-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, T4kwyAlQMY8+wV0snWB5xlL/QBf0eiO+96vNn/MIIEWtZbDWDhClTxNg+hvLCCyG EGlUEmmzGqrMpilcw6z7Lw== 0000950116-95-000403.txt : 19950905 0000950116-95-000403.hdr.sgml : 19950905 ACCESSION NUMBER: 0000950116-95-000403 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950831 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC CENTRAL INDEX KEY: 0000357059 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 236732199 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03363 FILM NUMBER: 95569539 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2157512926 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP TREASURY RESERVES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE TREASURY RESERVES DATE OF NAME CHANGE: 19880718 N-30D 1 LIMITED-TERM GOV'T FUND SEMI-ANNUAL REPORT PHOTO OF COLONIAL OBJECTS August 1, 1995 Dear Shareholder: Six months ago, the Federal Reserve Board was still tightening credit in an effort to inhibit expected inflation. A final 0.50% increase in the Federal Funds rate to 6.0% occurred in February after the nation's economy grew at a brisk 5.1% annual rate in the fourth quarter of 1994. In the spring, however, the Fed's worries about inflation turned into concerns about a slowdown and the possible risk of a mild recession. By the summer, the Fed began to cut interest rates, a reversal of policy that the bond market had anticipated well in advance of a 0.25% reduction in the Fed Funds rate on July 6. Considering that 1994 provided a negative return for nearly all government funds, the change in Fed policy was welcome. Limited-Term Government Fund A Class provided an attractive total return of +5.73% (capital change plus reinvested dividends) at net asset value in the six months ended June 30. The table below presents the Fund's total return for the first fiscal half of 1995 relative to a comparable intermediate U.S. Treasury Note and a long-term U.S. Treasury Bond. Overall quality of the portfolio remains AAA. - ------------------------------------------------------------------------------- Total Return January 1, 1995 - January 30, 1995 Limited-Term Government Fund A Class +5.73% Three-year U.S. Treasury Note +8.66% 30-Year U.S. Treasury Bond +19.70% Fund performance is calculated at net asset value without the impact of sales charge. Past performance is not a guarantee of future results. Source for Treasury returns: Bloomberg Business News. - ------------------------------------------------------------------------------- The increase in net asset value that Fund shareholders enjoyed in the first half may not have been as large as some government funds that bet aggressively on falling rates. However, we believe the conservative strategy implemented by Roger A. Early, Vice President and Senior Portfolio Manager, puts the Fund in a favorable position should the pace of the current economic expansion gradually increase in the second half of 1995. A July 18 survey by the National Association of Home Builders which predicts an improved construction climate for the next six months is one indicator of renewed economic growth. Home buying typically picks up when interest rates drop as sharply as they did during this year's second quarter. The average fixed rate on a conventional 30-year home loan fell below 8% as the summer began. 2 PHOTO OF COLONIAL OBJECTS Of course, falling rates can prompt refinancing, which can have a negative effect on the value of mortgage-related securities that make up a substantial share of the Fund's portfolio. However, before the drop, the Fund's portfolio manager took steps to help protect the Fund from the potential negative effects of mortgage prepayments that typically occur when interest rates fall substantially. We encourage you to read the remainder of this report, which includes the portfolio manager's review of the Fund's performance in its first half ended June 30, 1995, and an explanation of how he has positioned the Fund to continue to meet its objectives in the coming months. As always, we thank you for your continued confidence in Delaware Group. Sincerely, /s/ WAYNE A STORK /s/ BRIAN F. WRUBLE - ---------------------------- ------------------------------------- Wayne A. Stork Brian F. Wruble Chairman, Board of Directors President and Chief Executive Officer Limited-Term Government Fund Limited-Term Government Fund - -------------------------------------------------------------------------------- Only the name has changed... We are pleased to announce that effective August 29, 1995, Treasury Reserves Intermediate Fund has been renamed Limited-Term Government Fund. The Fund's objective remains the same -- to provide a high, stable level of current income while attempting to minimize principal fluctuation and provide maximum liquidity. The Fund's strategy is to invest primarily in a portfolio of short- and intermediate-term securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities as well as debt obligations backed by such securities. The average weighted maturity of the holdings ranges between two and five years. We believe the new name reflects this strategy and the fixed-income securities that are the Fund's primary focus. We stress that this is a name change only. We have made no changes to the Fund's investment policies or strategies. Roger A. Early, whose report begins on page 4, continues as the Fund's Senior Portfolio Manager. The Fund's NASDAQ symbol will remain DTRIX. The abbreviated listing of the Fund in THE WALL STREET JOURNAL and other major dailies is expected to be "LtdGov." - -------------------------------------------------------------------------------- 3 PHOTO OF COLONIAL OBJECTS PORTFOLIO MANAGER'S REVIEW In the Fund's first half of 1995, the bond market turned its attention from concern about inflation and the industrial production pressures of a booming economy to speculation about a possible recession, weak consumer spending and bloated inventories. Investors in U.S. Government securities recovered some of 1994's capital losses, as intermediate-term interest rates declined more than 1.8 percentage points through June, pushing bond prices higher. In the six months through June, Limited-Term Government Fund Class A shares provided a total return of +5.73% at net asset value while employing a relatively defensive strategy. Compare that to the +5.6% average ANNUAL return for intermediate bonds since the end of World War II as tracked by Ibbotson and Sinquefeld, an investment research firm, and you can see that the 1995 rally in bonds has been very pronounced. The Fund shortened its average duration from 2.5 years as of December 31, to 2.0 years, as of June 30, in an attempt to increase stability of principal. Duration is the most common measure of a bond's sensitivity to changes in interest rates. It indicates the approximate percentage of change in a bond's price given a 1% change in interest rates. This year's drop in interest rates took place as bondholders witnessed a slowing in economic activity combined with only a modest increase in consumer prices. In fact, the bond rally was unusual in that it occurred despite a final 0.50% rate increase by the Federal Reserve Board in early February. Traditionally, "fighting the Fed" or anticipating that the bond market will move in the opposite direction of the Federal Reserve's most recent policy has not been a successful strategy for fixed-income investors. But the first half of 1995 was different, especially for longer term bonds, which had the steepest decline in yield. In addition to concerns about "fighting the Fed," our view is that sustained bond rallies usually start during a recession. Several economic indicators that have consistently preceded recessions and sustained bond rallies include a major drop in stock prices and a yield curve in which short-term rates are higher than long-term rates. These events had not yet occurred by June 30. With this in mind, and knowing that bond price declines normally continue through the end of economic expansions, we concluded that the rally would not be sustained. =============================================== U.S. Treasury Yields Have Dropped Since January ----------------------------------------------- 01/02/95 06/30/95 3 month 5.682% 5.563% 6 month 6.495% 5.576% 1 year 7.162% 5.623% 2 year 7.69 % 5.793% 3 year 7.778% 5.852% 5 year 7.827% 5.970% 10 year 7.827% 6.203% 30 year 7.876% 6.617% ----------------------------------------------- Source: Bloomberg Business News This chart shows how much interest rates on U.S. Treasury securities dropped between January and June this year. Note tht the interest rate spread between very short maturity securities (three-month T-Bills) and intermediate-term securities (two- to five-year maturity Treasury Notes) has "flattened" considerably since the start of the year. 4 PHOTO OF COLONIAL OBJECTS To us, the economy's current condition looks a lot like the growth slowdowns of 1966-1967 and 1986. During both periods, interest rates declined, spurring renewed economic growth. In the mid-1960s and mid-1980s, the economy, like the economy of the mid-1990s, had enjoyed several years of expansion. Still, there was more room to grow. Consequently, we are looking for an economic rebound in the second half of 1995, especially given the fact that bonds rallied in anticipation of the Federal Reserve Board's decision to cut interest rates on July 6. As you can see from the chart to the left, conventional mortgage rates tumbled to 7.67% by early June, down sharply from a December 1994 peak of 9.45%, suggesting there may be a greater level of home buying later this year. =========================================== Fannie Mae 90-Day Mortgage Commitment Rates ------------------------------------------- 30-Dec 9.45% 6-Jan 9.45% 13-Jan 9.25% 20-Jan 9.33% 27-Jan 9.19% 3-Feb 9.28% 10-Feb 9.18% 17-Feb 9.04% 24-Feb 8.88% 3-Mar 8.96% 10-Mar 8.83% 17-Mar 8.73% 24-Mar 8.69% 31-Mar 8.84% 7-Apr 8.57% 14-Apr 8.57% 21-Apr 8.51% 28-Apr 8.60% 5-May 8.26% 12-May 8.35% 19-May 8.22% 26-May 8.03% 2-Jun 7.67% 9-Jun 7.88% 16-Jun 7.95% 23-Jun 7.76% 30-Jun 7.93% -------------------------------------------- Source: Bloomberg Business News This chart shows that the average interest rate consumers paid on new conventional fixed-rate mortgages dropped substantially between December and June. The typical effect of a rate decline of this magnitude is to generate home buying because consumers can enjoy interest savings of more than $125 a month on a 30-year term, $100,000 mortgage. A CONSERVATIVE PORTFOLIO Despite generating higher income for investors than comparable maturity U.S. Treasury notes, Limited-Term Government Fund's defensive strategy caused it to lag the average return of two- to five-year maturity government funds in the first half of 1995, as measured by Lipper Analytical Services, an evaluator of mutual funds. We believed it was prudent to maintain a conservative portfolio that provided a desirable risk/reward profile, with emphasis on high income and protection of principal. The Fund's portfolio had, as of June 30, an average effective maturity of 3.5 years, down from 4.4 years in December. The average overall quality of the portfolio remained AAA, the highest rating available. Throughout the first half of 1995, the Fund was invested primarily in U.S. Government securities, with an emphasis on mortgage-backed securities. About 12% of the portfolio was in high-quality corporate and asset-backed securities such as auto loans and credit card debt. Emphasis on residential mortgages has given the Fund a yield-to-maturity almost 1% higher than a comparable maturity U.S. Treasury Note. We expect to maintain the Fund's focus in this defensive, better yielding sector. 5 PHOTO OF COLONIAL OBJECTS The sharp drop in interest rates this year has the potential to trigger refinancing activity, increasing mortgage prepayments. However, we believe the Fund's mortgages are less likely to be refinanced because many loans date from the 1986-1987 period, and have already been through several periods of heavy refinancing activity. We think the Fund's sensitivity in this area is more limited than the market as a whole. With the potential for more bond market volatility during the second half of 1995, the Fund's disciplined investment strategy aims to serve the needs of investors targeting the attractive characteristics of the short-to-intermediate government bond market. /s/ ROGER A. EARLY - -------------------------------------------- Roger A. Early Vice President and Senior Portfolio Manager Limited-Term Government Fund LIMITED-TERM GOVERNMENT FUND'S PERFORMANCE CLASS A CLASS B Average Annual Total Returns(1) Average Annual Total Returns(2) (Established 11/24/85) (Established 5/2/94) Including Sales Charge Lifetime +6.63% Lifetime Excluding Sales Charge +4.12% Including Sales Charge +2.47% 5 Years +5.97% One Year Excluding Sales Charge +5.59% Including Sales Charge +3.62% One Year +3.26% Through June 30, 1995 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. (1) CLASS A returns reflect the impact of the 3.00% maximum sales charge and the 12b-1 fee, and take into account the reinvestment of all distributions. (2) CLASS B performance reflects the reinvestment of all distributions. Class B shares do not carry a front-end sales charge, but are subject to a 1% annual distribution and service fee. They are subject to a deferred sales charge of up to 2% if redeemed before the end of the fourth year. Class B six-month total returns for the period ending June 30, 1995 were +5.28% (excluding sales charge) and +3.28% (including sales charge). Performance "excluding sales charge" assumes the investment was not redeemed. Class B was initially offered on May 2, 1994. The average annual total returns for the lifetime, five-year and one-year periods and the unannualized total return for the six-month period ended June 30, 1995 for Limited-Term Government Fund's Institutional Class, which is available without sales or asset-based distribution charges only to certain eligible institutional accounts, were +7.08%, +6.78%, +6.65% and +5.80% respectively. The Institutional Class was initially made available September 2, 1987; performance prior to that date is based on the performance of Class A, adjusted to eliminate the effect of the sales charge, but not Class A's asset-based distribution charge. 6 FINANCIAL STATEMENTS DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC. - LIMITED-TERM GOVERNMENT FUND* STATEMENT OF NET ASSETS June 30, 1995 (Unaudited)
PRINCIPAL MARKET AMOUNT VALUE U.S. TREASURY OBLIGATIONS - 16.52% U.S. Treasury Bonds 13.125% 5/15/01......... $20,570,000 $ 27,730,931 U.S. Treasury Bonds 13.375% 8/15/01......... 42,927,000 58,836,819 U.S. Treasury Notes 5.125% 2/28/98.......... 5,500,000 5,402,029 U.S. Treasury Notes 5.75% 8/15/03........... 39,200,000 38,048,500 ------------ TOTAL U.S. TREASURY OBLIGATIONS (COST $125,576,032)......................... 130,018,279 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OBLIGATIONS (GNMA) - 15.57% GNMA 8.00% 2016 to 2017..................... 24,391,063 25,028,096 GNMA 9.00% 2016 to 2022..................... 51,033,615 54,000,319 GNMA 10.00% 2016 to 2018.................... 2,003,036 2,182,058 GNMA 10.50% 2015 to 2016.................... 759,850 825,387 GNMA 11.00% 2009 to 2020.................... 9,260,997 10,431,662 GNMA 11.50% 2015 to 2019.................... 158,823 178,924 GNMA GPM (Graduated Payment Mortgage) 11.50% 2010 to 2013........................ 289,498 323,242 GNMA GPM 12.00% 2010 to 2012................ 122,361 137,733 GNMA GPM 12.25% 2013 to 2014................ 372,029 421,149 GNMA 12.50% 2010 ........................... 312,779 359,989 GNMA GPM 13.75% 2014........................ 123,890 142,706 GNMA II 9.50% 2020 to 2021.................. 8,753,467 9,182,939 GNMA II 9.75% 2016 to 2019.................. 905,075 963,764 GNMA II 10.00% 2020......................... 5,951,537 6,401,622 GNMA II 10.50% 2020......................... 354,133 384,678 GNMA II 11.00% 2015......................... 3,106,485 3,397,718 GNMA II Jumbo 11.50% 2017 to 2018........... 726,429 803,839 GNMA II 12.00% 2014 to 2016................. 5,284,731 5,908,990 GNMA II 12.50% 2013 to 2014................. 1,279,551 1,447,093 GNMA II GPM 12.75% 2015..................... 29,868 34,119 ------------ TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OBLIGATIONS (COST $122,626,707)........................ 122,556,027 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - 31.10% Citicorp Mortgage Securities 1990-10 A5 9.50% 7/25/05.............................. 1,854,026 1,905,553 Federal Home Loan Mortgage Corporation 31 D 7.55% 5/15/20......................... 1,000,000 1,011,859
PRINCIPAL MARKET AMOUNT VALUE COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) (CONTINUED) Federal Home Loan Mortgage Corporation 1260-E 8.00% 10/15/04...................... $ 4,823,959 $ 4,887,022 Federal Home Loan Mortgage Corporation 1276 H 8.00% 9/15/06....................... 20,413,000 21,177,157 Federal Home Loan Mortgage Corporation 1126 I 8.50% 10/15/19...................... 15,000,000 15,274,674 Federal Home Loan Mortgage Corporation 69F 9.00% 12/15/05......................... 2,900,000 3,058,378 Federal Home Loan Mortgage Corporation 136D 9.00% 3/15/20......................... 4,624,676 4,752,532 Federal Home Loan Mortgage Corporation 26F 9.50% 2/15/20.......................... 11,030,041 11,708,150 Federal Home Loan Mortgage Corporation 139F 9.50% 6/15/20......................... 8,726,604 9,016,903 Federal Home Loan Mortgage Corporation 1765-B BA 10.00% 1/15/17................... 17,357,727 18,323,251 Federal Home Loan Mortgage Corporation 1614 10.00% 6/15/20........................ 37,846,328 40,585,789 Federal National Mortgage Association 6.50% 3/1/09............................... 1,034,512 1,020,287 Federal National Mortgage Association 1989-58E 8.50% 9/25/18..................... 8,617,000 8,809,253 Federal National Mortgage Association 1990-128H 8.50% 12/25/19................... 16,990,261 17,611,820 Federal National Mortgage Association 1993-39A 8.75% 3/25/18..................... 15,781,318 16,376,973 Federal National Mortgage Association 1990-137D 9.00% 12/25/18................... 15,000,000 15,382,191 Federal National Mortgage Association 1990-23G 9.20% 12/25/18.................... 9,310,000 9,552,148 Federal National Mortgage Association 10.00% 9/25/18............................. 3,417,531 3,536,566 Federal National Mortgage Association 1989-1C 10.30% 3/25/18..................... 2,439,968 2,530,693 Federal National Mortgage Association 1989-19A 10.30% 4/25/19.................... 8,391,420 9,090,305 Federal National Mortgage Association (STRIP) 46-2 11.00% 12/25/03............... 5,956,122 6,425,167 Investors F5 CMO 10.875% 10/25/13........... 247,626 277,434 PaineWebber Trust CMO 9.00% 3/20/97......... 2,207,669 2,228,423
- -------- *Formerly known as Delaware Group Treasury Reserves, Inc. - Treasury Reserves Intermediate Series 7 STATEMENT OF NET ASSETS (CONTINUED)
PRINCIPAL MARKET AMOUNT VALUE COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) (CONTINUED) Prudential Home Mortgage Securities 1992-2 A17 8.30% 3/25/07................... $ 3,736,978 $ 3,886,083 Resolution Trust 1995-C1 6.55% 2/25/27...... 6,535,000 6,424,722 Travelers Mortgage Securities 1-Z2 12.00% 3/1/14.............................. 8,930,815 10,013,676 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (COST $244,205,947)........................ 244,867,009 ------------ ASSET-BACKED SECURITIES - 8.52% Ammes Mortgage Trust 1994 - DI AIA 9.00% 2/15/27.............................. 21,197,551 21,932,841 First Alliance Mortgage Loan Trust 1994-3 A1 7.825% 10/25/25............................ 8,708,682 8,918,235 First Chicago 1991-D 8.40% 6/15/98.......... 20,000,000 20,400,000 MBNA Master Credit Card Trust 1995- C A 6.45% 2/15/08.................... 10,000,000 9,931,250 Standard Credit Card Master Trust 1994 - 2A 7.25% 4/7/08..................... 5,700,000 5,892,375 ------------ TOTAL ASSET-BACKED SECURITIES (COST $67,356,897)......................... 67,074,701 ------------ CORPORATE BONDS - 3.26% Security Pacific 11.00% 3/1/01.............. 21,500,000 25,686,867 ------------ TOTAL CORPORATE BONDS (COST $24,477,105).... 25,686,867 ------------ AGENCY OBLIGATIONS - 10.59% Federal Home Loan Bank 8.05% 9/2/09......... 24,700,000 24,802,406 Federal National Mortgage Association 8.45% 10/21/96............................. 10,450,000 10,787,180 Federal National Mortgage Association 9.15% 4/10/98.............................. 8,400,000 9,028,202 Resolution Trust Funding Corp. Note 0.00% 4/15/06.............................. 59,000,000 29,291,435 Resolution Trust Funding Corp. Note 0.00% 10/15/06............................. 10,000,000 4,788,550 Resolution Trust Funding Corp. Note 0.00% 1/15/07.............................. 10,000,000 4,700,880 ------------ TOTAL AGENCY OBLIGATIONS (COST $83,674,390)......................... 83,398,653 ------------
PRINCIPAL MARKET AMOUNT VALUE AGENCY MORTGAGE-BACKED SECURITIES - 13.68% Federal Home Loan Mortgage Corporation 8.00% 3/1/09 to 7/1/11..................... $14,420,566 $ 14,766,540 Federal Home Loan Mortgage Corporation 8.50% 12/1/08 to 11/1/10................... 4,423,860 4,576,417 Federal Home Loan Mortgage Corporation 8.75% 5/1/10............................... 1,289,008 1,336,965 Federal Home Loan Mortgage Corporation 9.00% 1/1/24............................... 12,537,998 13,169,310 Federal Home Loan Mortgage Corporation 9.50% 11/1/05.............................. 7,138,312 7,397,076 Federal Home Loan Mortgage Corporation 11.00% 9/1/10 to 10/1/14................... 584,381 643,184 Federal Home Loan Mortgage Corporation 11.50% 3/1/01 to 3/1/16.................... 9,184,714 10,168,055 Federal National Mortgage Association 8.00% 7/1/02 to 7/1/23..................... 6,120,905 6,275,192 Federal National Mortgage Association 8.50% 8/1/07 to 8/1/17..................... 19,469,593 20,260,747 Federal National Mortgage Association 9.00% 8/1/04 to 4/1/16..................... 4,943,182 5,163,577 Federal National Mortgage Association 9.25% 7/1/08 to 8/1/16..................... 3,564,222 3,762,972 Federal National Mortgage Association 10.00% 1/1/19.............................. 1,175,289 1,276,657 Federal National Mortgage Association 11.00% 8/1/10 to 8/1/20.................... 16,531,202 18,342,738 Federal National Mortgage Association 12.50% 2/01/11............................. 328,280 374,349 Federal National Mortgage Association 13.00% 7/01/15............................. 182,418 207,500 ------------ TOTAL AGENCY MORTGAGE-BACKED SECURITIES (COST $106,671,569)........................ 107,721,279 ------------ NUMBER OF CONTRACTS PUT OPTIONS - 0.10% 5 Year Futures on U.S. Treasury Notes, 9/20/95, $105.............................. 1,500 351,570 5 Year Futures on U.S. Treasury Notes, 9/20/95, $106.............................. 1,000 437,500 ----------- TOTAL PUT OPTIONS (COST $1,682,805) ........ 789,070 -----------
8 STATEMENTS OF NET ASSETS (CONTINUED)
NUMBER OF MARKET CONTRACTS VALUE CALL OPTIONS WRITTEN - (0.55%) 5 Year Futures on U.S. Treasury Notes, 9/20/95, $105.............................. 1,000 $ (2,546,880) 5 Year Futures on U.S. Treausry Notes 9/20/95, $106.............................. 1,000 (1,750,000) ----------- TOTAL CALL OPTIONS WRITTEN (PREMIUM RECEIVED $2,403,764).............. (4,296,880) ----------- PRINCIPAL AMOUNT REPURCHASE AGREEMENTS - 1.19% With Paine Webber 6.20%, 7/3/95 (dated 6/30/95 collateralized by $9,505,000 U.S. Treasury Notes 6.00% due 6/30/96, market value $9,530,171)................... $9,338,000 9,338,000 ----------- TOTAL REPURCHASE AGREEMENTS (COST $9,338,000).......................... 9,338,000 ----------- TOTAL MARKET VALUE OF SECURITIES OWNED - 99.98% (COST $783,205,688)......... 787,153,005 RECEIVABLES NET OF LIABILITIES AND OTHER ASSETS - 0.02%................... 140,146 ----------- NET ASSETS APPLICABLE TO 80,967,555 LIMITED-TERM GOVERNMENT FUND A CLASS SHARES, 1,191,519 LIMITED-TERM GOVERNMENT FUND B CLASS SHARES AND 4,106,892 LIMITED-TERM GOVERNMENT INSTITUTIONAL CLASS SHARES ($.001 PAR VALUE) OUTSTANDING; EQUIVALENT TO $9.13 PER SHARE - 100.00%.... $787,293,151 ============ COMPONENTS OF NET ASSETS AT JUNE 30, 1995 Common stock, $.001 par value, 2,000,000,000 shares authorized to the Limited-Term Government Fund............................ $895,324,307 Accumulated undistributed loss: Net realized loss on investments........... (111,978,473) Net unrealized appreciation of investments. 3,947,317 ------------ Total net assets........................... $787,293,151 ============
See accompanying notes 9 DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.- LIMITED-TERM GOVERNMENT FUND STATEMENT OF OPERATIONS Six Months Ended June 30, 1995 (Unaudited)
INVESTMENT INCOME: Interest.................................... $36,737,545 EXPENSES: Management fees ($2,001,806) and directors' fees ($4,471).................... $2,006,277 Dividend disbursing and transfer agent fees and expenses.................... 781,114 Distribution expenses....................... 595,485 Reports and statements to shareholders...... 181,837 Salaries.................................... 112,851 Custodian fees.............................. 62,332 Taxes (other than income)................... 47,673 Registration fees........................... 34,623 Professional fees........................... 11,934 Other....................................... 146,235 3,980,361 ---------- ----------- NET INVESTMENT INCOME..... ................. 32,757,184 ----------- NET REALIZED LOSS AND UNREALIZED GAIN ON INVESTMENTS: Net realized loss from security transactions.............................. (4,263,603) Net realized loss on options............... (15,323,881) (19,587,484) ----------- Net unrealized appreciation of investments during the period............. 31,570,473 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS........................ 11,982,989 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $44,740,173 ===========
See accompanying notes DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.- LIMITED-TERM GOVERNMENT FUND STATEMENT OF CHANGES IN NET ASSETS
Six Months Year Ended Ended 6/30/95 12/31/94 (Unaudited) OPERATIONS: Net investment income ...................... $32,757,184 $71,534,054 Net realized loss from investment transactions............................... (19,587,484) (85,112,787) Net unrealized appreciation (depreciation) during the period.......................... 31,570,473 (7,549,434) ------------ -------------- Net increase (decrease) in net assets resulting from operations.... 44,740,173 (21,128,167) ------------ -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Limited-Term Government Fund A Class....... (30,930,516) (67,899,145) Limited-Term Government Fund B Class....... (302,961) (145,627) Limited-Term Government Fund Institutional Class....................... (1,523,707) (3,489,282) ------------ -------------- (32,757,184) (71,534,054) ------------ -------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Limited-Term Government Fund A Class....... 45,147,368 173,103,587 Limited-Term Government Fund B Class....... 4,970,124 6,890,177 Limited-Term Government Fund Institutional Class....................... 4,555,713 17,044,450 Net asset value of shares issued upon reinvestment of dividends from net investment income: Limited-Term Government Fund A Class....... 20,372,883 46,483,822 Limited-Term Government Fund B Class....... 189,324 98,455 Limited-Term Government Fund Institutional Class....................... 1,519,205 3,479,603 ------------ -------------- 76,754,617 247,100,094 ------------ -------------- Cost of shares repurchased: Limited-Term Government Fund A Class....... (127,433,934) (468,009,117) Limited-Term Government Fund B Class....... (683,386) (550,004) Limited-Term Government Fund Institutional Class....................... (6,372,419) (26,564,816) ------------ -------------- (134,489,739) (495,123,937) ------------ -------------- Decrease in net assets derived from capital share transactions................. (57,735,122) (248,023,843) ------------ -------------- NET DECREASE IN NET ASSETS.................. (45,752,133) (340,686,064) NET ASSETS: Beginning of period......................... 833,045,284 1,173,731,348 ------------ -------------- End of period .............................. $787,293,151 $ 833,045,284 ============ ==============
See accompanying notes 10 DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS, INC.- LIMITED-TERM GOVERNMENT FUND NOTES TO FINANCIAL STATEMENTS June 30, 1995 (Unaudited) Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government Fund, (formerly known as Delaware Group Treasury Reserves, Inc. - Treasury Reserves Intermediate Series) (the "Fund"), a series of Delaware Group Limited-Term Government Funds, Inc., (the "Company"), is registered as a diversified open-end investment company under the Investment Company Act of 1940. The Company is organized as a Maryland corporation. The Fund offers three classes of shares. 1. SIGNIFICANT ACCOUNTING POLICIES The following accounting policies are in accordance with generally accepted accounting principles and are consistently followed by the Fund for financial statement preparation: SECURITY VALUATION - Securities listed on an exchange are valued at the last quoted sales price as of 4:00 p.m. on the valuation date. Securities not listed on an exchange are valued at the mean of the last quoted bid and asked prices. Long-term debt securities are valued by an independent pricing service when 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. 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 is required in the financial statements. REPURCHASE AGREEMENTS - The Fund may invest in a pooled cash account along with other members of the Delaware Group 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 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. CLASS ACCOUNTING - Investment income, common expenses and gain (loss) are allocated to the various classes of the Fund on the basis of daily net assets. Distribution expenses relating to a specific class are charged directly to that class. OTHER - Expenses common to all funds within the Delaware Group 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 an 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. 2. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES In accordance with the terms of the Investment Management Agreement, the Fund pays Delaware Management Company, Inc. (DMC), the investment manager of the Fund, an annual fee which is calculated daily at the rate of 0.50% of average daily net assets of the Fund less fees paid to the independent directors. At June 30, 1995, the Fund had a liability for Investment Management fees and other expenses payable to DMC for $22,819. 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 0.15% of the average daily net assets of the A Class and 1.00% of the average daily net assets of the B Class. No distribution expenses are paid by the Institutional Class. For the six months ended June 30, 1995, the Fund paid DDLP $92,016 for commissions earned on sales of Limited-Term Government Fund A shares. At June 30, 1995, the Fund had a liability for distribution fees and other expenses payable to DDLP for $9,724. The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC, to serve as dividend disbursing and transfer agent for the Fund. For the six months ended June 30, 1995, the Fund expensed $781,114 for these services. At June 30, 1995, the Fund had a liability for such fees and other expenses payable to DSC for $22,882. Certain officers of the Investment Manager are officers, directors and/or employees of the Fund. These officers, directors and employees are paid no compensation by the Fund. On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of DMC, DDLP and DSC, through a merger transaction (the "Merger") became a wholly-owned subsidiary of Lincoln National Corporation. Other than the resulting change in ownership, the Merger will not materially change the manner in which DMC, DDLP or DSC have heretofore conducted their relationship with the Fund. 11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. INVESTMENTS During the six months ended June 30, 1995, the Fund made purchases of $149,981,188 and sales of $153,690,478 of investment securities other than U.S. Government securities and temporary cash investments. At June 30, 1995, unrealized appreciation for federal income tax purposes aggregated $4,161,081 of which $11,832,149 related to unrealized appreciation of securities and $7,671,068 related to unrealized depreciation of securities. The realized loss for federal income tax purposes was $19,373,739 for the six months ended June 30, 1995. For federal income tax purposes, the Fund had accumulated capital losses of $92,391,252 at December 31, 1994 of which may be carried forward and applied against future capital gains. The capital loss carryforward expires as follows: 1995 - $2,146,972, 1996 - $859,564, 1997 - $574,529, 1998 - $707,105, 2001 - $2,978,605 and 2002 - $85,124,477. Transactions in call options written for the six months ended June 30, 1995, were as follows: CALL OPTIONS TERMINATED ---------- NO. OF PREMIUMS NET REALIZED CONTRACTS RECEIVED COST LOSS --------- -------- ---- ---- Options outstanding December 31, 1994 ...... 1,150 $ 565,901 Contracts written ....... 8,350 7,643,374 ----- ---------- 9,500 8,209,275 Contracts terminated: Closed.................. 7,500 5,805,511 $19,251,791 $(13,446,280) ----- ---------- =========== ============ Contracts outstanding June 30, 1995........... 2,000 $2,403,764 ----- ========== Net realized losses on put options purchased for the six months ended June 30, 1995 were $1,877,601. 4. CAPITAL STOCK Transactions in capital stock shares were as follows: SIX MONTHS YEAR ENDED ENDED 6/30/95 12/31/94 Shares sold: Limited-Term Government Fund A Class ....... 4,979,600 18,177,057 Limited-Term Government Fund B Class ....... 547,592 747,755 Limited-Term Government Fund Institutional Class ....................... 501,458 1,776,208 Shares issued upon reinvestment of dividends from net investment income: Limited-Term Government Fund A Class ....... 2,244,112 4,974,528 Limited-Term Government Fund B Class ....... 20,842 10,824 Limited-Term Government Fund Institutional Class ....................... 167,333 373,041 ---------- ---------- 8,460,937 26,059,413 ---------- ---------- Shares repurchased: Limited-Term Government Fund A Class ....... (14,045,543) (49,806,031) Limited-Term Government Fund B Class ....... (75,389) (60,105) Limited-Term Government Fund Institutional Class ....................... (702,497) (2,856,655) ---------- ---------- (14,823,429) (52,722,791) ---------- ---------- Net decrease ............................... (6,362,492) (26,663,378) ========== ========== 5. CONCENTRATION OF CREDIT RISK The Fund invests 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. As a writer of call options, the Fund receives a premium at the outset which is recorded as a liability and is subsequently adjusted to the current market value of the option written. The Fund bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the Fund would incur a gain, to the extent of the premiums, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the Fund would realize a loss, if the price on the financial instrument increases between those dates. 12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
LIMITED-TERM GOVERNMENT FUND A CLASS(1) ------------------------------------------------------------------ SIX MONTHS ENDED YEAR ENDED DECEMBER 31, 6/30/95(4) 1994 1993 1992 1991 1990 Net asset value, beginning of period............. $8.990 $9.840 $10.000 $10.190 $ 9.770 $9.720 Income from investment operations: Net investment income .......................... 0.367 0.667 0.681 0.740 0.799 0.814 Net realized and unrealized gain (loss) from security transactions ......................... 0.140 (0.850) (0.160) (0.190) 0.420 0.050 ------ ------ ------- ------- ------- ------ Total from investment operations................. 0.507 (0.183) 0.521 0.550 1.219 0.864 Less distributions: Dividends....................................... (0.367) (0.667) (0.681) (0.740) (0.799) (0.814) Distributions from net realized gain on security transactions ......................... none none none none none none ------ ------ ------- ------- ------- ------ Total distributions.............................. (0.367) (0.667) (0.681) (0.740) (0.799) (0.814) Net asset value, end of period .................. $9.130 $8.990 $ 9.840 $10.000 $10.190 $9.770 ====== ====== ======= ======= ======= ====== Total returns(5)................................. 5.73% (1.88%) 5.31% 5.62% 13.04% 9.32% Ratios/supplemental data: Net assets, end of period (000 omitted)......... $738,938 $789,525 $1,126,031 $861,829 $144,129 $107,739 Ratio of expenses to average net assets......... 0.99% 0.91% 0.88% 0.87% 20.90%(2) 0.99% Ratio of net investment income to average net assets .................................... 8.14% 7.10% 6.77% 7.03%(3) 7.96%(3) 8.41% Portfolio turnover.............................. 54% 148% 171% 77% 42% 175%
- ---------- (1) Formerly known as Treasury Reserves Intermediate Fund A Class. (2) Ratio of expenses to average net assets prior to expense limitation was 0.90% for 1992 and 0.99% for 1991. (3) Ratio of net investment income to average net assets prior to expense limitation was 7.01% for 1992 and 7.87% for 1991. (4) Ratios have been annualized and total return has not been annualized. (5) Does not include maximum sales charge of 3.00% nor the 1% limited contingent deferred sales charge that would apply in the event of certain redemptions within 12 months of purchase. 13 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. FINANCIAL HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
LIMITED-TERM GOVERNMENT LIMITED-TERM GOVERNMENT FUND INSTITUTIONAL CLASS FUND B CLASS(1) ------------------------------------------------------------- ----------------------- PERIOD SIX MONTHS SIX MONTHS 5/2/94(4) ENDED YEAR ENDED DECEMBER 31, ENDED TO 6/30/95(5) 1994 1993 1992* 1991 1990 6/30/95(5) 12/31/94 Net asset value, beginning of period ......................... $8.990 $9.840 $10.000 $10.190 $9.770 $9.720 $8.990 $9.430 Income from investment operations: Net investment income ............. 0.373 0.681 0.696 0.754 0.816 0.828 0.328 0.399 Net realized and unrealized gain (loss) from security transactions. 0.140 (0.850) (0.160) (0.190) 0.420 0.050 0.140 (0.440) Total from investment operations ... 0.513 (0.169) 0.536 0.564 1.236 0.878 0.468 (0.041) Less distributions: Dividends.......................... (0.373) (0.681) (0.696) (0.754) (0.816) (0.828) (0.328) (0.399) Distributions from net realized gain on security transactions..... none none none none none none none none Total distributions................ (0.373) (0.681) (0.696) (0.754) (0.816) (0.828) (0.328) (0.399) Net asset value, end of period ..... $9.130 $8.990 $9.840 $10.000 $10.190 $9.770 $9.130 $8.990 Total return(6)..................... 5.80% (1.74%) 5.44% 5.77% 13.21% 9.48% 5.28% (0.44%) Ratios/supplemental data: Net assets, end of period (000 omitted) .................... $37,481 $37,238 $47,700 $52,403 $146,598 $12,811 $10,874 $6,282 Ratio of expenses to average net assets ....................... 0.84% 0.76% 0.74% 0.75%(2) 0.75%(2) 0.84% 1.84% 1.76% Ratio of net investment income to average net assets................ 8.29% 7.25% 6.91% 7.58%(3) 8.11%(3) 8.56% 7.29% 6.25% Portfolio turnover................. 54% 148% 171% 77% 42% 175% 54% 148%
- ------------------ The per share data for the periods 1990 and 1991 is derived from data of the Investors I class, which like the Limited-Term Government Fund Institutional Class (formerly known as Treasury Reserves Intermediate Fund Institutional Class), a new class of shares, was not subject to Rule 12b-1 distribution expenses. Shares of Investors I class were converted into shares of Investors II class, now referred to as Limited-Term Government Fund A Class, on June 1, 1992 pursuant to a Plan of Recapitalization approved by shareholders of Investors I class. (1) Formerly known as Treasury Reserves Intermediate Fund B Class. (2) Ratio of expenses to average net assets prior to expense limitation was 0.78% for 1992 and 0.84% for 1991 for the Limited-Term Government Fund Institutional Class. (3) Ratio of net investment income to average net assets prior to expense limitation was 7.54% for 1992 and 8.02% for 1991 for the Limited-Term Government Institutional Class. (4) Date of initial public offering; ratios have been annualized and total return has not been annualized. (5) Ratios have been annualized and total return has not been annualized. (6) Does not include any applicable contingent deferred sales charge which varies from 1%-2% depending upon the holding period for the Limited-Term Government Fund B Class. * The per share data and ratios for Investors I class and the Limited-Term Government Institutional Class have been combined for 1992. For the five months ended May 31, 1992, the Investors I class operating expenses and net investment income per share were $0.031 and $0.325, respectively. For the seven months ended December 31, 1992, the Limited-Term Government Fund Institutional Class operating expenses and net investment income per share were $0.045 and $0.429, respectively. All net investment income was distributed to shareholders. 14 A REPORT ON LIMITED-TERM GOVERNMENT FUND'S ANNUAL MEETING At an annual meeting of shareholders held on March 29, 1995, the following matters were submitted for shareholder vote: the election of directors, the ratification of the selection of Ernst & Young LLP as independent auditors of the Fund and the approval of a new investment management agreement. The new investment management agreement was proposed in connection with the April 3, 1995, merger of Delaware Management Holdings, Inc.(the parent of Delaware Management Company, Inc.) and a subsidiary of Lincoln National Corporation. Whenever there is a change in control of an investment manager, the Investment Company Act of 1940 requires shareholders to vote on a new investment management agreement. Below are the names of each director elected at the meeting as well as the results of the other matters voted on by shareholders.
NUMBER OF VOTES ------------------------------------------------ FOR AGAINST/WITHHELD ABSTENTIONS ---------- ---------------- ----------- Election of Directors*: Wayne A.Stork 63,772,321 1,734,614 -- Walter P. Babich 63,791,470 1,715,464 -- Anthony D. Knerr 63,791,558 1,715,376 -- Ann R. Leven 63,789,806 1,717,128 -- W. Thacher Longstreth 63,782,327 1,724,607 -- Charles E. Peck 63,791,470 1,715,464 -- Approval of the New Investment Management Agreement 50,349,959 906,946 2,992,463 Selection of Ernst & Young LLP as Independent Auditors* 60,561,793 605,865 4,339,275
* Voted upon by shareholders of Delaware Group Limited-Term Government Funds, Inc. + Please note that the results of this meeting were not audited by Ernst & Young LLP. - ------------------------------------------------------------------------------ This semi-annual report is for the information of Limited-Term Government Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current PROSPECTUS, which gives details about charges, expenses, investment objectives and operating policies of the Fund. Summary investment results are documented in the current STATEMENT OF ADDITIONAL INFORMATION. If used with prospective investors after September 30, 1995, this report must also be accompanied by a Limited-Term Government Fund Performance Update for the most recently completed calendar quarter. The figures in this report represent past results which are not a guarantee of future results. The return and principal value of an investment in the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
BOARD MEMBERS OTHER AFFILIATED OFFICERS WAYNE A. STORK ANN R. LEVEN BRIAN F. WRUBLE Chairman Treasurer President and CEO Delaware Group of Funds National Gallery of Art Delaware Group of Funds Philadelphia, PA Washington, DC Philadelphia, PA WALTER P. BABICH W. THACHER LONGSTRETH GEORGE M. CHAMBERLAIN, JR. Board Chairman Vice Chairman Senior Vice President and Secretary Citadel Constructors, Inc. Packquisition Corp. Delaware Group of Funds King of Prussia, PA Philadelphia, PA Philadelphia, PA ANTHONY D. KNERR CHARLES E. PECK DAVID K. DOWNES Consultant Secretary of Enterprise Homes, Inc. Senior Vice President, Anthony Knerr & Associates Fredericksburg, VA Chief Financial Officer and New York, NY former Chairman and CEO Chief Administrative Officer The Ryland Group, Inc. Delaware Group of Funds Columbia, MD Philadelphia, PA KEITH E. MITCHELL President and CEO Delaware Distributors, L.P. Philadelphia, PA DELAWARE GROUP OF FUNDS FOR GROWTH OF CAPITAL FOR CURRENT INCOME MONEY MARKET FUNDS Trend Fund Delchester Fund Delaware Cash Reserve DelCap Fund U.S. Government Fund U.S. Government Money Fund Value Fund Limited-Term Government Fund Tax-Free Money Fund FOR TOTAL RETURN FOR TAX-FREE CLOSED-END EQUITY/INCOME Devon Fund CURRENT INCOME Dividend and Income Fund Decatur Total Return Fund Tax-Free USA Fund Global Dividend and Decatur Income Fund Tax-Free Insured Fund Income Fund Delaware Fund Tax-Free USA Intermediate Fund FOR GLOBAL Tax-Free Pennsylvania Fund DIVERSIFICATION International Equity Fund Global Assets Fund Global Bond Fund
DELAWARE GROUP A TRADITION OF SOUND INVESTING SINCE 1929 PHOTO OF VARIOUS COLONIAL OBJECTS 1995 SEMI- ANNUAL REPORT DELAWARE GROUP ======== LIMITED-TERM GOVERNMENT FUND (Formerly Treasury Reserves Intermediate Fund) The Delaware Group includes funds with a wide range of investment objectives. Stock funds, income funds, tax-free funds, money market funds, closed-end equity/income funds and global funds give investors the ability to create a portfolio that fits their personal financial goals. For more information, including a prospectus of any Delaware Group fund, contact your financial adviser or call Delaware Group at 800-523-4640 or 215-988-1333 in Philadelphia. Read the prospectus carefully before investing. 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, ARE NOT OBLIGATIONS OF ANY BANK OR ANY CREDIT UNION, AND INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. SHARES OF THE FUND ARE NOT BANK OR CREDIT UNION DEPOSITS. INVESTMENT MANAGER SHAREHOLDER SERVICING, Delaware Management Company, Inc. DIVIDEND AND DISBURSING AND TRANSFER AGENT INTERNATIONAL AFFILIATE Delaware Service Company, Inc. Delaware International Advisers Ltd. NATIONAL DISTRIBUTOR Delaware Distributors, L.P. SA-022 [6/95] PP8/95 Printed in the U.S.A. -----END PRIVACY-ENHANCED MESSAGE-----