N-CSR 1 ncsr.txt NCSR.TXT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-3363 Exact name of registrant as specified in charter: Delaware Group Limited-Term Government Fund Address of principal executive offices: 2005 Market Street Philadelphia, PA 19103 Name and address of agent for service: Richelle S. Maestro, Esq. 2005 Market Street Philadelphia, PA 19103 Registrant's telephone number, including area code: (800) 523-1918 Date of fiscal year end: November 30 Date of reporting period: June 30, 2003 Item 1. Reports to Stockholders Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) FIXED INCOME Semiannual Report 2003 -------------------------------------------------------------------------------- DELAWARE LIMITED-TERM GOVERNMENT FUND [LOGO] POWERED BY RESEARCH(SM). Table OF CONTENTS -------------------------------------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 1 Statement of Assets and Liabilities 5 Statement of Operations 6 Statements of Changes in Net Assets 7 Financial Highlights 8 Notes to Financial Statements 12 -------------------------------------------------------------------------------- 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)2003 Delaware Distributors, L.P. Statement Delaware Limited-Term Government Fund OF NET ASSETS June 30, 2003 (Unaudited) Principal Market Amount Value Agency Bonds - 14.20% Fannie Mae 2.625% 4/21/06 $ 3,500,000 $ 3,543,736 2.875% 5/19/08 13,990,000 14,051,696 4.625% 5/1/13 2,000,000 2,060,892 7.125% 6/15/10 4,500,000 5,570,438 Federal Farm Credit Bank 1.875%1/16/07 8,955,000 8,895,888 Federal Home Loan Bank System 2.00% 5/20/05 2,145,000 2,162,426 Freddie Mac 2.10% 2/25/05 4,000,000 4,025,840 3.25% 2/25/08 8,880,000 9,084,870 5.75% 3/15/09 3,945,000 4,536,876 5.875% 3/21/11 2,000,000 2,253,278 Tennessee Valley Authority 6.375% 6/15/05 1,860,000 2,036,012 ----------- Total Agency Bonds (cost $57,587,821) 58,221,952 ----------- Agency Collateralized Mortgage Obligations - 12.55% Fannie Mae Series 2002-5 Class PN Interest Only Strip 6.00% 2/25/16 4,440,730 87,422 Fannie Mae Series 2002-7 Class IC Interest Only Strip 6.00% 4/25/15 2,890,445 40,609 Fannie Mae Series 02-70 QD 5.50% 6/25/26 4,475,000 4,603,161 Fannie Mae Series 2002-16 Class IG Interest Only Strip 6.00% 3/25/15 2,320,475 37,681 Fannie Mae Series 2003-18 Class DA 4.50% 11/25/14 5,070,000 5,160,084 Fannie Mae Series 2003-42 JA 4.00% 11/25/13 11,052,678 11,253,007 Fannie Mae Series 46 Class 2 11.00% 12/25/03 32,426 32,714 Fannie Mae Whole Loan Series 2002- W1 Class 1A2 4.81% 12/25/33 5,155,000 5,259,647 Fannie Mae Whole Loan Series 2003- W1 Class 1A1 6.50% 12/25/42 3,705,648 3,991,680 Freddie Mac Series 69 Class F 9.00% 12/15/05 57,566 57,690 Freddie Mac Series 1684 Class G 6.50% 3/15/23 3,224,062 3,298,179 Freddie Mac Series 2091 Class PD 6.00% 4/15/21 1,014,661 1,014,118 Freddie Mac Series 2302 Class NJ 6.50% 11/15/29 1,558,578 1,570,127 GNMA Series 02 61 BA 4.648% 3/16/26 3,000,000 3,142,482 GNMA Series 2002-28 Class B 5.779% 7/16/24 6,000,000 6,752,516 GNMA Series 2003-43 Class B 4.374% 4/16/33 5,000,000 5,167,188 ----------- Total Agency Collateralized Mortgage Obligations (cost $51,981,738) 51,468,305 ----------- Principal Market Amount Value Agency Mortgage-Backed Securities - 29.47% Fannie Mae 7.41% 4/1/10 $ 4,948,030 $ 5,735,076 9.00% 11/1/15 484,770 532,490 10.00% 10/1/30 548,463 624,391 10.50% 6/1/30 344,400 395,415 Fannie Mae FHAVA 10.00% 1/1/19 125,184 144,861 11.00% 8/1/10 to 8/1/15 1,029,589 1,180,578 Fannie Mae GPM 11.00% 11/1/10 52,983 60,318 Fannie Mae S.F. 15 yr 4.50% 7/1/18 to 8/1/18 17,930,000 18,280,999 5.00% 7/1/18 4,055,000 4,189,322 6.00% 12/1/09 to 6/1/17 11,795,504 12,330,518 8.00% 10/1/14 1,415,818 1,528,420 8.50% 3/1/08 211,203 224,008 Fannie Mae S.F. 20 yr 6.50% 2/1/22 to 5/1/22 5,332,436 5,604,057 Fannie Mae S.F. 30 yr 6.00% 5/1/33 to 5/1/33 8,479,867 8,819,062 6.50% 7/1/32 600,639 626,542 7.50% 3/1/14 to 4/1/30 1,151,710 1,216,027 8.00% 5/1/05 to 5/1/24 2,529,212 2,783,264 8.50% 11/1/07 to 8/1/17 1,494,016 1,596,051 9.00% 8/1/04 5,175 5,304 9.25% 7/1/08 to 3/1/20 303,597 334,833 11.00% 7/1/12 to 8/1/20 787,293 910,467 12.50% 2/1/11 21,291 24,358 13.00% 7/1/15 63,768 74,150 Fannie Mae July TBA 5.00% 7/1/33 12,190,000 12,388,087 5.50% 7/3/33 4,120,000 4,259,050 Freddie Mac August TBA 5.50% 8/1/33 1,060,000 1,093,788 Freddie Mac FHAVA 8.00% 3/1/08 162,798 171,854 9.50% 11/1/05 to 2/1/10 360,200 387,517 11.00% 9/1/10 to 11/1/15 207,072 236,621 Freddie Mac July TBA 4.50% 7/1/18 11,000,000 11,230,312 5.00% 7/1/18 5,745,000 5,933,508 Freddie Mac S.F. 15 yr 6.50% 6/1/11 182,421 192,340 Freddie Mac S.F. 30 yr 8.00% 10/1/07 to 7/1/11 3,415,111 3,649,799 8.50% 12/1/08 to 11/1/10 454,722 486,098 8.75% 5/1/10 150,173 163,829 9.00% 6/1/09 to 8/1/11 284,170 307,798 9.75% 12/1/08 53,273 58,767 11.00% 4/1/19 to 6/1/20 115,773 135,250 11.50% 4/1/11 to 3/1/16 1,212,960 1,406,355 GNMA I GPM 11.00% 7/15/10 31,567 36,016 11.50% 4/15/10 to 4/15/13 39,287 45,453 12.00% 10/15/10 26,766 31,023 12.25% 1/15/14 to 1/15/14 23,790 28,139 GNMA II GPM 9.75% 11/20/16 to 9/20/17 90,139 102,796 10.50% 11/15/15 109,933 126,629 1 Statement Delaware Limited-Term Government Fund OF NET ASSETS (CONTINUED) Principal Market Amount Value Agency Mortgage-Backed Securities (continued) GNMA II S.F. 30 yr 9.50% 11/20/20 to 11/20/21 $ 732,271 $ 823,574 10.50% 6/20/20 37,358 43,452 11.00% 9/20/15 to 10/20/15 230,990 268,721 11.50% 12/20/17 to 10/20/18 117,148 138,160 12.00% 4/20/14 to 5/20/16 547,709 647,783 12.50% 10/20/13 to 1/20/14 249,414 295,957 GNMA S.F. 15 yr 9.00% 11/15/06 115,252 117,125 GNMA S.F. 30 yr 7.00% 5/15/28 2,561,119 2,710,785 7.50% 12/15/23 to 12/15/31 3,874,469 4,127,172 8.00% 6/15/30 99,204 107,109 9.00% 10/15/09 to 2/15/17 555,517 609,769 9.50% 6/15/16 to 11/15/17 273,827 308,565 11.00% 12/15/09 to 5/15/20 843,316 983,293 11.50% 7/15/15 13,359 15,759 12.50% 12/15/10 24,083 28,267 ------------ Total Agency Mortgage-Backed Securities (cost $115,209,149) 120,917,031 ------------ Asset-Backed Securities - 8.21% Freddie Mac Structured Pass Through Securities Series T-11 A6 6.50% 9/25/18 839,170 842,772 Freddie Mac Structured Pass Through Securities Series T-50 A2 1.27% 9/27/05 1,877,547 1,876,854 Freddie Mac Structured Pass Through Securities Series T-50 A3 2.182% 9/27/07 5,300,000 5,314,078 Freddie Mac Structured Pass Through Securities Series T-56 A2A 2.842% 7/25/36 3,475,000 3,510,293 MBNA Credit Card Master Trust Series 01-A1 A1 5.75% 10/15/08 1,345,000 1,486,017 Nissan Auto Loan Trust Series 2002-A A3B 2.56% 8/15/07 3,410,000 3,443,034 Peoplefirst.com Auto Receivable Owner Trust Series 2000-2 A4 6.43% 9/15/07 2,298,981 2,328,762 PP&L Transition Bond Series 1991-1 Class A5 6.83% 3/25/07 550,000 583,450 Residential Asset Securities Series 2001-KS3 AI4 5.81% 8/25/29 100,000 103,473 Sallie Mae Student Loan Trust Series 1997-3 Class A2 1.802% 10/25/10 1,592,925 1,602,240 Sallie Mae Student Loan Trust Series 1998-2 Class A2 1.892% 1/25/14 1,862,734 1,878,850 Sallie Mae Student Loan Trust Series 1997-1 Class A2 1.732% 1/25/10 5,544,683 5,577,478 Sallie Mae Student Loan Trust Series 1997-4 Class A2 1.912% 10/25/10 1,254,442 1,266,113 Sierra Receivables Funding Series 2003-1A Class A 3.09% 1/15/14 1,780,526 1,779,320 Principal Market Amount Value Asset-Backed Securities (continued) Whole Auto Loan Trust Series 2002-1 A4 3.04% 4/15/09 $ 2,000,000 $ 2,058,913 ----------- Total Asset-Backed Securities (cost $33,321,533) 33,651,647 ----------- Collateralized Mortgage Obligations - 4.46% Bank of America Mortgage Securities Series 2003-A Class 2A4 2.994% 2/25/33 3,450,000 3,466,757 Countrywide Alternative Loan Trust Series 2002-7 6.75% 8/25/32 1,760,527 1,798,111 Countrywide Home Loans Series 2003-21 Class A1 4.227% 5/25/33 2,017,417 2,047,928 CS First Boston Mortgage Securities Series 2002-34 Class 1A1 7.50% 12/25/32 2,071,927 2,154,274 CS First Boston Mortgage Securities Series 2003-8 Class 5A1 6.50% 4/25/33 2,839,036 2,925,357 Freddie Mac Gold Pool D68776 8.50% 12/1/09 217,624 231,566 Freddie Mac Structured Pass Through Securities Series T-30 Class A4 7.37% 11/15/26 376,162 382,392 GSMPS Mortgage Loan Trust Series 1998-2 Class A 7.75% 5/19/27 652,353 719,295 Residential Funding Mortgage Security Series 1999-S10 A1 6.25% 4/25/14 285,021 285,016 Washington Mutual Series 2003-AR4 Class A7 3.95% 5/25/33 4,210,232 4,291,805 ----------- Total Collateralized Mortgage Obligations (cost $18,256,842) 18,302,501 ----------- Commercial Mortgage-Backed Securities - 0.86% JP Morgan Chase Commercial Mortgage Series 2002-FLIA A1 1.66% 2/14/14 3,526,745 3,528,016 ----------- Total Commercial Mortgage-Backed Securities (cost $3,527,985) 3,528,016 ----------- Corporate Bonds - 7.22% Banking, Finance & Insurance - 4.38% Citigroup 6.00% 2/21/12 1,500,000 1,709,276 Countrywide Home Loans 3.50% 12/19/05 1,900,000 1,962,206 5.625% 5/15/07 1,500,000 1,653,510 *First Bank National Association 7.30% 8/15/05 650,000 722,993 General Electric Capital 4.25% 1/28/05 1,475,000 1,541,475 5.875% 2/15/12 1,000,000 1,120,525 GMAC 4.50% 7/15/06 685,000 688,747 6.75% 1/15/06 690,000 732,960 2 Statement Delaware Limited-Term Government Fund OF NET ASSETS (CONTINUED) Principal Market Amount Value Corporate Bonds (continued) Merrill Lynch 6.00% 2/17/09 $ 500,000 $ 562,758 6.15% 1/26/06 2,000,000 2,201,804 Morgan Stanley 5.30% 3/1/13 1,500,000 1,597,290 ++Tiaa Global Markets 144A 2.75% 1/13/06 905,000 923,539 US Bank National Association 6.30% 2/4/14 2,130,000 2,497,633 ----------- 17,914,716 ----------- Cable, Media & Publishing - 0.27% Thomson Multimedia 5.75% 2/1/08 1,000,000 1,124,799 ----------- 1,124,799 ----------- Computers & Technology - 0.41% Computer Sciences 6.75% 6/15/06 1,500,000 1,696,973 ----------- 1,696,973 ----------- Energy - 0.52% ConocoPhillips 4.75% 10/15/12 1,500,000 1,588,232 North Border Pipeline 6.25% 5/1/07 500,000 547,636 ----------- 2,135,868 ----------- Food, Beverage & Tobacco - 0.10% Kraft Foods 4.625% 11/1/06-00 400,000 425,161 ----------- 425,161 ----------- Retail - 0.84% Lowe's Companies 7.50% 12/15/05 1,000,000 1,136,949 Target 5.875% 3/1/12 2,005,000 2,269,694 ----------- 3,406,643 ----------- Telecommunications - 0.44% ++Cingular Wireless 144A 5.625% 12/15/06 650,000 713,040 Verizon Wireless 5.375% 12/15/06 1,000,000 1,099,390 ----------- 1,812,430 ----------- Utilities - 0.26% Southern Company 5.30% 2/1/07 1,000,000 1,081,122 ----------- 1,081,122 ----------- Total Corporate Bonds (cost $27,733,877) 29,597,712 ----------- U.S. Treasury Obligations - 24.54% U.S. Treasury Bond **10.75% 8/15/05 10,605,000 12,690,791 11.625% 11/15/04 5,180,000 5,918,155 12.00% 8/15/13 7,195,000 10,458,328 U.S. Treasury Inflation Index Notes 3.00% 7/15/12 3,250,755 3,583,450 3.375% 4/15/32 5,840,164 7,072,076 3.875% 1/15/09 9,866,064 11,302,819 U.S. Treasury Note 1.25% 5/31/05 10,305,000 10,302,187 2.00% 5/15/06 6,835,000 6,909,761 2.625% 5/15/08 245,000 247,316 3.625% 5/15/13 15,585,000 15,711,645 U.S. Treasury Strip 4.017% 8/15/10 15,500,000 12,363,312 +U.S. Treasury Strip - Tiger 3.89% 11/15/09 5,000,000 4,091,955 ----------- Total U.S. Treasury Obligations (cost $100,676,039) 100,651,795 ----------- Principal Market Amount Value Repurchase Agreements - 17.23% With BNP Paribas 1.08% 7/1/03 (dated 6/30/03, collateralized by $22,625,000 U.S. Treasury Notes 1.625% due 1/31/05, market value $22,929,463) $22,463,000 $ 22,463,000 With Cantor Fitzgerald 1.12% 7/1/03 (dated 6/30/03, collateralized by $3,171,000 U.S. Treasury Notes 3.00% due 2/29/04, market value $3,246,907 and $14,040,000 U.S. Treasury Notes 5.25% due 5/15/04, market value $14,656,033) 17,550,000 17,550,000 With J. P. Morgan Securities 1.07% 7/1/03 (dated 6/30/03, collateralized by $7,915,000 U.S. Treasury Notes 11.875% due 11/15/03, market value $8,352,469) 8,172,000 8,172,000 With UBS Warburg 1.08% 7/1/03 (dated 6/30/03, collateralized by $22,519,000 U.S. Treasury Notes 2.125% due 8/31/04, market value $22,951,916) 22,463,000 22,463,000 ------------ Total Repurchase Agreements (cost $70,648,000) 70,648,000 ------------ Total Market Value of Securities - 118.74% (cost $478,942,984) 486,986,959 Liabilities Net of Receivables and Other Assets - (18.74%) (76,858,885) ------------ Net Assets Applicable to 46,756,882 Shares Outstanding - 100.00% $410,128,074 ============ 3 Statement Delaware Limited-Term Government Fund OF NET ASSETS (CONTINUED) Net Asset Value - Delaware Limited-Term Government Fund Class A ($268,743,401 / 30,638,447 Shares) $8.77 ----- Net Asset Value - Delaware Limited-Term Government Fund Class B ($45,183,565 / 5,151,114 Shares) $8.77 ----- Net Asset Value - Delaware Limited-Term Government Fund Class C ($81,143,523 / 9,250,651 Shares) $8.77 ----- Net Asset Value - Delaware Limited-Term Government Fund Class R ($8.80 / 1.003 Shares) $8.77 ----- Net Asset Value - Delaware Limited-Term Government Fund Institutional Class ($15,057,576 / 1,716,669 Shares) $8.77 ----- Components of Net Assets at June 30, 2003: Shares of beneficial interest (unlimited authorization - no par) $471,039,143 Accumulated net realized loss on investments (69,121,891) Net unrealized appreciation of investments 8,210,822 ------------ Total net assets $410,128,074 ============ Summary of Abbreviations: FHAVA - Federal Housing Authority & Veterans Administration GNMA - Government National Mortgage Association GPM - Graduate Payment Mortgage S.F. - Single Family TBA - To be announced *Step coupon bond. **Fully or partially pledged as collateral for financial futures contracts. +Zero coupon bond. The interest rate shown is the yield at time of purchase. ++Securities exempt from registration under Rule 144A of the securities Act of 1933. See Note 9 in "Notes to Financial Statements." Net Asset Value and Offering Price per Share -- Delaware Limited-Term Government Fund Net asset value Class A (A) $8.77 Sales charge (2.75% of offering price, or 2.85% of the amount invested per share) (B) 0.25 ----- Offering price $9.02 ===== (A) Net asset value per share, as illustrated, is the estimated amount which would be paid upon the redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. See accompanying notes 4 Statement Delaware Limited-Term Government Fund OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) Assets: Investments at market (cost $478,942,984) $486,986,959 Subscriptions receivable 266,074 Interest receivable 2,966,764 Swap income receivable 511,385 Receivables for securities sold 36,981,620 Mortgage paydown receivable 2,197,333 ------------ Total assets 529,910,135 ------------ Liabilities: Payables for securities purchased 115,368,547 Cash overdraft 2,581,671 Liquidations payable 949,088 Distributions payable 279,406 Accrued expenses 436,502 Mark to market on futures 166,847 ------------ Total liabilities 119,782,061 ------------ Total Net Assets $410,128,074 ============ See accompanying notes 5 Statement Delaware Limited-Term Government Fund OF OPERATIONS Six Months Ended June 30, 2003 (Unaudited) Investment Income: Interest $6,975,497 ---------- Expenses: Management fees $1,001,974 Dividend disbursing and transfer agent fees and expenses 591,979 Distribution expenses -- Class A 327,884 Distribution expenses -- Class B 237,884 Distribution expenses -- Class C 381,928 Accounting and administration expenses 98,019 Reports and statements to shareholders 73,973 Registration fees 52,966 Professional fees 18,578 Custodian fees 11,860 Trustees' fees 10,600 Other 64,125 2,871,770 --------- Less expenses absorbed or waived (717,166) Less waiver of distribution expenses-- Class A (131,437) Less expenses paid indirectly (4,836) ---------- Total expenses 2,018,331 ---------- Net Investment Income 4,957,166 ---------- Net Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) on: Investments 5,794,294 Swap agreements 1,140,391 Futures contracts (2,804,501) Options 26,397 ---------- Net realized gain 4,156,581 Net change in unrealized appreciation/depreciation of investments (1,531,333) ---------- Net Realized and Unrealized Gain on Investments 2,625,248 ---------- Net Increase in Net Assets Resulting from Operations $7,582,414 ========== See accompanying notes 6 Statements Delaware Limited-Term Government Fund OF CHANGES IN NET ASSETS Six Months Ended Year Ended 6/30/03 12/31/02 (Unaudited) Increase (decrease) in net assets from operations: Net investment income $ 4,957,166 $ 11,920,607 Net realized gain on investments 4,156,581 4,528,352 Net change in unrealized appreciation/ depreciation of investments (1,531,333) 4,635,340 ------------ ------------ Net increase in net assets resulting from operations 7,582,414 21,084,299 ------------ ------------ Dividends and distributions to shareholders from: Net investment income Class A (5,137,477) (11,413,821) Class B (733,332) (1,390,120) Class C (1,172,448) (1,732,925) Institutional Class (290,605) (471,156) ------------ ------------ (7,333,862) (15,008,022) ------------ ------------ Capital share transactions: Proceeds from shares sold: Class A 45,733,033 86,761,260 Class B 9,238,360 40,198,695 Class C 25,652,481 60,264,474 Class R 9 -- Institutional Class 3,418,670 8,734,589 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 3,997,837 8,340,113 Class B 572,802 1,020,132 Class C 838,033 1,194,947 Institutional Class 290,727 467,489 ------------ ------------ 89,741,952 206,981,699 ------------ ------------ Cost of shares repurchased: Class A (31,912,325) (56,871,624) Class B (14,962,674) (13,289,426) Class C (16,570,231) (12,566,802) Institutional Class (1,950,178) (3,194,621) ------------ ------------ (65,395,408) (85,922,473) ------------ ------------ Increase in net assets derived from capital share transactions 24,346,544 121,059,226 ------------ ------------ Net increase in net assets 24,595,096 127,135,503 Net Assets: Beginning of period 385,532,978 258,397,475 ------------ ------------ End of period $410,128,074 $385,532,978 ============ ============ See accompany notes 7 Financial HIGHLIGHTS Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Limited-Term Government Fund Class A ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 6/30/03(1) 12/31/02 12/31/01(3) 12/31/00 12/31/99 12/31/98 (Unaudited) Net asset value, beginning of period $8.770 $8.600 $8.430 $8.270 $8.700 $8.620 Income (loss) from investment operations: Net investment income 0.121 0.349 0.423 0.522 0.519 0.540 Net realized and unrealized gain (loss) on investments 0.050 0.255 0.238 0.161 (0.429) 0.079 ------ ------ ------ ------ ------ ------ Total from investment operations 0.171 0.604 0.661 0.683 0.090 0.619 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income (0.171) (0.434) (0.491) (0.523) (0.520) (0.539) ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.171) (0.434) (0.491) (0.523) (0.520) (0.539) ------ ------ ------ ------ ------ ------ Net asset value, end of period $8.770 $8.770 $8.600 $8.430 $8.270 $8.700 ====== ====== ====== ====== ====== ====== Total return(2) 1.97% 7.08% 8.16% 8.59% 1.07% 7.46% Ratios and supplemental data: Net assets, end of period (000 omitted) $268,743 $250,729 $208,152 $208,565 $262,776 $317,329 Ratio of expenses to average net assets 0.75% 0.75% 0.89% 1.13% 1.00% 1.01% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.21% 1.05% 1.08% 1.13% 1.00% 1.01% Ratio of net investment income to average net assets 2.73% 3.99% 4.92% 6.36% 6.12% 6.32% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.27% 3.69% 4.73% 6.36% 6.12% 6.32% Portfolio turnover 874% 313% 386% 273% 175% 69%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) 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 waivers and payment of fees by the manager and the distributor, as applicable. Performance would have been lower had the expense limitation and waiver not been in effect. (3) 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 8 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Limited-Term Government Fund Class B ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 6/30/03(1) 12/31/02 12/31/01(3) 12/31/00 12/31/99 12/31/98 (Unaudited) Net asset value, beginning of period $8.770 $8.600 $8.430 $8.270 $8.700 $8.620 Income (loss) from investment operations: Net investment income 0.080 0.274 0.348 0.453 0.447 0.467 Net realized and unrealized gain (loss) on investments 0.054 0.255 0.238 0.160 (0.429) 0.079 ------ ------ ------ ------ ------ ------ Total from investment operations 0.134 0.529 0.586 0.613 0.018 0.546 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income (0.134) (0.359) (0.416) (0.453) (0.448) (0.466) ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.134) (0.359) (0.416) (0.453) (0.448) (0.466) ------ ------ ------ ------ ------ ------ Net asset value, end of period $8.770 $8.770 $8.600 $8.430 $8.270 $8.700 ====== ====== ====== ====== ====== ====== Total return(2) 1.54% 6.17% 7.22% 7.68% 0.22% 6.55% Ratios and supplemental data: Net assets, end of period (000 omitted) $45,184 $50,326 $21,743 $8,600 $12,483 $13,900 Ratio of expenses to average net assets 1.60% 1.60% 1.74% 1.98% 1.85% 1.86% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.96% 1.90% 1.93% 1.98% 1.85% 1.86% Ratio of net investment income to average net assets 1.88% 3.14% 4.07% 5.51% 5.27% 5.47% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 1.52% 2.84% 3.88% 5.51% 5.27% 5.47% Portfolio turnover 874% 313% 386% 273% 175% 69%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) 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 waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation and waiver not been in effect. (3) 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 9 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Limited-Term Government Fund Class C ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 6/30/03(1) 12/31/02 12/31/01(3) 12/31/00 12/31/99 12/31/98 (Unaudited) Net asset value, beginning of period $8.770 $8.600 $8.430 $8.270 $8.700 $8.620 Income (loss) from investment operations: Net investment income 0.083 0.274 0.347 0.453 0.447 0.467 Net realized and unrealized gain (loss) on investments 0.051 0.255 0.238 0.160 (0.431) 0.079 ------ ------ ------ ------ ------ ------ Total from investment operations 0.134 0.529 0.585 0.613 0.016 0.546 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income (0.134) (0.359) (0.415) (0.453) (0.446) (0.466) ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.134) (0.359) (0.415) (0.453) (0.446) (0.466) ------ ------ ------ ------ ------ ------ Net asset value, end of period $8.770 $8.770 $8.600 $8.430 $8.270 $8.700 ====== ====== ====== ====== ====== ====== Total return(2) 1.54% 6.16% 7.20% 7.68% 0.20% 6.56% Ratios and supplemental data: Net assets, end of period (000 omitted) $81,144 $71,189 $21,386 $4,506 $6,638 $4,932 Ratio of expenses to average net assets 1.60% 1.60% 1.74% 1.98% 1.85% 1.86% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.96% 1.90% 1.93% 1.98% 1.85% 1.86% Ratio of net investment income to average net assets 1.88% 3.14% 4.07% 5.51% 5.27% 5.47% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 1.52% 2.84% 3.88% 5.51% 5.27% 5.47% Portfolio turnover 874% 313% 386% 273% 175% 69%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) 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 waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation and waiver not been in effect. (3) 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect this change in accounting. As of June 30, 2003, the Class R had one share outstanding, representing the initial seed purchase. Shareholder data for this class is not disclosed because management does not believe it to be meaningful. See accompanying notes 10 Financial HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
Delaware Limited-Term Government Fund Institutional Class ------------------------------------------------------------------------------------------------------------------------------------ Six Months Ended Year Ended 6/30/03(1) 12/31/02 12/31/01(3) 12/31/00 12/31/99 12/31/98 (Unaudited) Net asset value, beginning of period $8.770 $8.600 $8.430 $8.270 $8.700 $8.620 Income (loss) from investment operations: Net investment income 0.128 0.364 0.437 0.534 0.531 0.553 Net realized and unrealized gain (loss) on investments 0.049 0.255 0.238 0.161 (0.428) 0.079 ------ ------ ------ ------ ------ ------ Total from investment operations 0.177 0.619 0.675 0.695 0.103 0.632 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income (0.177) (0.449) (0.505) (0.535) (0.533) (0.552) ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.177) (0.449) (0.505) (0.535) (0.533) (0.552) ------ ------ ------ ------ ------ ------ Net asset value, end of period $8.770 $8.770 $8.600 $8.430 $8.270 $8.700 ====== ====== ====== ====== ====== ====== Total return(2) 2.04% 7.27% 8.34% 8.75% 1.22% 7.62% Ratios and supplemental data: Net assets, end of period (000 omitted) $15,058 $13,289 $7,116 $4,514 $4,448 $21,201 Ratio of expenses to average net assets 0.60% 0.60% 0.74% 0.98% 0.85% 0.86% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.96% 0.90% 0.93% 0.98% 0.85% 0.86% Ratio of net investment income to average net assets 2.88% 4.14% 5.07% 6.51% 6.27% 6.47% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.52% 3.84% 4.88% 6.51% 6.27% 6.47% Portfolio turnover 874% 313% 386% 273% 175% 69%
(1) Ratios and portfolio turnover have been annualized and total return has not been annualized. (2) 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 waivers and payment of fees by the manager, as applicable. Performance would have been lower had the expense limitation and waiver not been in effect. (3) 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect this change in accounting. See accompanying notes 11 Notes Delaware Limited-Term Government Fund TO FINANCIAL STATEMENTS June 30, 2003 (Unaudited) 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, Class R 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 and Class R 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 seeks to provide a high stable level of 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. U.S. government and agency securities are valued at the mean between the bid and asked price. 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 gains (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. 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. Realized gains (losses) on paydowns of mortgage- and asset-backed securities are classified as 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 $4,836 for the six months ended June 30, 2003. In addition, the Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. There were no earnings credits for the six months ended June 30, 2003. 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 contracted 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, 2004. Delaware Service Company, Inc. (DSC), an affiliate of DMC, provides accounting, administration, dividend disbursing and transfer agent services. The Fund pays DSC a monthly fee based on average net assets subject to certain minimums for accounting and administration services. The Fund pays DSC a monthly fee based on the number of shareholder accounts for dividend disbursing and transfer agent services. Prior to June 1, 2003 the monthly fee for dividend disbursing and transfer agent services was based on the number of shareholder accounts and shareholder transactions. Pursuant to a distribution agreement and distribution plan, 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, 1.00% of the average daily net assets of the Class B and C shares and 0.60% of the average daily net assets of Class R shares. No distribution expenses are paid by Institutional Class shares. DDLP has contractually waived its fees through February 28, 2004 in order to prevent distribution fees of Class A shares from exceeding 0.15% of average daily net assets. At June 30, 2003, the Fund had liabilities payable to affiliates as follows: Investment management fees payable to DMC $94,952 Dividend disbursing, transfer agent fees, accounting and other expenses payable to DSC 56,307 Other expenses payable to DMC and affiliates 7,952 For the six months ended June 30, 2003, DDLP earned $29,882 for commissions on sales of the Fund's Class A shares. Certain officers of DMC, DSC and DDLP are officers, and/or trustees of the Trust. These officers and trustees are paid no compensation by the Fund. 12 Notes Delaware Limited-Term Government Fund TO FINANCIAL STATEMENTS (CONTINUED) 3. Investments For the six months ended June 30, 2003, the Fund made purchases of $450,187,769 and sales of $416,494,751 of investment securities other than U.S. government securities and short-term investments. The purchases and sales of U.S. government securities were $583,484,576 and $585,327,254, respectively. At June 30, 2003, the cost of investments for federal income tax purposes has been estimated since the final tax characteristics cannot be determined until fiscal year end. At June 30, 2003 the cost of investments was $483,188,844. At June 30, 2003, net unrealized appreciation was $3,798,115 of which $7,547,577 related to unrealized appreciation of investments and $3,749,462 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 six months ended June 30, 2003 and the year ended December 31, 2002 were as follows: Six Months Ended Year Ended 6/30/03* 12/31/02 Ordinary income $7,333,862 $15,008,022 *Tax information for the six months ended June 30, 2003 is an estimate and the tax character of dividends and distributions may be redesignated at fiscal year end. The components of net assets are estimated since final tax characteristics cannot be determined until fiscal year end. As of June 30, 2003, the components of net assets on a tax basis were as follows: Shares of beneficial interest 471,039,143 Net realized capital gains on investments 2,543,080 Capital loss carryforwards (67,252,264) Unrealized appreciation 3,798,115 ------------ Net Assets $410,128,074 ============ For federal income tax purposes, capital losses may be carried forward and applied against future capital gains. Such capital loss carry forwards expire as follows: 2003 -- $29,779,768, 2004 -- $16,636,244, 2005 -- $9,442,127, 2007 -- $5,505,504 and 2008 -- $5,888,621. 5. Capital Shares Transactions in capital shares were as follows: Six Months Ended Year Ended 6/30/03 12/31/02 ------- -------- Shares sold: Class A 5,227,010 10,010,314 Class B 1,054,382 4,629,024 Class C 2,928,109 6,946,473 Class R 1 -- Institutional Class 390,004 1,003,311 Shares issued upon reinvestment of dividends and distributions: Class A 456,834 963,578 Class B 65,466 117,689 Class C 95,748 137,874 Institutional Class 33,221 53,985 ---------- ---------- 10,250,775 23,862,248 ---------- ---------- Shares repurchased: Class A (3,643,261) (6,565,751) Class B (1,708,916) (1,533,347) Class C (1,892,857) (1,450,015) Institutional Class (222,303) (368,471) ---------- ---------- (7,467,337) (9,917,584) ---------- ---------- Net increase 2,783,438 13,944,664 ========== ========== For the six months ended June 30, 2002 and the year ended December 31, 2002, 47,670 Class B shares were converted to 47, 670 Class A shares valued at $417,523 and 76,239 Class B shares to 76,239 Class A shares valued at $612,655, respectively. The respective amounts are included in Class B redemptions and Class A subscriptions in the table above and the Statements of changes in Net Assets. 13 Notes Delaware Limited-Term Government Fund TO FINANCIAL STATEMENTS (CONTINUED) 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. Risk 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. Financial futures contracts open at June 30, 2003 were as follows: Contracts Notional Unrealized to Buy/(Sell) Cost/ (Proceeds) Expiration Date Gain (Loss) ------------- ---------------- --------------- ----------- 253 U.S. 5YR Treasury Note $29,421,874 September 2003 ($295,249) (440) U.S. 2YR Treasury Note (47,562,488) September 2003 (22,826) (500) U.S. 10YR Treasury Note (59,203,672) September 2003 484,922 -------- $166,847 ======== The use of futures contracts involves elements of market risk and risks in excess of the amount recognized in the financial statements. The notional 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. Options Written During the six months ended June 30, 2003, the Fund entered into options contracts in accordance with its investment objectives. When the Fund writes an option, a premium is received and a liability is recorded and adjusted on a daily basis to reflect the current market value of the options written. Premiums received from writing options that expire unexercised are treated by the Fund on the expiration date as realized gains. The difference between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is treated as realized gain or loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Fund has a realized gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. Transactions in options written during the six months ended June 30, 2003 for the Fund were as follows: Number of Contracts Premiums --------- -------- Options outstanding at December 31, 2002 566 $560,340 Options written 1,286 653,078 Options terminated in closing purchase transactions 1,852 1,213,418 ----- ---------- Options outstanding at June 30, 2003 -- $ -- ----- ---------- 8. Swap Agreements During the six months ended June 30, 2003, 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 Funds' 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, 2003, the Fund did not have total return swap agreements outstanding. Because there is no organized market for these swap agreements, the value of open swaps may differ from that which would be realized in the event the Fund terminated its position in the agreement. Risks of entering into these agreements include the potential inability of the counterparties to meet the terms of the agreements. This type of risk is generally limited to the amount of favorable movements in the value of the underlying security, instrument or basket of instruments, if any, at the day of default. Risks could also arise from potential losses from adverse market movements and such losses could exceed the related amounts shown above. 9. 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 mortgage 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. The Fund may invest up to 10% of its total assets in illiquid securities, which may include securities with contractual restrictions on resale, securities exempt from registration under Rule 144A of the securities Act of 1933, as amended, and other securities which may not be readily marketable. The relative illiquidity of these securities may impair the Fund from disposing of them in a timely manner and at a fair price when it is necessary or desirable to do so. 10. 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, 2003, or at any time during the period. 14 Delaware Investments(SM) -------------------------------------- A member of Lincoln Financial Group(R) This semiannual report is for the information of Delaware Limited-Term Government Fund shareholders, but it may be used with prospective investors when preceded or accompanied by a current prospectus for Delaware 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.
Board of Trustees Affiliated Officers Contact Information Jude T. Driscoll Michael P. Bishof Investment Manager Chairman Senior Vice President and Treasurer Delaware Management Company Delaware Investments Family of Funds Delaware Investments Family of Funds Philadelphia, PA Philadelphia, PA Philadelphia, PA International Affiliate Walter P. Babich Richelle S. Maestro Delaware International Advisers Ltd. Board Chairman Executive Vice President, London, England Citadel Construction Corporation General Counsel and Secretary King of Prussia, PA Delaware Investments Family of Funds National Distributor Philadelphia, PA Delaware Distributors, L.P. John H. Durham Philadelphia, PA Private Investor Gwynedd Valley, PA Shareholder Servicing, Dividend Disbursing and Transfer Agent John A. Fry Delaware Service Company, Inc. President 2005 Market Street Franklin & Marshall College Philadelphia, PA 19103-7094 Lancaster, PA For Shareholders Anthony D. Knerr 800 523-1918 Managing Director Anthony Knerr & Associates For Securities Dealers and Financial New York, NY Institutions Representatives Only 800 362-7500 Ann R. Leven Former Treasurer/Chief Fiscal Officer Web site National Gallery of Art www.delawareinvestments.com Washington, DC Thomas F. Madison President and Chief Executive Officer MLM Partners, Inc. Minneapolis, MN Janet L. Yeomans Vice President/Mergers & Acquisitions 3M Corporation St. Paul, MN
-------------------------------------------------------------------------------- A description of the policies and procedures that the Fund uses to determine how to vote proxies (if any) relating to portfolio securities is available without charge (i) upon request, by calling 800 523-1918; (ii) on the Fund's website at http://www.delawareinvestments.com; and (iii) on the Commission's website at http://www.sec.gov. Beginning no later than August 31, 2004, information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge (i) through the Fund's website at http://www.delawareinvestments.com; and (ii) on the Commission's website at http://www.sec.gov. -------------------------------------------------------------------------------- (8042) Printed in the USA SA-022 [6/03] IVES 8/03 J9341 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of the filing of this report and have concluded that they are effective in providing reasonable assurance that the information required to be disclosed by the registrant in its reports or statements filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits (a) (1) Code of Ethics Not applicable. (2) Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rule 30a-2 under the Investment Company Act of 1940 are attached hereto as Exhibit 99.CERT. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are furnished herewith as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf, by the undersigned, thereunto duly authorized. Name of Registrant: Delaware Group Limited-Term Government Fund JUDE T. DRISCOLL ------------------------- By: Jude T. Driscoll ---------------- Title: Chairman Date: September 2, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. JUDE T. DRISCOLL ------------------------- By: Jude T. Driscoll ---------------- Title: Chairman Date: September 2, 2003 JOSEPH H. HASTINGS -------------------------------- By: Joseph H. Hastings ----------------------- Title: Chief Financial Officer Date: September 2, 2003 -----------------------