................................ 6,293,279 - 156,443
Thomas F. Madison ........................... 6,293,279 - 156,443
Charles E. Peck ............................. 6,293,279 - 156,443
Wayne A. Stork .............................. 6,293,279 - 156,443
Jan L. Yeomans .............................. 6,293,279 - 156,443
2. To approve the reclassification of the Fund's investment objective from
fundamental to non-fundamental.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,224,923 65,935 220,552
3. To approve standardized fundamental investment restrictions for the Fund
(proposal involves separate votes on seven sub-proposals 3A-3G).
3A. To adopt a new fundamental investment restriction concerning concentration
of the Fund's investments in the same industry.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,254,821 58,168 198,421
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,223,831 81,929 205,649
3C. To adopt a new fundamental investment restriction concerning underwriting.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,249,128 51,822 210,459
3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,248,394 64,670 198,344
<PAGE>
PROXY RESULTS
(UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,247,029 68,016 196,363
3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,231,246 67,397 212,765
3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,211,699 64,956 234,628
4. To approve a new investment management agreement with Delaware Management
Company for the Fund.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
1,235,610 80,929 194,871
5. To approve a new sub-advisor agreement with Voyageur Asset Management, Inc.
for the Voyageur Funds, Inc.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
2,327,257 53,092 209,557
6. To ratify the selection of Ernst & Young LLP, as the independent auditors for
the Voyageur Funds, Inc.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
6,053,172 33,711 362,834
7. To approve the restructuring of the Voyageur Funds, Inc. from a Maryland
Corporation into a Delaware Business Trust.
SHARES SHARES SHARES
VOTED VOTED VOTED
FOR AGAINST ABSTAIN
------ ------- -------
5,018,275 152,574 402,892
YEAR 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if computer
systems used by the Investment Manager and other service providers do not
properly process and calculate date-related information and data on and after
January 1, 2000. The Fund is taking steps to obtain satisfactory assurances that
the Investment Manager and other major service providers are taking steps
reasonably designed to address the Year 2000 issue with respect to the computer
systems that such service provides use. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Fund.
<PAGE>
THIS SEMI-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 and
the Delaware Investments Performance Update for the most recently completed
calendar quarter. The prospectus sets forth details about charges, expenses,
investment objective and operating policies of the Fund. You should read the
prospectus carefully before you invest or send money. The figures in this report
represent past results which are not a guarantee of future results. The return
and principal value of an investment in the Fund will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SUBADVISER
Voyageur Asset Management, L.L.C.
Minneapolis, Minnesota
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
(photo of globes)
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Printed in the USA
on recycled paper
(J4764)
SA-404 [4/99] PP6/99
(1818)