<PAGE>
DELAWARE(SM)
INVESTMENTS
------------- Delaware U.S. Government Securities Fund
Current Income
[Current Income Artwork]
2000 Semi-annual report
<PAGE>
TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 2
Performance Summary 4
Financial Statements
Statement of Net Assets 5
Statement of Operations 6
Statements of Changes in
Net Assets 7
Financial Highlights 8
Notes to Financial
Statements 12
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
A Commitment To Our Investors
Experienced
o Our seasoned investment professionals average more than 15 years' experience.
o We opened our first mutual fund in 1938. For over 70 years, we have managed
money in a variety of investment styles that have weathered a full range of
economic and market environments.
Disciplined
o We follow strict investment policies and clear buy/sell guidelines.
o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
o We believe consistent processes are the best way to seek consistent investment
performance.
o Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage over $46
billion in assets as of March 31, 2000.
Comprehensive
o We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
o Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
June 12, 2000
Recap of Events - Predictions of rising interest rates, an overheating economy
and increasing inflation concerns during the past six months caused massive
swings in the equity markets and prompted more investors to seek the safety of
U.S. government securities. Since last June, the Federal Reserve Board has
raised interest rates on six separate occasions. As of this writing, the federal
funds rate - the rate banks charge each other for overnight loans - stands at
6.5%, its highest level since January, 1991 (Source: Bloomberg).
Recently released government reports indicate that the economy is still steaming
ahead despite the Fed's attempts to slow economic growth. During the first
quarter of 2000, Gross Domestic Product (GDP) increased at an annual rate of
5.4%, consumer spending rose faster than it had at anytime during the past 17
years and the employment cost index rose 1.4% for the same quarter - its largest
increase since 1989 (Source: Bloomberg).
Several international events have also played a role in the government bond
market's performance. Energy inflation has been stemmed temporarily by OPEC's
decision to increase oil production, but international economic growth continues
in spite of more restrictive monetary policies from central banks. Despite
worldwide economic growth, an apparent lack of confidence has caused the euro to
fall steadily against the U.S. dollar, making the U.S. dollar and
dollar-denominated investments more attractive.
Delaware U.S. Government Securities Fund returned a positive 1.40% for the six
months ended April 30, 2000 (Class A shares at net asset value with
distributions reinvested), reversing the Fund's negative performance during the
previous six-month period. Since our fiscal period began on November 1, 1999,
your Fund's subadviser, Voyageur Asset Management, has focused on income and
high-quality bond investments as investors continue their flight to safety. They
increased the Fund's holdings of GNMA securities, which continue to perform
well. Long-term Treasury bonds have been trading lower compared to notes of five
years or less, due in great part to a decline in Treasury supply.
Market Outlook - We believe that further Fed rate increases, combined with
inflation pressures, will continue to impact the Fund's performance. As always,
Delaware U.S. Government Securities Fund's management will closely monitor
economic and market conditions and adjust our holdings accordingly. On the
following pages, the Fund's manager shares his outlook and expectations for the
Fund over the coming months.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
--------------------------- --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
Total Return
For Period Ended April 30, 2000 Six Months
--------------------------------------------------------------------------------
Delaware U.S. Government Securities Fund Class A 1.40%
--------------------------------------------------------------------------------
Lipper General U.S. Government Fund Average (188 funds) 1.33%
Lehman Brothers Government Bond Index 2.25%
--------------------------------------------------------------------------------
All performance shown above is at net asset value and assumes reinvestment of
dividends. Performance information for all Fund classes can be found on page 4.
The Lipper category represents the average return of general U.S. government
funds tracked by Lipper Analytical (Source: Lipper Analytical Services, Inc.).
The Lehman Brothers Government Bond Index is an unmanaged composite of several
types of U.S. government securities and assumes no fees or expenses. You cannot
invest directly in an index. Past performance does not guarantee future results.
"YOUR FUND'S SUBADVISER, VOYAGEUR ASSET MANAGEMENT, HAS FOCUSED ON INCOME AND
HIGH-QUALITY BOND INVESTMENTS AS INVESTORS CONTINUE THEIR FLIGHT TO SAFETY."
1
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
---------------------------
Randal W. Harrison, CFA
Senior Portfolio Manager
Voyageur Asset Management, LLC
June 12, 2000
GNMAs Continue to Reward Investors
With the Federal Reserve's additional .50% interest rate increase in May pushing
the federal funds rate to 6.5%, its highest level since 1991, we believe
Delaware U.S. Government Securities Fund is well positioned to capitalize on
this changing market environment.
We believe that the inversion of the Treasury curve--where short-term rates have
risen relatively faster than longer-term rates--will continue at least for the
foreseeable future. This makes shorter-term investments riskier and more prone
to interest-rate risk, at least in the short term.
Longer-term Government National Mortgage Association (GNMAs) bonds benefited
from the inverted Treasury yield curve, particularly bonds with lower interest
rates, as these bonds increased in price during our fiscal period. As of April
30, 2000, fully 66% of the Fund's net assets were invested in GNMAs, positioning
the Fund as an attractive alternative for investors who place a higher premium
on GNMA's explicit government guarantee. The full faith and credit of the U.S.
government back both GNMAs and Treasuries, guaranteeing a bond holder's
principal and stated interest payments.
We expect rising federal funds rates to increase GNMA's attractiveness to
investors. As long as the Fed continues its increasingly restrictive bias toward
raising rates, and as long as Treasury yields remain low--at least compared to
two-to-five-year Treasury note yields--GNMAs will continue to make up a large
portion of the portfolio.
Our strategic purchases of long-dated Treasuries enhanced the Fund's performance
as these securities rose in price, especially during the last three months of
our fiscal period, and we increased slightly the portfolio's overall duration
during this period, both of which boosted the net asset value. In April, with
strong indications of a more restrictive Fed, we reduced the average duration in
an effort to help protect the net asset value. Duration is a common measure of a
bond or bond fund's sensitivity to interest rate changes. The shorter the
duration, the less the bond's price will change for a given increase or decrease
in interest rates. As of April 30, 2000, your Fund's duration was 5.26 years,
which is near the top of the yield curve.
[Current Income Artwork]
"WE ARE POSITIONING THE FUND TO STRIKE WHAT WE BELIEVE IS AN APPROPRIATE BALANCE
BETWEEN INCOME AND SAFETY OF PRINCIPAL."
2
<PAGE>
"WE EXPECT YOUR FUND TO PERFORM FAVORABLY AS THE ECONOMY SLOWS TO WHAT THE FED
BELIEVES IS A MORE SUSTAINABLE RATE OF GROWTH."
Outlook
It has been some time since interest rates exerted so much pressure on the
market, and we don't think the May 16 rate increase will not be the Fed's last
rate increase this year. We expect the Fed to remain vigilant in its drive to
thwart inflation. As a result, we think that higher mortgage and other interest
rates will ultimately act as a drag on economic growth, which in turn will
increase the attractiveness of investing in bond funds.
Our high concentration of GNMAs and the inversion of the Treasury curve,
combined with increasing investor preference for better quality and an apparent
confidence in the Fed's ability to ultimately tame inflationary force, bode well
for the Fund in the coming months. We are positioning the Fund to strike what we
believe is an appropriate balance between safety of principal and income.
While much is made of individual events, such as single interest rate hikes and
one-day market results, we will continue to look at the broader picture. We
anticipate that the full effects of the Fed's belt tightening, won't be felt for
at least another six to 12 months. We believe the economy will become more
stable by year end as it finally settles down to a slower rate of growth.
During the remainder of 2000, we will closely watch for any changes in the Fed's
monetary policy as well as inflation and price trends, and monitor their effect
on your Fund's performance. With the current outlook, we expect your Fund to
perform favorably as the economy slows to what the Fed believes is a more
sustainable rate of growth.
3
<PAGE>
Delaware U.S. Government Securities Fund
FUND BASICS
-----------
Fund Objective
The Fund seeks high current income consistent with safety of principal by
investing primarily in debt obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
Total Fund Assets
$40.56 million
Number of Holdings
18
Fund Start Date
November 2, 1987
Your Fund Manager
Randal W. Harrison holds a Bachelor's degree from Miami University (Ohio) and a
Master's degree from the University of Iowa. Prior to joining Voyageur Asset
Management, LLC. In 1993, Mr. Harrison was a securities analyst and trader for
AEGON USA Insurance Group. He is a CFA charterholder and has been in the
investment industry since 1990.
NASDAQ Symbols
Class A VUSGX
Class B DVGBX
Class C DVUCX
FUND PERFORMANCE
----------------
Average Total Returns
Through April 30, 2000 Lifetime 10 Years Five Years One Year
--------------------------------------------------------------------------------
Class A (Est. 11/2/87)
Excluding Sales Charge +7.79% +7.78% +5.99% -0.01%
Including Sales Charge +7.37% +7.26% +4.96% -4.77%
--------------------------------------------------------------------------------
Class B (Est. 6/7/94)
Excluding Sales Charge +5.28% +5.27% -0.77%
Including Sales Charge +5.15% +4.94% -4.56%
--------------------------------------------------------------------------------
Class C (Est. 1/10/95)
Excluding Sales Charge +6.37% +5.23% -0.68%
Including Sales Charge +6.37% +5.23% -1.63%
--------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable front-end sales
charges as noted below. Return and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Class B and C
results, excluding sales charges, assume either that contingent deferred sales
charges did not apply or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 4.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 5% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
The average annual returns for lifetime, five-year and one-year periods ended
April 30, 2000 for the Delaware U.S. Government Securities Fund Institutional
Class were +6.03%, +6.04% and +0.19%, respectively. The Institutional Class
(Est. June 7, 1994) is available without sales charge only to certain eligible
institutional accounts. Performance for the Institutional Class for periods
prior to this date is based on Class A performance adjusted to eliminate the
sales charge, but not the asset-based distribution charge.
NASDAQ Symbol Institutional Class: VUSIX
4
<PAGE>
Statement of Net Assets
DELAWARE U.S. GOVERNMENT SECURITIES FUND
========================================
Principal Market
April 30, 2000 (Unaudited) Amount Value
--------------------------------------------------------------------------------
Government National Mortgage
Association Obligations - 66.60%
GNMA 6.00% 11/20/28 ............................ $ 1,906,260 $ 1,722,783
GNMA 6.50% 7/15/14 to 4/15/29 .................. 16,661,627 15,663,957
GNMA 7.50% 3/15/27 to 4/15/29 .................. 9,716,640 9,578,316
GNMA 8.00% 1/15/17 ............................. 3,550 3,599
GNMA 10.00% 3/15/16 ............................ 26,513 28,617
GNMA II 10.00% 12/20/02 ........................ 14,255 14,843
-----------
Total Government National Mortgage
Association Obligations
(cost $28,484,640) ........................... 27,012,115
-----------
U.S. Treasury Obligations - 32.48%
U.S. Treasury Bill 4.69% 7/20/00 ............... 65,000 64,175
U.S. Treasury Bond 6.13% 8/15/29 ............... 1,600,000 1,603,075
U.S. Treasury Bond 8.13% 8/15/21 ............... 2,000,000 2,432,458
U.S. Treasury Bond 8.50% 2/15/20 ............... 500,000 624,025
U.S. Treasury Note 4.25% 11/15/03 .............. 500,000 464,334
U.S. Treasury Note 4.75% 11/15/08 .............. 2,000,000 1,789,080
U.S. Treasury Note 5.63% 5/15/01
to 12/31/02 .................................. 1,250,000 1,223,715
U.S. Treasury Note 6.00% 8/15/00 ............... 190,000 189,970
U.S. Treasury Note 6.13% 8/15/07 ............... 1,300,000 1,274,838
U.S. Treasury Note 6.50% 8/31/01 ............... 600,000 598,950
U.S. Treasury Note 7.00% 7/15/06 ............... 2,045,000 2,094,172
*U.S. Treasury Strip-Principal
6.54% 11/15/04 ............................... 1,100,000 817,076
-----------
Total U.S. Treasury Obligations
(cost $13,579,042) ........................... 13,175,868
-----------
Total Market Value of Securities - 99.08%
(cost $42,063,682) ........................... 40,187,983
Receivables and Other Assets
Net of Liabilities - 0.92% ................... 373,315
-----------
Net Assets Applicable to 4,030,744
Shares Outstanding - 100.00% ................. $40,561,298
===========
Net Asset Value - Delaware
U.S. Government Securities Fund A Class
($30,820,804 / 3,063,649 Shares) ............. $10.06
------
Net Asset Value - Delaware
U.S. Government Securities Fund B Class
($5,691,143 / 564,727 Shares) ................ $10.08
------
Net Asset Value - Delaware
U.S. Government Securities Fund C Class
($1,534,933 / 152,627 Shares) ................ $10.06
------
Net Asset Value - Delaware
U.S. Government Securities Institutional
Class ($2,514,418 / 249,741 Shares) .......... $10.07
------
<PAGE>
------------------------------------------------------------------------------
Components of Net Assets at April 30, 2000:
Shares of beneficial interest
(unlimited authorization - no par) ........... $46,539,819
Undistributed net investment income ............ 769
Accumulated net realized loss
on investments ............................... (4,103,591)
Net unrealized depreciation
of investments ............................... (1,875,699)
-----------
Total net assets $40,561,298
===========
------
*Zero coupon security. The interest rate disclosed is the effective yield at
April 30, 2000.
Net Asset Value and Offering Price per Share
Delaware U.S.Government Securities Fund
Net asset value A class (A) ....................... $10.06
Sales charge (4.75% of offering price or
4.97% of the amount invested per
share) (B) ..................................... 0.50
------
Offering price .................................... $10.56
======
------
(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 the current prospectus for purchases of $100,000 or more.
See accompanying notes
5
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
Six Months Ended April 30, 2000 (Unaudited) Delaware U.S. Government Securities Fund
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest ........................................................... $1,454,543
----------
Expenses:
Management fees .................................................... $112,669
Distribution expense ............................................... 81,235
Dividend disbursing and transfer agent fees and expenses ........... 55,839
Accounting and administration ...................................... 10,900
Registration fees .................................................. 31,364
Reports and statements to shareholders ............................. 20,800
Professional fees .................................................. 17,750
Custodian fees ..................................................... 5,000
Directors' fees .................................................... 1,800
Taxes (other than taxes on income) ................................. 6,651
Other .............................................................. 5,631
--------
349,639
Less expenses waived or absorbed ................................... (83,883)
Less expenses paid indirectly ...................................... (509)
--------
Total operating expenses ........................................... 265,247
Interest expense ................................................... 3,496 268,743
-------- ----------
Net Investment Income .............................................. 1,185,800
----------
Net Realized and Unrealized Loss on Investments:
Net realized loss on investments ................................... (953,932)
Net change in unrealized appreciation/depreciation of investments .. 280,932
----------
Net Realized and Unrealized Loss on Investments .................... (673,000)
----------
Net Increase in Net Assets Resulting From Operations ............... $ 512,800
==========
</TABLE>
See accompanying notes
6
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware U.S. Government Securities Fund
-----------------------------------------------------------------------------------------------------------------------
Six Months Year
Ended Ended
4/30/00 10/31/99
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income .......................................................... $ 1,185,800 $ 4,122,259
Net realized loss on investments ............................................... (953,932) (3,031,615)
Net change in unrealized appreciation/depreciation of investments .............. 280,932 (2,802,444)
-----------------------------------
Net increase (decrease) in net assets resulting from operations ................ 512,800 (1,711,800)
-----------------------------------
Distributions to Shareholders from:
Net investment income:
A Class ..................................................................... (922,889) (1,997,496)
B Class ..................................................................... (147,590) (235,557)
C Class ..................................................................... (32,126) (38,943)
Institutional Class ......................................................... (95,880) (1,836,809)
Net realized gain on investments:
A Class ..................................................................... - (242,646)
B Class ..................................................................... - (26,084)
C Class ..................................................................... - (2,085)
Institutional Class ......................................................... - (201,369)
-----------------------------------
(1,198,485) (4,580,989)
-----------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ..................................................................... 3,493,314 8,038,131
B Class ..................................................................... 885,003 4,291,874
C Class ..................................................................... 564,453 1,597,648
Institutional Class ......................................................... 85,154 10,762,439
Net asset value of shares issued upon reinvestment of distributions
from net investment income and net realized gain on investments:
A Class ..................................................................... 625,969 1,533,537
B Class ..................................................................... 116,599 209,476
C Class ..................................................................... 27,412 33,177
Institutional Class ......................................................... 61,458 1,845,529
-----------------------------------
5,859,362 28,311,811
-----------------------------------
Cost of shares repurchased:
A Class ..................................................................... (11,331,507) (13,003,403)
B Class ..................................................................... (1,762,584) (2,143,849)
C Class ..................................................................... (421,929) (560,273)
Institutional Class ......................................................... (1,842,213) (42,448,667)
-----------------------------------
(15,358,233) (58,156,192)
-----------------------------------
Decrease in net assets derived from capital share transactions ................. (9,498,871) (29,844,381)
-----------------------------------
Net Decrease in Net Assets ..................................................... (10,184,556) (36,137,170)
Net Assets:
Beginning of period ............................................................ 50,745,854 86,883,024
-----------------------------------
End of period .................................................................. $40,561,298 $50,745,854
===================================
See accompanying notes
</TABLE>
7
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware U.S. Government Securities Fund Class A
------------------------------------------------------------------------------------------------------------------------------------
Six Months Four Months
Ended Year Ended Ended Year Ended
4/30/00 10/31/99 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 6/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $10.200 $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.760
Income (loss) from investment operations:
Net investment income ........................ 0.276 0.516 0.555 0.590 0.210 0.630 0.620
Net realized and unrealized gain (loss)
on investments ............................. (0.137) (0.681) 0.351 0.240 0.210 (0.230) 0.630
---------------------------------------------------------------------------------
Total from investment operations ............. 0.139 (0.165) 0.906 0.830 0.420 0.400 1.250
---------------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ......... (0.279) (0.515) (0.566) (0.600) (0.210) (0.610) (0.620)
Distributions from net realized gain
on investments ............................. - (0.060) - - - - (0.020)
---------------------------------------------------------------------------------
Total dividends and distributions ............ (0.279) (0.575) (0.566) (0.600) (0.210) (0.610) (0.640)
---------------------------------------------------------------------------------
Net asset value, end of period .................. $10.060 $10.200 $10.940 $10.600 $10.370 $10.160 $10.370
=================================================================================
Total return(3) ................................. 1.40% (2.07%) 8.79% 8.37% 4.18% 3.88% 13.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...... $30,821 $38,520 $44,819 $52,213 $65,516 $68,442 $75,886
Ratio of expenses to average net assets ...... 1.10%(4) 1.32% 1.00% 0.93% 0.98% 0.97% 0.95%
Ratio of expenses to average net assets
prior to expense limitation ................ 1.48%(4) 1.34% 1.06% 1.01% 0.98% 0.97% 0.95%
Ratio of net investment income to average
net assets ................................. 5.49%(4) 4.62% 5.21% 5.76% 6.03% 6.07% 6.38%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly ................... 5.12%(4) 4.60% 5.15% 5.68% 6.03% 6.07% 6.38%
Portfolio turnover ........................... 60%(4) 186% 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) 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. An expense
limitation was in effect during the period. Performance would have been
lower if the expense limitation was not in effect.
(4) Annualized
See accompanying notes
8
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware U.S. Government Securities Fund Class B
------------------------------------------------------------------------------------------------------------------------------------
Six Months Four Months
Ended Year Ended Ended Year Ended
4/30/00 10/31/99 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 6/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $10.220 $10.950 $10.610 $10.380 $10.170 $10.380 $ 9.750
Income (loss) from investment operations:
Net investment income ........................ 0.238 0.438 0.477 0.520 0.180 0.570 0.560
Net realized and unrealized gain (loss)
on investments ............................. (0.137) (0.673) 0.348 0.240 0.210 (0.230) 0.650
---------------------------------------------------------------------------------
Total from investment operations ............. 0.101 (0.235) 0.825 0.760 0.390 0.340 1.210
---------------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ......... (0.241) (0.435) (0.485) (0.530) (0.180) (0.550) (0.560)
Distributions from net realized gain
on investments ............................. - (0.060) - - - - (0.020)
---------------------------------------------------------------------------------
Total dividends and distributions ............ (0.241) (0.495) (0.485) (0.530) (0.180) (0.550) (0.580)
---------------------------------------------------------------------------------
Net asset value, end of period .................. $10.080 $10.220 $10.950 $10.610 $10.380 $10.170 $10.380
=================================================================================
Total return(3) ................................. 1.01% (2.72%) 7.97% 7.59% 3.91% 3.32% 12.90%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...... $5,691 $6,550 $4,582 $2,257 $2,139 $1,780 $139
Ratio of expenses to average net assets ...... 1.85%(4) 2.07% 1.75% 1.67% 1.73% 1.46% 1.54%
Ratio of expenses to average net assets
prior to expense limitation ................ 2.23%(4) 2.09% 1.81% 1.75% 1.73% 1.63% 1.69%
Ratio of net investment income to average
net assets ................................. 4.74%(4) 3.87% 4.46% 5.02% 5.24% 5.55% 5.56%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly ................... 4.37%(4) 3.85% 4.40% 4.94% 5.24% 5.38% 5.41%
Portfolio turnover ........................... 60%(4) 186% 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) 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. An expense
limitation was in effect during the period. Performance would have been
lower if the expense limitation was not in effect.
(4) Annualized.
See accompanying notes
9
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware U.S. Government Securities Fund Class C
------------------------------------------------------------------------------------------------------------------------------------
Six Months Four Months Year Period
Ended Year Ended Ended Ended from 1/10/95(3)
4/30/00 10/31/99 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> <C>
Net asset value, beginning of period ........... $10.200 $10.930 $10.590 $10.360 $10.150 $10.360 $ 9.480
Income (loss) from investment operations:
Net investment income ....................... 0.238 0.438 0.477 0.520 0.180 0.550 0.270
Net realized and unrealized gain (loss)
on investments ............................ (0.137) (0.676) 0.348 0.240 0.210 (0.230) 0.880
-------------------------------------------------------------------------------
Total from investment operations ............ 0.101 (0.238) 0.825 0.760 0.390 0.320 1.150
-------------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ........ (0.241) (0.432) (0.485) (0.530) (0.180) (0.530) (0.270)
Distributions from net realized gain
on investments ............................ - (0.060) - - - - -
-------------------------------------------------------------------------------
Total dividends and distributions ........... (0.241) (0.492) (0.485) (0.530) (0.180) (0.530) (0.270)
-------------------------------------------------------------------------------
Net asset value, end of period ................. $10.060 $10.200 $10.930 $10.590 $10.360 $10.150 $10.360
===============================================================================
Total return(4) ................................ 1.02% (2.72%) 7.98% 7.60% 3.92% 3.11% 12.73%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ..... $1,535 $1,392 $385 $138 $234 $224 $221
Ratio of expenses to average net assets ..... 1.85%(5) 2.07% 1.75% 1.68% 1.73% 1.70% 1.62%(5)
Ratio of expenses to average net assets
prior to expense limitation ............... 2.23%(5) 2.09% 1.81% 1.76% 1.73% 1.70% 1.65%(5)
Ratio of net investment income to average
net assets ................................ 4.74%(5) 3.87% 4.46% 5.02% 5.26% 5.33% 5.10%(5)
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly .................. 4.37%(5) 3.85% 4.40% 4.94% 5.26% 5.33% 5.07%(5)
Portfolio turnover .......................... 60%(5) 186% 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. An expense
limitation was in effect during the period. Performance would have been
lower if the expense limitation was not in effect.
(5) Annualized.
See accompanying notes
10
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware U.S. Government Securities Fund Institutional Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months Four Months
Ended Year Ended Ended Year Ended
4/30/00 10/31/99 10/31/98 10/31/97(1) 10/31/96(2) 6/30/96 6/30/95
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $10.210 $10.940 $10.600 $10.370 $10.160 $10.370 $ 9.750
Income (loss) from investment operations:
Net investment income ........................ 0.283 0.521 0.555 0.600 0.210 0.630 0.620
Net realized and unrealized gain (loss)
on investments ............................. (0.137) (0.672) 0.351 0.240 0.210 (0.230) 0.640
---------------------------------------------------------------------------------
Total from investment operations ............. 0.146 (0.151) 0.906 0.840 0.420 0.400 1.260
---------------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ......... (0.286) (0.519) (0.566) (0.610) (0.210) (0.610) (0.620)
Distributions from net realized gain
on investments ............................. - (0.060) - - - - (0.020)
---------------------------------------------------------------------------------
Total dividends and distributions ............ (0.286) (0.579) (0.566) (0.610) (0.210) (0.610) (0.640)
---------------------------------------------------------------------------------
Net asset value, end of period .................. $10.070 $10.210 $10.940 $10.600 $10.370 $10.160 $10.370
=================================================================================
Total return(3) ................................. 1.47% (1.94%) 8.79% 8.39% 4.17% 3.88% 13.57%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...... $2,514 $4,285 $37,097 $45,589 $50,066 $41,688 $54,445
Ratio of expenses to average net assets ...... 0.99%(4) 1.27% 1.00% 0.93% 0.99% 0.97% 0.94%
Ratio of expenses to average net assets
prior to expense limitation ................ 1.37%(4) 1.29% 1.06% 1.01% 0.99% 0.97% 0.94%
Ratio of net investment income to average
net assets ................................. 5.61%(4) 4.67% 5.21% 5.76% 6.00% 6.07% 6.39%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly ................... 5.24%(4) 4.65% 5.15% 5.68% 6.00% 6.07% 6.39%
Portfolio turnover ........................... 60%(4) 186% 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) 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. An expense
limitation was in effect during the period. Performance would have been
lower if the expense limitation was not in effect.
(4) Annualized.
See accompanying notes
11
<PAGE>
Notes to Financial Statements
April 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
Voyageur Funds - (the "Company") is registered as an investment company under
the Investment Company Act of 1940, as amended. The Company is organized as a
Delaware Business Trust. Delaware U.S. Government Securities Fund (the "Fund"),
a series of Voyageur Funds, Inc., is a diversified investment company. The Fund
currently offers four classes of shares. The Delaware U.S. Government Securities
Fund A Class carries a maximum front-end sales charge of 4.75%. The Delaware
U.S. Government Securities Fund B Class carries a back-end contingent deferred
sales charge, the Delaware U.S. Government Securities Fund C Class (known as
level load class) carries a back-end contingent deferred sales charge for one
year and the Delaware U.S. Government Securities Fund 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. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
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 Trustees.
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 accounting
principles generally accepted in the United States.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
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 102% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
<PAGE>
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts are
accreted to interest income over the lives of the respective securities. The
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 commission arrangements with
brokers. These transactions are done subject to best execution. The amount of
these expenses was approximately $509 for the six months ended April 30, 2000.
The expenses paid under the above agreement are included in the other expenses
on the Statement of Operations with a corresponding expense offset shown as
"Expenses paid indirectly."
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company ("DMC"), the Investment Manager of the Fund, an
annual fee which is calculated daily at the rate of 0.55% 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 average daily net assets
over $2,500 million, less fees paid to the unaffiliated trustees. However, DMC
has agreed to limit its management fee to 0.50% of average net assets through
April 30, 2001. At April 30, 2000, the Fund had a liability for Investment
Management fees and other expenses payable to DMC of $12,711.
DMC has entered into a sub-advisory agreement with Voyageur Asset Management,
LLC with respect to the management of the Fund. The sub-advisor receives a
sub-advisory fee from DMC for their services equal to one half of the actual fee
paid to DMC under the terms of the Investment Management Agreement. The Fund
does not pay any fees directly 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 expenses and extraordinary expenses exceed
0.85% of the Fund's average daily net assets through October 31, 2000.
12
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
(continued)
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent, and accounting services.
The Fund pays DSC a monthly fee based on number of shareholder accounts,
shareholder transactions and average net assets, subject to certain minimums. At
April 30, 2000, the Fund had a liability for such fees and other expenses
payable to DSC of $13,921.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.25% of the average daily net assets 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. The Distributor has agreed to waive
these fees for the Institutional Class shares acquired by shareholders on or
after March 1, 1998. On April 30, 2000, the Fund had a payable to DDLP of
$13,994.
For the six months ended April 30, 2000, DDLP earned $12,238 for commissions on
sales of the Fund A Class shares.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
3. Investments
During the six months ended April 30, 2000, the Fund had purchases of
$12,964,320 and sales of $22,690,449 of long term U.S. government securities.
At April 30, 2000, the aggregate cost of securities for federal income tax
purposes was $42,063,682.
At April 30, 2000, net unrealized depreciation for federal income tax purposes
aggregated $1,875,699 of which $14,551 related to unrealized appreciation of
securities and $1,890,250 related to unrealized depreciation of securities.
4. Capital Shares
Transactions in capital shares were as follows:
Six Months
Ended Year Ended
4/30/00 10/31/99
Shares sold:
A Class ......................................... 347,045 768,054
B Class ......................................... 87,550 407,097
C Class ......................................... 55,584 152,135
Institutional Class ............................. 8,488 1,016,118
Shares issued upon reinvestment of
dividends from net investment income
and net realized gains on investments:
A Class ......................................... 62,162 145,433
B Class ......................................... 11,564 19,894
C Class ......................................... 2,725 3,187
Institutional Class ............................. 6,101 174,713
--------- ---------
581,219 2,686,631
--------- ---------
Shares repurchased:
A Class ......................................... (1,121,864) (1,235,065)
B Class ......................................... (175,424) (204,181)
C Class ......................................... (42,162) (54,037)
Institutional Class ............................. (184,707) (4,160,715)
---------- ----------
(1,524,157) (5,653,998)
---------- ----------
Net Decrease ....................................... (942,938) (2,967,367)
========== ==========
5. 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.
13
<PAGE>
DELAWARE(SM) For Shareholders
INVESTMENTS 1.800.523.1918
------------
Philadelphia o London For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware U.S. Government
Securities Fund shareholders, but it may be used with prospective investors when
preceded or accompanied by a current Prospectus for Delaware 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 objectives and operating policies of the Fund. You
should read the prospectus carefully before you invest. The figures in this
report represent past results which are not a guarantee of future results. The
return and principal value of an investment in the Fund will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman Subadviser
Citadel Constructors, Inc. Voyageur Asset Management, LLC
King of Prussia, PA Minneapolis, MN
David K. Downes AFFILIATED OFFICERS National Distributor
President and Chief Executive Officer Delaware Distributors, L.P.
Delaware Investments Family of Funds Charles E. Haldeman, Jr. Philadelphia, PA
Philadelphia, PA President and Chief Executive Officer
Delaware Management Holdings, Inc. Shareholder Servicing, Dividend
John H. Durham Philadelphia, PA Disbursing and Transfer Agent
Private Investor Delaware Service Company, Inc.
Horsham, PA Richard J. Flannery Philadelphia, PA
Executive Vice President
Anthony D. Knerr and General Counsel
Consultant, Anthony Knerr & Associates Delaware Investments 1818 Market Street
New York, NY Philadelphia, PA Philadelphia, PA 19103-3682
Ann R. Leven Bruce D. Barton
Former Treasurer, National Gallery of Art President and Chief Executive Officer
Washington, DC Delaware Distributors, L.P.
Philadelphia, PA
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(3223) Printed in the USA
SA-404 [4/00] PP 6/00 (J5939)
