<DOCUMENT>
<TYPE>N-30D
<SEQUENCE>1
<FILENAME>n30d.txt
<DESCRIPTION>N-30D
<TEXT>
<PAGE>
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
(Fixed Income Artwork)
FIXED INCOME
Semiannual Report
2002
DELAWARE
Limited-Term Government Fund
[Graphic Appears Here] POWERED BY RESEARCH.(SM)
<PAGE>
A Commitment
to Our Investors
Experience
o Our seasoned investment professionals average 12 years experience, bringing a
wealth of knowledge and expertise to our management team.
o We trace our origins to 1929 and opened our first mutual fund in 1938. Over
the past 73 years, we have weathered a wide range of economic and market
environments.
Performance
o We strive to deliver consistently good performance in all asset classes.
o We believe that hiring the best and the brightest in the industry, conducting
fundamental research, and working in a disciplined investment process are
essential to quality investment management.
Service
o We are committed to providing the highest standards of client service.
o You can count on quick and courteous service, easy access to information about
your accounts, and hassle-free transaction processing.
o We make our funds available through financial advisors who can offer you
individualized attention and valuable investment advice.
Diversification
o Our comprehensive family of funds gives you the opportunity to diversify your
portfolio effectively.
o We offer mutual funds in virtually every asset class from domestic equity and
fixed income to international securities.
Our commitments have earned us the confidence of discriminating institutional
and individual investors. Delaware Management Company and its affiliates managed
more than $87 billion in assets as of June 30, 2002.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
Mutual fund advisory services provided by Delaware Management Company, a series
of Delaware Management Business Trust, which is a registered investment advisor.
(C)Delaware Distributors, L.P.
Table
of Contents
Letter to Shareholders 1
Portfolio Management Review 2
Performance Summary 4
At Delaware 5
Financial Statements:
Statement of Net Assets 6
Statement of Operations 9
Statements of Changes in Net Assets 10
Financial Highlights 11
Notes to Financial Statements 15
<PAGE>
Letter
to Shareholders
Recap of Events
U.S. equity markets struggled mightily in the six months ended June 30, 2002,
leading to robust demand in the fixed-income markets. With major U.S. stock
indexes entrenched deep in negative territory year-to-date, investors put $73.9
billion into bond funds during the year's first half (Source: AMG Data
Services). For the period, the average U.S. bond fund made a gain of +1.36%,
according to fund-tracking firm Lipper Inc., while the Lehman Brothers Aggregate
Bond Index turned in a gain of +3.80%.
Economic growth for the first quarter of 2002 was strong, signaling that the
recession is likely over. Our analysis reveals that the recession was the
mildest of 10 recessions since the close of WWII, and the only one not to have
recorded consecutive quarters of negative real growth in the nation's gross
domestic product. A mitigating factor for the recession was strong consumer
demand. While low interest rates helped drive the housing market through cheap
mortgages, investors noticed a steep drop in yields for short-term debt
securities.
In this environment, Delaware Limited-Term Government Fund posted a total return
of +2.99% (Class A shares at net asset value with distributions reinvested) for
the six-month period ended June 30, 2002. The Fund trailed the Lipper
Short-Intermediate U.S. Government Funds Average, which posted a gain of +3.22%.
As of June 30, 2002, Delaware Limited-Term Government Fund's SEC 30-day yield
was 4.05% (Class A shares).
Outlook
Despite the struggles of the equity market, we believe there are still positives
to be taken from the current economic outlook. Further economic weakness remains
a possibility, but the consensus GDP forecast for the remainder of 2002 is still
for continued growth at a tempered pace.
Total Return
For the period ended June 30, 2002 Six Months
Delaware Limited-Term Government Fund-- Class A Shares +2.99%
Lipper Short-Intermediate U.S. Government Funds Average (78 funds) +3.22%
Merrill Lynch 1-3 Year Government Bond Index +2.38%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of all distributions. Performance information
for all Fund classes can be found on page 4. For U.S. Treasury securities,
interest and principal repayment at maturity are guaranteed by the U.S.
government, unlike mutual fund distributions and share values, which are not
guaranteed. The Lipper Short-Intermediate U.S. Government Funds Average
represents the average return of short-intermediate government funds tracked by
Lipper (Source: Lipper Inc.). The Merrill Lynch 1-3 Year Government Bond Index
is an unmanaged composite that generally tracks the market for U.S. Treasury
securities with maturities of one to three years. You cannot invest directly in
an index. Past performance is not a guarantee of future results.
<PAGE>
Delaware Limited-Term Government Fund
July 9, 2002
Assuming the recovery does not lose momentum, the Federal Reserve is likely to
raise short-term rates sometime in the future. Rising interest rates are
typically not a welcome sign for bond investors, yet other factors point to a
strong bond-investing environment going forward. For one, a stronger economy
should benefit corporate and other non-Treasury sectors that have suffered from
credit concerns. And with longer-term interest rates not as those on shorter
investments, we may be unlikely to interest rate hikes across the spectrum of
maturities.
It is important for investors to periodically reexamine the asset allocation
within their investment portfolios. For those individuals seeking reasonable
current income and relative stability of their capital, we believe that Delaware
Limited-Term Government Fund will continue to be an excellent investment
vehicle.
Thank you for your continued commitment to Delaware Investments.
Sincerely,
/s/ Charles E. Haldeman, Jr.
----------------------------------------
Charles E. Haldeman, Jr.
Chairman,
Delaware Investments Family of Funds
/s/ David K. Downes
----------------------------------------
David K. Downes
President and Chief Executive Officer,
Delaware Investments Family of Funds
1
<PAGE>
Portfolio
Management Review
Fund Manager
Paul Grillo, Jr.
Senior Portfolio Manager
Stephen R. Cianci
Portfolio Manager
The Fund's Results
Your Fund experienced a total return of +2.99% for the six-month period ended
June 30, 2002 (Class A shares at net asset value with distributions reinvested).
The Fund outperformed its benchmark index, the Merrill Lynch 1-3 Year Government
Bond Index, which returned +2.38%. The performance of the Fund's peer group --
the 78 funds that comprised the Lipper Short-Intermediate Term U.S. Government
Funds Average -- gained +3.22% for the same period (source: Lipper Inc.). By
contrast and despite generally positive news on the domestic economic front, the
U.S. stock market, as measured by the S&P 500 Index, moved substantially lower
for the period and recorded a loss of -13.15%.
Interest rates for the six-month period were generally stable, and historically
low. The Federal Reserve maintained the fed funds rate at a level 1.75% in an
effort to provide liquidity to the markets. As a measure of longer-term rates,
the 10-year U.S. Treasury bond yielded an annualized rate of +4.93% for the
month of June (Source: Bloomberg).
The interest rate environment provided a challenge to investors seeking
conservation of their capital with a reasonable current income. As of June 30,
2002, your Fund's 30-day SEC yield was +4.05% (Class A shares).
Portfolio Highlights
In managing Delaware Limited-Term Government Fund, we seek to provide a
competitive and consistent dividend, while attempting to minimize fluctuations
in principal and provide maximum liquidity. During the six-month period of this
report, when many stocks largely dropped in value, we believe the bond
investments in your Fund produced attractive returns with only slight share
price movement.
<PAGE>
Delaware Limited-Term Government Fund
July 9, 2002
We established a defensive posture for the Fund during the period. The slight
decline in shorter-term interest rates during the period caused performance to
slightly lag the funds of our peer group. Credit quality is of great importance
to us, and we have not diminished our conservative stance. Likewise we have
managed bond duration (a measure of a Fund's sensitivity to changes in interest
rates) in order to sustain the Fund's relatively lower risk profile.
With regard to the Fund's holdings, we slightly decreased the Fund's exposure to
securities issued directly by the U.S. Treasury. This strategy was due in part
to the recent rise in supply of such securities, which can lead to slightly
lower bond prices. Though no bond can exceed Treasuries' virtually non-existent
default risk, we identified other opportunities that we felt would safely
advance the Fund's objectives and allow us to remain competitive to our peers.
Thus we increased the Fund's holdings of mortgage-backed bonds during the
period. This asset type comes with very high credit ratings and offers us the
chance to support the Fund's dividend level. This latter quality has indeed been
a challenge for many income investors, given the precipitous fall of interest
rates dating back over two years - particularly in the shorter end of the
maturity curve.
Outlook
Going forward, we anticipate retaining our focus on the non-treasury sectors of
the market as we seek yield.
Although the labor cycle has been sluggish, we generally do not foresee a
"double-dip" or secondary recession. In typical market cycles, stocks would have
likely responded favorably by now to the onset of a recovery. Yet the current
environment does not appear to be typical, and a wave of stories chronicling
corporate fraud has brought into question the integrity of corporate earnings.
We believe that the fallout from the late 1990s overexpansion and stock market
bubble may have effectively "capped" interest rates to some degree. The fed
funds target rate has been stable at 1.75% now for many months, and is expected
to generally remain low during the second half of 2002. It is also currently at
an historical low versus the real rate of interest.
2
<PAGE>
We believe the flow of capital from equities into fixed income holdings will
continue, at least for the short term, as investors seek relatively safe harbors
from the stock market's stormy seas. The spate of negative news of corporate
improprieties, not to mention incidents of international instability, will
likely enhance the prospects for bonds, particularly those issued by the federal
government or its affiliated agencies.
Especially given the current environment, we believe the Fund can continue to be
an excellent vehicle for investors seeking a reliable income stream from a
high-quality fixed-income portfolio. We will continue to stress stability in the
portfolio, while monitoring the market and economy for signs of a changing
environment.
Delaware Limited-Term Government Fund
Sectors Allocation
As of June 30, 2002
Percentage
of Net Assets
--------------------------------------------------------------------------------
Agency Mortgage-Backed Securities 38.80%
--------------------------------------------------------------------------------
U.S. Treasury Obligations 18.35%
--------------------------------------------------------------------------------
Asset-Backed Securities 11.52%
--------------------------------------------------------------------------------
Repurchase Agreements 9.64%
--------------------------------------------------------------------------------
Agency Collateralized Mortgage Obligations 7.65%
--------------------------------------------------------------------------------
Agency Fixed Rate CMOs 7.05%
--------------------------------------------------------------------------------
Collateralized Mortgage Obligations 4.54%
--------------------------------------------------------------------------------
Corporate Bonds 4.39%
--------------------------------------------------------------------------------
Agency Obligations 4.38%
--------------------------------------------------------------------------------
Commercial Mortgage-Backed Securities 1.53%
--------------------------------------------------------------------------------
3
<PAGE>
Delaware
Limited-Term Government Fund
Fund Basics
As of June 30, 2002
--------------------------------------------------------------------------------
Fund Objectives:
The Fund seeks to provide a high stable level of income, while attempting to
minimize fluctuations in principal and provide maximum liquidity.
--------------------------------------------------------------------------------
Total Fund Assets:
$301.72 million
--------------------------------------------------------------------------------
Number of Holdings:
337
--------------------------------------------------------------------------------
Fund Start Date:
November 24, 1985
--------------------------------------------------------------------------------
Your Fund Management:
Paul Grillo, Jr. joined Delaware Investments in 1993, after serving
as a Mortgage Strategist and Trader at Dreyfus Corporation. He
holds a bachelor's degree from North Carolina State University and
an MBA from Pace University. He is a CFA charterholder.
Stephen R. Cianci joined Delaware Investments in 1992. He holds
both a BS and an MBA from Widener University. He became co-manager
of the Fund in January 1999. Mr. Cianci is an Adjunct Professor of
finance at Widener University and is a CFA charterholder.
--------------------------------------------------------------------------------
Nasdaq Symbols:
Class A DTRIX
Class B DTIBX
Class C DTICX
<PAGE>
Fund Performance
Average Annual Total Returns
<TABLE>
<CAPTION>
Through June 30, 2002 Lifetime 10 Years Five Years One Year
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 11/24/85)
Excluding Sales Charge +6.43% +5.18% +6.06% +7.83%
Including Sales Charge +6.25% +4.89% +5.47% +4.86%
----------------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.71% +5.16% +6.89%
Including Sales Charge +4.71% +5.16% +4.89%
----------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +4.89% +5.15% +6.88%
Including Sales Charge +4.89% +5.15% +5.88%
----------------------------------------------------------------------------------------------
</TABLE>
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Returns and share values will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost. Class B and C
share 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.
The Fund offers Class A, B, C, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 2.75% and have an annual
distribution and service fee of up to 0.30%.
Class B shares are sold with a contingent deferred sales charge that declines
from 2% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately five years after purchase. They are also subject to an annual
distribution and service fee of 1%.
Class C shares are sold with a contingent deferred sales charge of 1% if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The average annual total returns for the lifetime (since 11/24/85), 10-year,
five-year, and one-year periods ended June 30, 2002 for Delaware Limited-Term
Government Fund's Institutional Class were +6.57%, +5.34%, +6.23%, and +8.04%,
respectively. The Institutional Class shares were first made available on June
1, 1992 and are available without sales or asset-based distribution charges only
to certain eligible institutional accounts. Institutional Class performance
prior to June 1, 1992 for Delaware Limited-Term Government Fund is based on
Class A performance and was adjusted to eliminate the sales charges, but not the
asset-based distribution charge of Class A shares.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
An expense limitation was in effect for all classes of Delaware Limited-Term
Government Fund during the lifetime and one-year periods. Performance would have
been lower had the expense limitation not been in effect.
Nasdaq Institutional Class symbol: DTINX
4
<PAGE>
At Delaware
Powered by Research
At Delaware Investments, our long history of asset management has taught us the
importance of two key principles:
o Astute security selection is essential when seeking a performance
advantage.
o Superior fundamental research is the key to astute security selection.
Using these core principles, we have built an organization that is Powered by
Research. We believe our organization represents an effective model for
conducting and capitalizing on independent fundamental research and analysis.
FIVE SPECIALIZED CENTERS OF EXPERTISE
While many organizations single handedly try to be all things across all
investment disciplines, we at Delaware Investments have elected instead to
decentralize and have structured ourselves into five distinct Centers of
Expertise, each focused on a specific investment discipline:
o U.S. growth equity
o U.S. value equity
o U.S. fixed income
o International and global
o U.S. structured equity products
Each Center of Expertise is led by a team of seasoned management professionals
who embrace our belief in superior fundamental research.
THE INDEPENDENT RESEARCH ADVANTAGE
Each Center of Expertise is responsible for its own investment process and
conducts its own independent research rather than rely on the one-size-fits-all
recommendations of a single, centralized research team. We believe our
decentralized approach offers us an independent research advantage:
Focused Expertise
Research is always conducted from the viewpoint of a specific asset-class
discipline by the professionals best equipped to shape and evaluate it.
Direct Accountability
The people who do the research are the very same people who actually manage the
investments and are accountable for the results.
Superior Security Selection
We believe this direct approach to fundamental research enables each Center of
Expertise to uncover market inefficiencies and underappreciated securities that
represent their discipline's most rewarding opportunities.
The Investor Advantage
Our experience has taught us that, despite ongoing change, knowledgeable
investors will continue to need long-range investment plans that have
well-defined objectives and diversified asset management. Delaware Investments
has put in place the intellectual capital, infrastructure, and organizational
commitment to deliver superior asset management to the discriminating investor.
For more information about the funds managed by each Center of Expertise and how
they might fit into your long-term investment strategy, we encourage you to
contact your financial advisor or call us at 800 523-1918.
Delaware eDelivery
WANT TO REDUCE PAPER CLUTTER?
You can receive these fund reports electronically instead of by U.S. mail. To
sign up for Delaware eDelivery and get your fund documents online, go to
www.delawareinvestments.com/edelivery.
[Graphic Omitted edelivery logo]
If you have questions or need assistance, contact our Shareholder Service Center
via e-mail at service@delinvest.com or call 800 523-1918. Representatives are
available Monday through Friday from 8:00 a.m. to 8:00 p.m., Eastern Time.
5
<PAGE>
Statement
of Net Assets
Principal Market
Amount Value
Agency Mortgage-Backed Securities - 38.80%
Fannie Mae
4.75% 6/18/07 $ 5,035,000 $ 5,078,809
6.00% 12/1/16 to 6/1/17 22,997,778 23,495,429
6.50% 4/1/16 to 10/1/31 20,023,327 20,553,951
7.00% 12/1/31 to 6/1/32 7,413,437 7,689,123
7.50% 7/30/31-00 to 10/1/31 2,944,700 3,090,530
8.00% 9/1/02 to 7/1/23 645,342 685,633
8.50% 11/1/07 to 8/1/17 2,166,875 2,297,138
9.00% 8/1/04 to 5/1/10 1,746,610 1,879,067
9.25% 7/1/08 to 8/1/16 501,504 552,739
10.00% 1/1/19 to 10/1/30 958,658 1,054,273
10.50% 6/1/30 473,409 524,300
11.00% 8/1/10 to 8/1/20 2,520,320 2,867,974
12.50% 2/1/11 25,813 29,451
13.00% 7/1/15 78,730 89,703
Fannie Mae 30 Year (TBA)
7.00% 7/1/31 10,000,000 10,356,199
Freddie Mac
8.00% 5/1/05 to 7/1/11 5,736,497 6,081,913
8.50% 12/1/08 to 11/1/10 1,188,295 1,259,281
8.75% 5/1/10 242,485 261,353
9.00% 6/1/09 to 8/1/11 495,957 528,871
9.50% 11/1/05 333,322 352,905
9.75% 12/1/08 79,662 87,604
11.00% 9/1/10 to 6/1/20 442,541 505,874
11.50% 4/1/11 to 3/1/16 1,699,501 1,953,732
Freddie Mac Gold
6.50% 6/1/11 336,341 352,107
8.00% 1/17/09 1,704,032 1,793,494
Freddie Mac (TBA) 6.50% 7/1/32 635,000 647,700
GNMA
7.50% 7/15/30 8,446,000 8,907,890
8.00% 6/15/30 361,712 385,449
9.00% 11/15/06 to 2/15/17 677,317 716,124
9.50% 6/15/16 to 11/15/17 422,394 473,180
10.50% 11/15/15 to 6/20/20 155,488 178,247
11.00% 2/15/10 to 3/15/13 37,751 42,970
12.00% 4/20/14 46,034 54,306
GNMA I GPM
11.50% 4/15/10 to 4/15/13 64,221 73,937
12.00% 10/15/10 28,684 33,247
12.25% 9/15/13 to 2/15/14 65,109 76,306
GNMA I S.F.
11.00% 12/15/09 to 5/15/20 1,106,012 1,283,379
11.50% 7/15/15 13,961 16,395
12.50% 12/15/10 25,868 30,201
GNMA II
9.00% 12/15/09 193,847 210,263
9.50% 11/20/20 to 11/20/21 1,031,594 1,152,476
12.00% 4/20/14 to 1/20/16 203,568 240,405
12.50% 10/20/13 to 1/20/14 286,603 337,718
GNMA II Jumbo
11.50% 12/20/17 to 10/20/18 122,059 142,701
12.00% 6/20/15 to 7/20/15 30,130 35,628
<PAGE>
Delaware Limited-Term Government Fund
June 30, 2002 (Unaudited)
Principal Market
Amount Value
Agency Mortgage-Backed Securities (continued)
GNMA II S.F.
9.75% 11/20/16 to 12/20/17 $ 143,356 $ 159,470
11.00% 9/20/15 to 10/20/15 361,211 418,070
12.00% 5/20/14 to 5/20/16 411,381 486,283
GNMA S.F.
7.00% 5/15/28 5,050,102 5,263,152
7.50% 12/15/23 1,810,014 1,927,099
9.00% 10/15/09 297,169 323,729
------------
Total Agency Mortgage-Backed Securities
(cost $112,310,756) 117,037,778
------------
Agency Collateralized Mortgage Obligations - 7.65%
Fannie Mae 1998-W3 6.50% 7/25/28 3,487,000 3,640,846
Fannie Mae Whole Loan
Series 98-W3 A2 6.50% 7/25/28 32,746 32,746
Freddie Mac Series
2303 CW 8.50% 11/15/24 9,968,679 10,698,176
Freddie Mac Structured Pass Through
Securities Series T-11 A6
6.50% 9/25/18 2,475,000 2,566,087
GNMA Series 98-9 B 6.85% 12/20/25 5,926,721 6,135,188
------------
Total Agency Collateralized
Mortgage Obligations (cost $22,555,167) 23,073,043
------------
Agency Fixed Rate CMO - 7.05%
Fannie Mae Pool 382344 7.41% 4/1/10 4,991,740 5,539,661
Fannie Mae 46 2 11.00% 12/25/03 262,013 273,679
Fannie Mae CT 6.50% 5/1/22 4,992,748 5,136,289
Fannie Mae Series 2002-16 Class IG
6.00% 3/25/15 2,508,000 332,978
Freddie Mac 69 Class F 9.00% 12/15/05 170,395 170,598
Freddie Mac Series 1684 Class G
6.50% 3/15/23 3,500,000 3,699,527
GNMA Series 2002-28 Class B
5.779% 7/16/24 6,000,000 6,112,501
------------
Total Agency Fixed Rate CMO
(cost $21,106,345) 21,265,233
------------
Agency Obligations - 4.38%
Federal Home Loan Bank
4.125% 1/14/05 13,000,000 13,222,456
------------
Total Agency Obligations
(cost $12,963,365) 13,222,456
------------
Asset-Backed Securities - 11.52%
DVI Receivables Series 01-1 A4
5.81% 4/11/09 2,000,000 2,083,988
Ford Credit Auto Ownership Trust
Series 02-B A4 4.75% 8/15/06 2,605,000 2,674,308
Freddie Mac Structured Pass Through
Securities Series T-11 A5
6.50% 1/25/15 6,265,000 6,340,645
6
<PAGE>
Statement
of Net Assets (continued)
Principal Market
Amount Value
Asset-Backed Securities (continued)
MBNA Credit Card Master Trust Series
01-A1 A1 5.75% 10/15/08 $ 1,200,000 $ 1,262,530
MBNA Credit Card Master Trust Series
02-A1 4.95% 6/15/09 2,000,000 2,037,670
Peoplefirst.com Auto Receivable
OwnerTrust Series 00-2 A4
6.43% 9/15/07 3,000,000 3,139,097
PP&L Transition Bond Series 1999-1
Class A3 6.60% 3/25/05 258,927 264,095
PSE&G Transition Funding
5.98% 6/15/08 3,600,000 3,811,043
Residential Asset Securities
Series 00-KS4 AI3 7.36% 1/25/26 4,003,152 4,080,175
Sallie Mae 3.375% 7/15/04 1,000,000 1,005,104
Sallie Mae Student Loan Trust Series
02-3 A1 1.93% 7/25/06 2,675,000 2,675,000
Sallie Mae Student Loan Trust Series
97-1 A2 2.34% 1/25/10 5,350,000 5,370,562
------------
Total Asset-Backed Securities
(cost $34,281,823) 34,744,217
------------
Collateralized Mortgage Obligations - 4.54%
Fannie Mae 2002-5 Class PN
6.00% 2/25/16 5,065,528 692,977
Fannie Mae 2002-7 Class IC
6.00% 4/25/15 3,068,771 387,957
Fannie Mae Pool 92710
9.25% 3/1/20 79,804 88,059
FHR 1468 HA 5.00% 2/15/21 3,285,353 3,336,832
JP Morgan Chase Commercial
Mortgage Series 2002-FLIA A1
2.19% 2/14/14 5,494,816 5,499,168
Residental Funding Mortgage
Security Series 1999-S10 A1
6.25% 4/25/14 3,596,287 3,705,039
------------
Total Collateralized Mortgage Obligations
(cost $13,190,921) 13,710,032
------------
Commercial Mortgage-Backed Securities - 1.53%
Commercial Series 01-- C3 A2
6.365% 12/15/28 3,340,000 3,494,491
First Union National Bank
Commercial Mortgage Series 02-C1 A2
6.141% 2/1/34 1,100,000 1,134,013
------------
Total Commercial Mortgage-Backed
Securities (cost $4,486,234) 4,628,504
------------
<PAGE>
Delaware Limited-Term Government Fund
Principal Market
Amount Value
Corporate Bonds - 4.39%
Banking & Finance - 2.44%
BB&T 6.50% 8/1/11 $ 1,150,000 $ 1,205,102
Boeing Capital 6.50% 2/15/12 1,000,000 1,050,384
Citigroup 6.00% 2/21/12 750,000 754,402
First Bank National Association
7.30% 8/15/05 640,000 702,554
General Electric Capital 1,470,000 1,486,898
4.25% 1/28/05
US Bank National Association
6.30% 2/4/14 2,130,000 2,196,081
------------
7,395,421
------------
Metals & Mining - 0.35%
Alcoa 6.50% 6/1/11 1,000,000 1,061,324
------------
1,061,324
------------
Retail - 0.87%
Lowes Companies 7.50% 12/15/05 1,000,000 1,094,072
Target 5.875% 3/1/12 1,500,000 1,519,739
------------
2,613,811
------------
Telecommunications - 0.21%
Cingular Wireless 144A
5.625% 12/15/06 650,000 625,031
------------
625,031
------------
Utilities - 0.52%
Nabors Industries 6.80% 4/15/04 1,000,000 1,049,021
North Border Pipeline 6.25% 5/2/07 500,000 511,518
------------
1,560,539
------------
Total Corporate Bonds
(cost $12,984,138) 13,256,126
U.S. Treasury Obligations - 18.35%
U.S. Treasury Bond
*10.75% 8/15/05 10,605,000 12,865,976
11.625% 11/15/04 5,180,000 6,180,185
U.S. Treasury Inflation Index Notes
3.375 4/15/32 1,200,358 1,268,816
3.625% 1/15/08 2,125,696 2,226,004
U.S. Treasury Note
3.25% 5/31/04 10,415,000 10,497,997
3.50% 11/15/06 1,050,000 1,031,626
4.375% 5/15/07 3,000,000 3,042,189
4.875% 2/15/12 1,550,000 1,556,298
6.00% 8/15/04 3,000,000 3,188,040
7.25% 5/15/04 3,000,000 3,245,802
U.S. Treasury Strip-Principal
**4.788% 8/15/07 12,750,000 10,274,001
------------
Total U.S. Treasury Obligations
(cost $55,902,990) 55,376,934
------------
7
<PAGE>
Statement
of Net Assets (continued)
Principal Market
Amount Value
Repurchase Agreements - 9.64%
With BNP Paribas 1.91%
7/1/02 (dated 6/28/02,
collateralized by $7,535,000
U.S. Treasury Notes 6.00% due
9/30/02, market value $7,724,004
and $2,883,000 U.S. Treasury Notes
5.375% due 6/30/03,
market value $3,056,593) $10,550,000 $ 10,550,000
With J. P. Morgan Securities 1.83%
7/1/02 (dated 6/28/02,
collateralized by $8,165,000
U.S. Treasury Bills due
9/19/02, market value $8,138,399) 7,975,000 7,975,000
With UBS Warburg 1.90%
7/1/02 (dated 6/28/02,
collateralized by $3,767,000
U.S. Treasury Notes 5.375% due
6/30/03, market value $3,994,293
and $3,767,000 U.S. Treasury Notes
5.875% due 2/15/04,
market value $4,046,123
and $2,432,000 U.S. Treasury Notes
6.625% due 5/15/07,
market value $2,721,927) 10,551,000 10,551,000
------------
Total Repurchase Agreements
(cost $29,076,000) 29,076,000
------------
Total Market Value of Securities - 107.85%
(cost $318,857,739) 325,390,323
Liabilities Net of Receivables
and Other Assets - (7.85%) (23,671,684)
------------
Net Assets Applicable to 34,931,947
Shares Outstanding - 100.00% $301,718,639
============
Net Asset Value - Delaware Limited-Term
Government Class A
($226,156,736 / 26,183,897 Shares) $8.64
-----
Net Asset Value - Delaware Limited-Term
Government Class B
($28,526,717 / 3,302,753 Shares) $8.64
-----
Net Asset Value - Delaware Limited-Term
Government Class C
($39,326,425 / 4,553,106 Shares) $8.64
-----
Net Asset Value - Delaware Limited-Term
Government Institutional Class
($7,708,761 / 892,191 Shares) $8.64
-----
<PAGE>
Delaware Limited-Term Government Fund
Components of Net Assets at June 30, 2002:
Shares of beneficial interest
(unlimited authorization -- no par) $444,396,994
Distributions in excess of net investment income (1,147,691)
Accumulated net realized loss on investments (148,185,672)
Net unrealized appreciation of investments 6,655,008
------------
Total net assets 301,718,639
============
Summary of Abbreviations:
GNMA -- Government National Mortgage Association
GPM -- Graduate Payment Mortgage
S.F. -- Single Family
TBA -- To be announced
*Fully or partially pledged as collateral for financial futures contracts.
**Zero coupon bond as of June 30, 2002. The interest rate shown is the yield at
time of purchase.
Net Asset Value and Offering Price per Share --
Delaware Limited-Term Government Fund
Net asset value Class A (A) $8.64
Sales charge (2.75% of offering price, or 2.78%
of amount invested per share)(B) 0.24
-----
Offering price $8.88
=====
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
8
<PAGE>
<TABLE>
<CAPTION>
Statement Delaware Limited-Term Government Fund
of Operations Period Ended June 30, 2002 (Unaudited)
<S> <C> <C>
Investment Income:
Interest $7,088,483
----------
Expenses:
Management fees $688,964
Dividend disbursing and transfer agent fees and expenses 307,959
Distribution expense -- Class A 160,872
Distribution expense -- Class B 116,750
Distribution expense -- Class C 147,449
Reports and statements to shareholders 97,147
Accounting and administration expenses 73,577
Registration fees 27,440
Professional fees 12,900
Custodian fees 11,452
Trustees' fees 6,072
Other 17,227 1,667,809
--------
Less expenses absorbed or waived (410,680)
Less expenses paid indirectly (6,432)
----------
Total expenses 1,250,697
----------
Net Investment Income 5,837,786
----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on:
Investments 1,228,131
Futures contracts (473,581)
----------
Net realized gain 754,550
----------
Net change in unrealized appreciation/depreciation of investments 1,548,193
----------
Net Realized and Unrealized Gain on Investments 2,302,743
----------
Net Increase in Net Assets Resulting from Operations $8,140,529
==========
</TABLE>
See accompanying notes
9
<PAGE>
<TABLE>
<CAPTION>
Statements Delaware Limited-Term Government Fund
of Changes in Net Assets
Period Ended Year Ended
6/30/02 12/31/01
(Unaudited)
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 5,837,786 $ 11,424,006
Net realized gain on investments 754,550 6,554,688
Net change in unrealized appreciation/depreciation of investments 1,548,193 (126,481)
------------ ------------
Net increase in net assets resulting from operations 8,140,529 17,852,213
------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (5,629,371) (11,918,074)
Class B (512,239) (628,650)
Class C (644,181) (392,130)
Institutional Class (199,686) (354,196)
------------ ------------
(6,985,477) (13,293,050)
------------ ------------
Capital Share Transactions:
Proceeds from shares sold:
Class A 37,442,736 40,977,026
Class B 11,030,614 17,726,653
Class C 22,065,693 21,214,250
Institutional Class 1,229,188 4,159,580
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 4,057,724 8,402,692
Class B 368,262 420,580
Class C 450,241 308,790
Institutional Class 202,878 353,566
------------ ------------
76,847,336 93,563,137
------------ ------------
Cost of shares repurchased:
A Class (24,350,275) (54,058,306)
B Class (4,719,005) (5,152,487)
C Class (4,741,599) (4,675,825)
Institutional Class (870,345) (2,023,352)
------------ ------------
(34,681,224) (65,909,970)
------------ ------------
Increase in assets derived from capital share transactions 42,166,112 27,653,167
------------ ------------
Net Increase in Net Assets 43,321,164 32,212,330
Net Assets:
Beginning of period 258,397,475 226,185,145
------------ ------------
End of period $301,718,639 $258,397,475
============ ============
</TABLE>
See accompanying notes
10
<PAGE>
Financial
Highlights
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Limited-Term Government Fund Class A
Period
ended Year Ended
6/30/02(1) 12/31/01(2) 12/31/00 12/31/99 12/31/98 12/31/97
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.600 $ 8.430 $ 8.270 $ 8.700 $ 8.620 $ 8.770
Income (loss) from investment operations:
Net investment income 0.188 0.423 0.522 0.519 0.540 0.601
Net realized and unrealized gain (loss) on investments 0.076 0.238 0.161 (0.429) 0.079 (0.150)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.264 0.661 0.683 0.090 0.619 0.451
-------- -------- -------- -------- -------- --------
Less dividends and distributions from:
Net investment income (0.224) (0.491) (0.523) (0.520) (0.539) (0.601)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (0.224) (0.491) (0.523) (0.520) (0.539) (0.601)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.640 $ 8.600 $ 8.430 $ 8.270 $ 8.700 $ 8.620
======== ======== ======== ======== ======== ========
Total return(3) 2.99% 8.16% 8.59% 1.07% 7.46% 5.23%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $226,157 $208,152 $208,565 $262,776 $317,329 $355,079
Ratio of expenses to average net assets 0.75% 0.89% 1.13% 1.00% 1.01% 0.98%
Ratio of expense to average net assets
prior to expense limitation and expense paid indirectly 1.04% 1.08% 1.13% 1.00% 1.01% 0.98%
Ratio of net investment income to average net assets 4.43% 4.92% 6.36% 6.12% 6.32% 6.85%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.14% 4.73% 6.36% 6.12% 6.32% 6.85%
Portfolio turnover 336% 386% 273% 175% 69% 79%
</TABLE>
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective January 1, 2001, the Fund has adopted the provision
of the AICPA Audit and Accounting Guide for Investment Companies that
requires amortization of all premiums and discounts on debt securities and
the recording of paydown gains and losses on mortgage- and asset-backed
securities as an adjustment to interest income. The effect of these changes
for the year ended December 31, 2001 was a decrease in net investment income
per share of $0.068, an increase in net realized and unrealized gain (loss)
per share of $0.068 and a decrease in the ratio of net investment income to
average net assets from 5.72% to 4.92%. Per share data for the periods prior
to January 1, 2001 have not been restated to reflect this change in
accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager for
the period ended June 30, 2002 and the year ended December 31, 2001.
See accompanying notes
11
<PAGE>
Financial
Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Limited-Term Government Fund Class B
Period
ended Year Ended
6/30/02(1) 12/31/01(2) 12/31/00 12/31/99 12/31/98 12/31/97
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.600 $ 8.430 $8.270 $ 8.700 $ 8.620 $ 8.770
Income (loss) from investment operations:
Net investment income 0.152 0.348 0.453 0.447 0.467 0.522
Net realized and unrealized gain (loss) on investments 0.075 0.238 0.160 (0.429) 0.079 (0.150)
------- ------- ------ ------- ------- -------
Total from investment operations 0.227 0.586 0.613 0.018 0.546 0.372
------- ------- ------ ------- ------- -------
Less dividends and distributions from:
Net investment income (0.187) (0.416) (0.453) (0.448) (0.466) (0.522)
------- ------- ------ ------- ------- -------
Total dividends and distributions (0.187) (0.416) (0.453) (0.448) (0.466) (0.522)
------- ------- ------ ------- ------- -------
Net asset value, end of period $ 8.640 $ 8.600 $8.430 $ 8.270 $ 8.700 $ 8.620
======= ======= ====== ======= ======= =======
Total return(3) 2.55% 7.22% 7.68% 0.22% 6.55% 4.35%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $28,527 $21,743 $8,600 $12,483 $13,900 $12,119
Ratio of expenses to average net assets 1.60% 1.74% 1.98% 1.85% 1.86% 1.83%
Ratio of expense to average net assets
prior to expense limitation and expense paid indirectly 1.89% 1.93% 1.98% 1.85% 1.86% 1.83%
Ratio of net investment income to average net assets 3.58% 4.07% 5.51% 5.27% 5.47% 5.98%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.29% 3.88% 5.51% 5.27% 5.47% 5.98%
Portfolio turnover 336% 386% 273% 175% 69% 79%
</TABLE>
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective January 1, 2001, the Fund has adopted the provision
of the AICPA Audit and Accounting Guide for Investment Companies that
requires amortization of all premiums and discounts on debt securities and
the recording of paydown gains and losses on mortgage- and asset-backed
securities as an adjustment to interest income. The effect of these changes
for the year ended December 31, 2001 was a decrease in net investment income
per share of $0.068, an increase in net realized and unrealized gain (loss)
per share of $0.068 and a decrease in the ratio of net investment income to
average net assets by 4.87% to 4.07%. Per share data for the periods prior
to January 1, 2001 have not been restated to reflect this change in
accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager for
the period ended June 30, 2002 and the year ended December 31, 2001.
See accompanying notes
12
<PAGE>
Financial
Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Limited-Term Government Fund Class C
Period
ended Year Ended
6/30/02(1) 12/31/01(2) 12/31/00 12/31/99 12/31/98 12/31/97
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.600 $ 8.430 $8.270 $8.700 $8.620 $8.770
Income (loss) from investment operations:
Net investment income 0.152 0.347 0.453 0.447 0.467 0.524
Net realized and unrealized gain (loss) on investments 0.074 0.238 0.160 (0.431) 0.079 (0.152)
------- ------- ------ ------ ------ ------
Total from investment operations 0.226 0.585 0.613 0.016 0.546 0.372
------- ------- ------ ------ ------ ------
Less dividends and distributions from:
Net investment income (0.186) (0.415) (0.453) (0.446) (0.466) (0.522)
------- ------- ------ ------ ------ ------
Total dividends and distributions (0.186) (0.415) (0.453) (0.446) (0.466) (0.522)
------- ------- ------ ------ ------ ------
Net asset value, end of period $ 8.640 $ 8.600 $8.430 $8.270 $8.700 $8.620
======= ======= ====== ====== ====== ======
Total return(3) 2.54% 7.20% 7.68% 0.20% 6.56% 4.34%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $39,326 $21,386 $4,506 $6,638 $4,932 $3,580
Ratio of expenses to average net assets 1.60% 1.74% 1.98% 1.85% 1.86% 1.83%
Ratio of expense to average net assets
prior to expense limitation and expense paid indirectly 1.89% 1.93% 1.98% 1.85% 1.86% 1.83%
Ratio of net investment income to average net assets 3.58% 4.07% 5.51% 5.27% 5.47% 5.98%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 3.29% 3.88% 5.51% 5.27% 5.47% 5.98%
Portfolio turnover 336% 386% 273% 175% 69% 79%
</TABLE>
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective January 1, 2001, the Fund has adopted the provision
of the AICPA Audit and Accounting Guide for Investment Companies that
requires amortization of all premiums and discounts on debt securities and
the recording of paydown gains and losses on mortgage- and asset-backed
securities as an adjustment to interest income. The effect of these changes
for the year ended December 31, 2001 was a decrease in net investment income
per share of $0.068, an increase in net realized and unrealized gain (loss)
per share of $0.068 and a decrease in the ratio of net investment income to
average net assets by 4.87% to 4.07%. Per share data for the periods prior
to January 1, 2001 have not been restated to reflect this change in
accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value and does not reflect the impact of a sales charge. Total
investment return reflects a waiver and payment of fees by the manager for
the period ended June 30, 2002 and the year ended December 31, 2001.
See accompanying notes
13
<PAGE>
Financial
Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Limited-Term Government Fund Institutional Class
Period
ended Year Ended
6/30/02(1) 12/31/01(2) 12/31/00 12/31/99 12/31/98 12/31/97
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.600 $8.430 $8.270 $8.700 $ 8.620 $ 8.770
Income (loss) from investment operations:
Net investment income 0.194 0.437 0.534 0.531 0.553 0.605
Net realized and unrealized gain (loss) on investments 0.079 0.238 0.161 (0.428) 0.079 (0.150)
------ ------ ------ ------ ------- -------
Total from investment operations 0.273 0.675 0.695 0.103 0.632 0.455
------ ------ ------ ------ ------- -------
Less dividends and distributions from:
Net investment income (0.233) (0.505) (0.535) (0.533) (0.552) (0.605)
------ ------ ------ ------ ------- -------
Total dividends and distributions (0.233) (0.505) (0.535) (0.533) (0.552) (0.605)
------ ------ ------ ------ ------- -------
Net asset value, end of period $8.640 $8.600 $8.430 $8.270 $ 8.700 $ 8.620
====== ====== ====== ====== ======= =======
Total return(3) 3.09% 8.34% 8.75% 1.22% 7.62% 5.39%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $7,709 $7,116 $4,514 $4,448 $21,201 $32,902
Ratio of expenses to average net assets 0.60% 0.74% 0.98% 0.85% 0.86% 0.83%
Ratio of expense to average net assets
prior to expense limitation and expense paid indirectly 0.89% 0.93% 0.98% 0.85% 0.86% 0.83%
Ratio of net investment income to average net assets 4.58% 5.07% 6.51% 6.27% 6.47% 6.98%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid indirectly 4.29% 4.88% 6.51% 6.27% 6.47% 6.98%
Portfolio turnover 336% 386% 273% 175% 69% 79%
</TABLE>
(1) Ratios and portfolio turnover have been annualized and total return has not
been annualized.
(2) As required, effective January 1, 2001, the Fund has adopted the provision
of the AICPA Audit and Accounting Guide for Investment Companies that
requires amortization of all premiums and discounts on debt securities and
the recording of paydown gains and losses on mortgage- and asset-backed
securities as an adjustment to interest income. The effect of these changes
for the year ended December 31, 2001 was a decrease in net investment income
per share of $0.068, an increase in net realized and unrealized gain (loss)
per share of $0.068 and a decrease in the ratio of net investment income to
average net assets by 5.87% to 5.07%. Per share data for the periods prior
to January 1, 2001 have not been restated to reflect this change in
accounting.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of dividends and distributions at
net asset value. Total investment return reflects a waiver and payment of
fees by the manager for the period ended June 30, 2002 and the year ended
December 31, 2001.
See accompanying notes
14
<PAGE>
Notes
to Financial Statements
Delaware Group Limited-Term Government Funds (the "Trust") is organized as a
Delaware business trust and offers one fund: Delaware Limited-Term Government
Fund (the "Fund"). The Trust is an open-end investment company. The Fund is
considered diversified under the Investment Company Act of 1940, as amended, and
offers Class A, Class B, Class C and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 2.75%. Class B shares are sold
with a contingent deferred sales charge that declines from 2% to zero depending
upon the period of time the shares are held. Class B shares will automatically
convert to Class A shares on a quarterly basis approximately five years after
purchase. Class C shares are sold with a contingent deferred sales charge of 1%,
if redeemed during the first 12 months. Institutional Class shares are not
subject to a sales charge and are offered for sale exclusively to a limited
group of investors.
The investment objective of the Fund is to seek a high stable level of current
income, while attempting to minimize fluctuations in principal and provide
maximum liquidity.
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. Short-term debt securities 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 under the direction of the Fund's Board of
Trustees.
Federal Income Taxes -- The Fund intends to continue to qualify for federal tax
purposes 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.
Class Accounting -- Investment income and common expenses are allocated to the
various classes of the Fund on the basis of "settled shares" of each class in
relation to the net assets of the Fund. 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 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.
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.
<PAGE>
Delaware Limited-Term Government Fund
June 30, 2002 (Unaudited)
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. Premiums and discounts are
amortized to interest income over the lives of the respective securities. Gains
(losses) on paydowns of mortgage - and asset-backed securities are recorded as
an adjustment to interest income. The Fund declares dividends daily from net
investment income and pays such dividends monthly and declares and pays
distributions from net realized gain on investments, if any, 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 $3,307 for the period ended June 30, 2002. In
addition, the Fund receives earnings credits from its custodian when positive
cash balances are maintained, which are used to offset custody fees. The
earnings credits for the period ended June 30, 2002 were approximately $3,125.
The expenses paid under the above arrangements are included in their respective
expense captions on the Statement of Operations with the corresponding expense
offset shown as "expenses paid indirectly".
2. Investment Management, Administration Agreements
and Other Transactions with Affiliates
In accordance with the terms of its investment management agreement, the Fund
pays Delaware Management Company (DMC), a series of Delaware Management Business
Trust and the investment manager, an annual fee which is calculated daily at the
rate of 0.50% on the first $500 million of average daily net assets of the Fund,
0.475% on the next $500 million, 0.45% on the next $1.5 billion, and 0.425% on
average daily net assets in excess of $2.5 billion.
DMC has elected to waive that portion, if any, of its management fee and
reimburse the Fund to the extent necessary to ensure that annual operating
expenses, exclusive of taxes, interest, brokerage commissions, distribution
fees, and extraordinary expenses, do not exceed 0.60% of average daily net
assets of the Fund through February 28, 2003.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to provide dividend disbursing, transfer agent, accounting and administration
services. The Fund pays DSC a monthly fee based on the number of shareholder
accounts, shareholder transactions, and average net assets, subject to certain
minimums.
Pursuant to a distribution agreement, the Fund pays Delaware Distributors, L.P.
(DDLP), the distributor and an affiliate of DMC, an annual fee not to exceed
0.30% of the average daily net assets of the Class A shares and 1.00% of the
average daily net assets of the Class B and C shares. No distribution expenses
are paid by Institutional Class shares. The Board of Trustees has set the fee at
an annual rate of 0.15% of the Class A shares average daily net assets.
For the period ended June 30, 2002, DDLP earned $27,990 for commissions on sales
of the Fund's Class A shares.
15
<PAGE>
Notes
to Financial Statements (continued)
2. Investment Management, Administration Agreements
and Other Transactions with Affiliates (continued)
At June 30, 2002, the Fund had liabilities payable to affiliates as follows:
Investment management fees payable to DMC $69,372
Dividend disbursing, transfer agent fees, accounting
and other expenses payable to DSC 64,829
Other expenses payable to DMC and affiliates 87,253
Certain officers of DMC, DSC and DDLP are officers and/or trustees of the Fund.
These officers and trustees are paid no compensation by the Fund.
3. Investments
For the period ended June 30, 2002, the Fund made purchases of $54,846,930 and
sales of $46,482,283 of investment securities other than U.S. government
securities and short-term investments. The purchases and sales of long-term U.S.
government securities were $436,206,631 and $392,430,152, respectively.
At June 30, 2002, the cost of investments approximates the cost for federal
income tax purposes. At June 30, 2002 the cost of investments was $321,884,518.
At June 30, 2002, net unrealized appreciation was $3,505,805 of which $4,637,413
related to unrealized appreciation of investments and $1,131,608 related to
unrealized depreciation of investments.
4. Dividend and Distribution Information
Income and long-term capital gain distributions are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States. The tax character of dividends and
distributions paid during the period ended June 30, 2002 and the year ended
December 31, 2001 were as follows:
June 30, December 31,
2002 2001
---------- -------------
Ordinary income $6,985,477 $13,293,050
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. Such capital loss carry
forwards expire as follows: 2002 - $78,570,846; 2003 -$29,779,768; 2004 -
$16,636,244; 2005 - $9,442,127; 2006 -$5,505,504 and 2008 - $5,888,621.
<PAGE>
Delaware Limited-Term Government Fund
5. Capital Shares
Transactions in capital shares were as follows:
Period Year
Ended Ended
6/30/02 12/31/01
Shares sold:
Class A 4,359,123 4,785,952
Class B 1,281,978 2,058,956
Class C 2,567,454 2,462,465
Institutional Class 143,157 486,552
Shares issued upon reinvestment of
dividends and distributions:
Class A 471,642 982,934
Class B 43,502 49,072
Class C 52,332 36,035
Institutional Class 23,584 41,322
---------- ----------
8,942,772 10,903,288
---------- ----------
Shares repurchased:
Class A (2,836,591) (6,319,088)
Class B (549,543) (601,290)
Class C (551,999) (547,742)
Institutional Class (101,470) (236,412)
---------- ----------
Net increase (4,039,603) (7,704,532)
---------- ----------
4,903,169 3,198,756
========== ==========
6. Futures Contracts
The Fund may invest in financial futures contracts to hedge its existing
portfolio securities against fluctuations in fair value caused by changes in
prevailing market interest rates. Upon entering into a futures contract, the
Fund deposits cash or pledges U.S. government securities to a broker, equal to
the minimum "initial margin" requirements of the exchange on which the contract
is traded. (In some cases, due to the form of the futures agreement, initial
margin is held in a segregated account with the Fund's custodian, rather than
directly with the broker). Subsequent payments are received from the broker or
paid to the broker, (or added to the segregated account) each day, based on the
daily fluctuation in the market value of the contract. These receipts or
payments are known as "variation margin" and are recorded daily by the Fund as
unrealized gains or losses until the contracts are closed. When the contracts
are closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. Risks of entering into futures contracts include potential
imperfect correlation between the futures contracts and the underlying
securities and the possibility of an illiquid secondary market for these
instruments.
16
<PAGE>
Notes Delaware Limited-Term Government Fund
to Financial Statements (continued)
6. Futures Contracts (continued)
Financial futures contracts open at June 30, 2002 were as follows:
Notional Unrealized
Contracts to Sell Proceeds Expiration Date Gain
----------------- -------- --------------- ----------
(55) U.S. 10 Year
Swap Futures $(5,146,962) September 2002 $ 288
(64) U.S. 5 Year
Treasury Note (5,604,067) September 2002 112,496
(48) U.S. 10 Year
Treasury Note (6,865,360) September 2002 9,640
--------
$122,424
========
The use of futures contracts involves elements of market risk and risks in
excess of the amount recognized in the financial statements. The "Notional Cost
Amount" presented above represents the Fund's total exposure in such contracts,
whereas only the net unrealized appreciation (depreciation) is reflected in the
Fund's net assets.
7. Swap Agreements
During the period ended June 30, 2002 the Fund entered into total return swap
agreements in accordance with its investment objectives. A swap is an agreement
to exchange the return generated by one instrument for the return generated by
another instrument. Total return swaps involve commitments to pay interest in
exchange for a market-linked return based on a notional amount. To the extent
the total return of the security, instrument or basket of instruments underlying
the transaction exceeds the offsetting interest obligation, the Fund will
receive a payment from the counterparty. To the extent the total return of the
security, instrument or basket of instruments underlying the transaction falls
short of the offsetting interest obligation, the Fund will make a payment to the
counterparty. Total return swaps are marked-to-market daily based upon the fair
valuation methodology established by the Fund's Board of Trustees. The change in
value of swap agreements outstanding, if any, is recorded as unrealized
appreciation or depreciation daily. A realized gain or loss is recorded on
maturity or termination of the swap agreement.
At June 30, 2002, the Fund did not have a total return swap agreement
outstanding.
<PAGE>
8. Credit and Market Risk
The Fund invests in fixed-income securities whose value is derived from an
underlying pool of mortgages or consumer loans. Investors receive principal and
interest payments as the underlying mortgages and consumer loans are paid back.
Some of these securities are collateralized mortgage obligations (CMOs). CMOs
are debt securities issued by U.S. government agencies or by financial
institutions and other mortgage lenders, which are collateralized by a pool of
mortgages held under an indenture. The Fund invests in private-backed CMOs only
if they are 100% collateralized at the time of issuance by securities or
certificates issued or guaranteed by the U.S. government, its agencies or
instrumentalities. Prepayment of mortgages may shorten the stated maturity of
the obligation and can result in a loss of premium, if any has been paid.
9. Line of Credit
The Fund, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $202,300,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Fund had no amount outstanding as of June 30, 2002, or at any time during the
period.
17
<PAGE>
Delaware
Investments(SM)
--------------------------------------
A member of Lincoln Financial Group(R)
This semiannual 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 for Limited-Term Government 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>
Board of Trustees Affiliated Officers Contact Information
<S> <C> <C>
Charles E. Haldeman, Jr. William E. Dodge Investment Manager
Chairman Executive Vice President and Delaware Management Company
Delaware Investments Family of Funds Chief Investment Officer, Equity Philadelphia, PA
Philadelphia, PA Delaware Investments Family of Funds
Philadelphia, PA International Affiliate
Walter P. Babich Delaware International Advisers Ltd.
Board Chairman Jude T. Driscoll London, England
Citadel Constructors, Inc. Executive Vice President and
King of Prussia, PA Head of Fixed Income National Distributor
Delaware Investments Family of Funds Delaware Distributors, L.P.
David K. Downes Philadelphia, PA Philadelphia, PA
President and Chief Executive Officer
Delaware Investments Family of Funds Richard J. Flannery Shareholder Servicing, Dividend
Philadelphia, PA President and Chief Executive Officer Disbursing and Transfer Agent
Delaware Distributors, L.P. Delaware Service Company, Inc.
John H. Durham Philadelphia, PA 2005 Market Street
Private Investor Philadelphia, PA 19103-7094
Gwynedd Valley, PA Richelle S. Maestro
Senior Vice President, For Shareholders
John A. Fry Deputy General Counsel and Secretary 800 523-1918
President Delaware Investments Family of Funds
Franklin & Marshall College Philadelphia, PA For Securities Dealers and Financial
Lancaster, PA Institutions Representatives Only
Michael P. Bishof 800 362-7500
Anthony D. Knerr Senior Vice President and Treasurer
Consultant Delaware Investments Family of Funds Web site
Anthony Knerr & Associates Philadelphia, PA www.delawareinvestments.com
New York, NY
Ann R. Leven
Former Treasurer/Chief Fiscal Officer
National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
</TABLE>
(6416) Printed in the USA
SA-022 [6/02] VG 8/02 J8466
</TEXT>
</DOCUMENT>