-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KZig+XQUUyZ/Xug+5VoPCWWG2rUflKENTZWt2iTYV8bDSyEYIXaHg242RxgyYYVe lvISxW4jvPtn11cvW+3WvA== 0000950116-05-002985.txt : 20050908 0000950116-05-002985.hdr.sgml : 20050908 20050908135020 ACCESSION NUMBER: 0000950116-05-002985 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050908 DATE AS OF CHANGE: 20050908 EFFECTIVENESS DATE: 20050908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS CENTRAL INDEX KEY: 0000357059 IRS NUMBER: 236732199 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03363 FILM NUMBER: 051074876 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2152552127 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP LIMITED TERM GOVERNMENT FUNDS INC DATE OF NAME CHANGE: 19950828 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE GROUP TREASURY RESERVES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DELAWARE TREASURY RESERVES DATE OF NAME CHANGE: 19880718 N-CSR 1 n-csr.txt N-CSR 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 Funds 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: December 31 Date of reporting period: June 30, 2005
Item 1. Reports to Stockholders Delaware Investments(R) ----------------------------------- A member of Lincoln Financial Group FIXED INCOME SEMIANNUAL REPORT JUNE 30, 2005 - -------------------------------------------------------------------------------- DELAWARE LIMITED-TERM GOVERNMENT FUND [LOGO] POWERED BY RESEARCH(R) TABLE OF CONTENTS - ----------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES 1 - ----------------------------------------------------------------- SECTOR ALLOCATION 2 - ----------------------------------------------------------------- FINANCIAL STATEMENTS: Statement of Net Assets 3 Statement of Operations 7 Statements of Changes in Net Assets 8 Financial Highlights 9 Notes to Financial Statements 14 - ----------------------------------------------------------------- OTHER FUND INFORMATION 17 - ----------------------------------------------------------------- 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) 2005 Delaware Distributors, L.P. DISCLOSURE For the Period January 1, 2005 to June 30, 2005 OF FUND EXPENSES As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period January 1, 2005 to June 30, 2005. ACTUAL EXPENSES The first section of the table shown, "Actual Fund Return," provides information about actual account values and actual expenses. You may use the information in this section of the table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second section of the table shown, "Hypothetical 5% Return," provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The Fund's actual expenses shown in the table reflect fee waivers in effect. The expenses shown in the table assume reinvestment of all dividends and distributions. DELAWARE LIMITED-TERM GOVERNMENT FUND EXPENSE ANALYSIS OF AN INVESTMENT OF $1,000
Expenses Beginning Ending Paid During Account Account Annualized Period Value Value Expense 1/1/05 to 1/1/05 6/30/05 Ratio 6/30/05* - ------------------------------------------------------------------------------------------------------------ ACTUAL FUND RETURN Class A $1,000.00 $1,014.60 0.82% $ 4.10 Class B 1,000.00 1,010.30 1.67% 8.32 Class C 1,000.00 1,010.30 1.67% 8.32 Class R 1,000.00 1,012.30 1.27% 6.34 Institutional Class 1,000.00 1,015.30 0.67% 3.35 - ------------------------------------------------------------------------------------------------------------ HYPOTHETICAL 5% RETURN (5% return before expenses) Class A $1,000.00 $1,020.73 0.82% $ 4.11 Class B 1,000.00 1,016.51 1.67% 8.35 Class C 1,000.00 1,016.51 1.67% 8.35 Class R 1,000.00 1,018.50 1.27% 6.36 Institutional Class 1,000.00 1,021.47 0.67% 3.36 - ------------------------------------------------------------------------------------------------------------
* "Expenses Paid During Period" are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 1 SECTOR ALLOCATION As of June 30, 2005 DELAWARE LIMITED-TERM GOVERNMENT FUND The SEC adopted a requirement that all funds present their categories of portfolio holdings in a table, chart, or graph format in their annual and semiannual shareholder reports. The following chart lists the Fund's categories of portfolio holdings as a percentage of total net assets and is provided in compliance with such requirement. Percentage SECTOR OF NET ASSETS - ------------------------------------------------------------------------- AGENCY ASSET-BACKED SECURITIES 3.46% - ------------------------------------------------------------------------- AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS 22.90% - ------------------------------------------------------------------------- AGENCY MORTGAGE-BACKED SECURITIES 34.85% - ------------------------------------------------------------------------- AGENCY OBLIGATIONS 4.74% - ------------------------------------------------------------------------- COMMERCIAL MORTGAGE-BACKED SECURITIES 1.01% - ------------------------------------------------------------------------- CORPORATE BONDS 3.11% - ------------------------------------------------------------------------- Banking 0.23% Brokerage 0.53% Consumer Non-Cyclical 0.42% Electric 0.40% Financial/Other 1.53% - ------------------------------------------------------------------------- MUNICIPAL BONDS 0.29% - ------------------------------------------------------------------------- NON-AGENCY ASSET-BACKED SECURITIES 5.99% - ------------------------------------------------------------------------- NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS 8.79% - ------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS 15.00% - ------------------------------------------------------------------------- REPURCHASE AGREEMENTS 0.58% - ------------------------------------------------------------------------- TOTAL MARKET VALUE OF SECURITIES 100.72% - ------------------------------------------------------------------------- LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS (0.72%) - ------------------------------------------------------------------------- TOTAL NET ASSETS 100.00% - ------------------------------------------------------------------------- 2 STATEMENT DELAWARE LIMITED-TERM GOVERNMENT FUND OF NET ASSETS June 30, 2005 (Unaudited) Principal Market Amount Value AGENCY ASSET-BACKED SECURITIES - 3.46% oFannie Mae Grantor Trust Series 2004-T4 A3 4.42% 8/25/24 $ 2,135,000 $ 2,132,350 oSLMA Student Loan Trust Series 1997-2 A2 3.747% 1/25/10 113,293 113,379 Series 2004-1 A1 3.201% 1/26/15 4,259,126 4,261,534 Series 2004-5 A2 3.191% 4/25/14 2,860,000 2,861,571 Series 2004-6 A2 3.201% 1/25/13 554,687 555,114 ----------- TOTAL AGENCY ASSET-BACKED SECURITIES (cost $9,923,622) 9,923,948 ----------- AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS - 22.90% oCollateralized Mortgage Obligation Trust Series 38 A 4.164% 12/25/17 527,773 528,003 Series 47 D 4.025% 9/1/18 737,358 737,376 oE.F. Hutton Trust III Series 1 Class A 4.22% 10/25/17 216,910 216,960 Fannie Mae Series 1993-18 PK 6.50% 2/25/08 1,175,000 1,205,935 Series 1993-71 PL 6.50% 5/25/08 573,609 583,267 Series 1996-46 ZA 7.50% 11/25/26 735,153 793,944 Series 2001-50 BA 7.00% 10/25/41 770,744 813,305 Series 2003-122 AJ 4.50% 2/25/28 541,842 539,920 Fannie Mae Grantor Trust Series 2001-T8 A2 9.50% 7/25/41 2,154,135 2,395,324 Series 2001-T10 A1 7.00% 12/25/41 866,304 914,490 Series 2002-T1 A2 7.00% 11/25/31 478,572 505,532 Series 2003-T1 A 3.807% 11/25/12 1,241,336 1,237,677 Fannie Mae Whole Loan Series 2002-W1 2A 7.50% 2/25/42 513,591 546,528 Series 2003-W3 2A3 4.16% 6/25/42 532,940 531,736 Series 2003-W14 1A5 4.71% 9/25/43 3,256,783 3,256,729 Series 2003-W18 1A5 4.61% 8/25/43 2,130,000 2,130,497 Series 2004-W3 A2 3.75% 5/25/34 1,335,000 1,324,964 Series 2004-W9 2A1 6.50% 2/25/44 580,707 607,483 Federal Home Loan Bank System Series 6T-9009 1 3.84% 11/25/09 2,157,752 2,134,423 Freddie Mac Series 1490 CA 6.50% 4/15/08 220,556 224,061 Series 2480 EH 6.00% 11/15/31 1,204,980 1,216,929 Series 2552 KB 4.25% 6/15/27 1,870,182 1,869,491 Series 2575 PT 4.50% 6/15/24 2,783,665 2,802,925 Series 2902 LC 5.50% 12/15/17 930,000 947,670 Series 2920 NB 5.00% 3/15/07 562,894 562,507 Series 2960 PC 5.00% 9/15/30 1,065,000 1,072,139 Series 2981 NC 5.00% 4/15/31 1,275,000 1,289,659 Freddie Mac-GNMA Series 21 Class J 6.25% 8/25/22 2,435 2,429 Freddie Mac Stated Final Series SF5 GC 2.95% 12/15/09 3,013,125 2,918,388 Freddie Mac Structured Pass Through Securities Series T-42 A5 7.50% 2/25/42 182,497 195,152 Series T-56 A2A 2.842% 7/25/36 1,693,941 1,685,966 Series T-56 A3B 4.406% 8/25/39 1,000,000 997,656 Series T-58 2A 6.50% 9/25/43 3,097,207 3,230,787 GNMA Series 2002-28 B 5.779% 7/16/24 6,000,000 6,323,651 Series 2002-61 BA 4.648% 3/16/26 3,000,000 3,027,637 Series 2003-43 B 4.374% 4/16/33 5,000,000 4,974,374 Series 2003-72 C 4.86% 2/16/30 2,500,000 2,557,733 Series 2003-78 B 5.11% 10/16/27 5,000,000 5,154,393 Principal Market Amount Value AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (continued) #GSMPS Mortgage Loan Trust 144A Series 1998-2 A 7.75% 5/19/27 $ 533,832 $ 571,129 Series 1999-3 A 8.00% 8/19/29 1,301,628 1,404,288 Series 2005-RP1 1A4 8.50% 1/25/35 1,491,594 1,648,270 ----------- TOTAL AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (cost $65,449,781) 65,681,327 ----------- AGENCY MORTGAGE-BACKED SECURITIES - 34.85% Fannie Mae 4.50% 3/1/14 2,754,231 2,766,281 4.92% 5/1/13 3,860,136 3,979,559 5.50% 5/15/09 1,267,435 1,293,576 6.215% 6/1/08 1,247,127 1,300,130 6.50% 8/1/17 595,597 619,607 6.52% 1/1/08 to 2/1/08 3,301,497 3,435,800 6.765% 1/1/07 2,504,818 2,568,221 7.00% 11/15/16 1,572,979 1,642,779 7.41% 4/1/10 4,850,496 5,393,146 8.00% 8/15/07 183,932 189,738 9.00% 11/1/15 264,819 287,328 10.00% 10/1/30 177,194 199,896 10.50% 6/1/30 91,475 103,795 oFannie Mae ARM 3.739% 8/1/34 1,406,740 1,406,497 3.958% 12/1/33 2,188,885 2,243,478 4.937% 11/1/33 3,705,186 3,711,326 Fannie Mae Balloon 7 yr 4.00% 8/1/10 2,416,897 2,388,951 5.00% 8/1/11 3,418,808 3,455,133 Fannie Mae FHAVA 7.25% 4/1/09 14,348 14,859 7.50% 3/1/25 76,272 81,445 8.50% 8/1/09 15,883 16,633 10.00% 1/1/19 70,850 80,481 11.00% 8/1/10 to 12/1/15 747,308 828,726 Fannie Mae GPM 11.00% 11/1/10 24,946 27,331 Fannie Mae Relocation 30 yr 5.00% 9/1/33 975,761 985,823 Fannie Mae S.F. 15 yr 6.00% 12/1/08 to 6/1/17 3,581,618 3,698,785 6.50% 8/1/08 8,553 8,839 7.50% 4/1/11 23,853 25,224 8.00% 10/1/09 to 10/1/16 2,235,175 2,378,756 8.50% 3/1/08 41,834 43,154 Fannie Mae S.F. 15 yr TBA 5.50% 7/1/20 1,290,000 1,324,266 Fannie Mae S.F. 20 yr 6.50% 2/1/22 753,186 783,549 Fannie Mae S.F. 30 yr 5.50% 3/1/29 to 4/1/29 2,402,631 2,443,926 7.00% 8/1/32 to 9/1/32 736,402 777,134 7.50% 12/1/10 to 11/1/31 487,404 514,115 8.00% 6/1/07 to 5/1/24 1,060,822 1,138,381 8.50% 11/1/07 to 8/1/17 606,393 641,765 9.00% 8/1/22 756,184 824,950 9.25% 7/1/09 to 3/1/20 99,422 107,745 10.00% 2/1/25 1,463,840 1,661,458 11.00% 7/1/12 to 8/1/20 368,562 419,584 11.50% 11/1/16 161,296 183,222 12.50% 2/1/11 4,160 4,570 13.00% 7/1/15 46,829 52,361 Fannie Mae S.F. 30 yr TBA 5.50% 7/1/35 1,870,000 1,895,713 6.00% 7/1/35 2,275,000 2,332,586 3 STATEMENT DELAWARE LIMITED-TERM GOVERNMENT FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value AGENCY MORTGAGE-BACKED SECURITIES (continued) Freddie Mac 6.00% 1/1/17 $ 935,867 $ 963,066 6.50% 6/17/14 to 3/1/16 1,699,424 1,749,502 9.00% 3/17/08 15,628 16,268 oFreddie Mac ARM 3.729% 4/1/34 788,977 801,305 3.748% 4/1/33 2,268,104 2,340,235 Freddie Mac Balloon 5 yr 4.00% 3/1/08 to 8/1/08 3,123,456 3,107,838 Freddie Mac Balloon 7 yr 4.50% 12/1/10 1,533,076 1,536,430 6.00% 4/1/09 82,236 83,547 Freddie Mac FHAVA 8.00% 3/1/08 45,896 47,201 8.50% 1/1/09 22,133 23,413 9.50% 2/1/10 77,067 80,270 11.00% 2/1/14 to 11/1/15 27,261 29,777 Freddie Mac Relocation 15 yr 3.50% 9/1/18 to 10/1/18 5,285,010 5,015,805 Freddie Mac Relocation 30 yr 5.00% 9/1/33 3,343,349 3,379,917 6.50% 10/1/30 4,506 4,692 Freddie Mac S.F. 15 yr 4.00% 2/1/14 5,555,404 5,473,808 6.00% 10/1/10 33,654 34,821 6.50% 11/1/09 to 6/1/11 81,803 85,031 7.50% 4/1/11 122,116 128,985 8.00% 7/1/16 423,259 452,094 9.00% 10/1/06 1,876 1,898 Freddie Mac S.F. 20 yr 5.50% 9/1/24 2,692,102 2,749,310 Freddie Mac S.F. 30 yr 7.00% 11/1/33 1,642,202 1,729,444 8.00% 10/1/07 to 5/1/31 1,770,164 1,862,527 8.25% 3/1/09 170,614 174,879 8.50% 12/1/08 to 11/1/10 206,972 214,373 8.75% 5/1/10 87,431 91,993 9.00% 6/1/09 to 9/1/30 1,052,377 1,162,905 9.50% 6/1/16 15,299 16,140 9.75% 12/1/08 20,344 21,539 11.00% 11/1/19 to 5/1/20 42,933 48,712 11.50% 6/1/15 to 3/1/16 670,516 762,494 Freddie Mac Tiered Payment 9.50% 11/1/05 21,739 22,813 GNMA I Buydown 30 yr 10.50% 11/15/15 100,572 113,740 GNMA I GPM 11.00% 7/15/10 24,594 26,899 11.50% 4/15/10 17,797 19,627 12.00% 10/15/10 10,062 11,135 12.25% 1/15/14 19,049 21,388 GNMA I Mobile Home 6.50% 9/15/10 30,257 31,335 GNMA I S.F. 15 yr 6.00% 2/15/09 to 6/15/09 351,625 360,868 7.50% 7/15/10 to 9/15/10 372,914 385,587 9.00% 11/15/06 8,800 8,844 GNMA I S.F. 30 yr 6.00% 4/15/33 768,453 793,427 7.00% 5/15/28 706,784 749,854 7.50% 12/15/23 to 12/15/31 882,299 948,113 8.00% 6/15/30 30,852 33,358 9.00% 10/15/09 to 2/15/17 245,746 262,578 9.50% 6/15/16 to 11/15/17 72,573 80,296 11.00% 12/15/09 to 5/15/20 374,443 417,149 Principal Market Amount Value AGENCY MORTGAGE-BACKED SECURITIES (continued) GNMA II GPM 9.75% 12/20/16 to 9/20/17 $ 23,091 $ 25,723 GNMA II S.F. 15 yr 7.50% 3/20/09 24,575 25,543 GNMA II S.F. 30 yr 9.50% 11/20/20 to 11/20/21 299,498 332,997 10.50% 6/20/20 2,560 2,928 11.00% 9/20/15 to 10/20/15 154,484 171,801 11.50% 12/20/17 to 10/20/18 90,697 102,147 12.00% 4/20/14 to 5/20/16 331,661 377,199 12.50% 10/20/13 to 1/20/14 123,213 139,215 ----------- TOTAL AGENCY MORTGAGE-BACKED SECURITIES (cost $100,202,505) 99,935,405 ----------- AGENCY OBLIGATIONS - 4.74% Fannie Mae 5.00% 4/15/15 2,670,000 2,826,102 Federal Home Loan Bank 3.50% 9/15/06 1,370,000 1,365,106 3.625% 2/16/07 1,500,000 1,495,463 4.875% 11/15/06 115,000 116,548 ^Financing Corporation Principal Strip PRN 2 5.019% 11/30/17 1,320,000 763,822 PRN 16 4.565% 4/5/19 1,000,000 538,950 ^Freddie Mac Principal Strip 3.57% 10/15/08 6,630,000 5,826,238 ^Residual Funding Corporation Principal Strip 5.122% 10/15/19 1,240,000 659,004 ----------- TOTAL AGENCY OBLIGATIONS (cost $13,373,210) 13,591,233 ----------- COMMERCIAL MORTGAGE-BACKED SECURITIES - 1.01% Bank of America Commercial Mortgage Series 2005-1 A3 4.877% 11/10/42 785,000 802,649 oSeries 2005-2 AJ 4.953% 7/10/43 320,000 327,200 oGeneral Electric Capital Commercial Mortgage Series 2005-C2 A2 4.706% 5/10/43 790,000 802,172 GS Mortgage Securities Corporation II Series 2005-GG4 A4A 4.751% 7/10/39 485,000 491,874 Morgan Stanley Capital I Series 1998-XL1 A2 6.45% 6/3/30 207,269 207,246 Wachovia Bank Commercial Mortgage Trust Series 2005-C18 A2 4.657% 4/15/42 270,000 273,398 ----------- TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (cost $2,874,123) 2,904,539 ----------- CORPORATE BONDS - 3.11% Banking - 0.23% First Bank National Association 7.30% 8/15/05 650,000 652,240 ----------- 652,240 ----------- Brokerage - 0.53% Merrill Lynch o3.948% 3/12/07 500,000 498,400 6.00% 2/17/09 500,000 527,884 oMorgan Stanley 3.44% 11/24/06 490,000 490,779 ----------- 1,517,063 ----------- Consumer Non-Cyclical - 0.42% Kraft Foods 4.625% 11/1/06 400,000 402,739 Universal 6.50% 2/15/06 790,000 801,289 ----------- 1,204,028 ----------- 4 STATEMENT DELAWARE LIMITED-TERM GOVERNMENT FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value CORPORATE BONDS (continued) Electric - 0.40% FPL Group Capital 4.086% 2/16/07 $ 115,000 $ 115,009 Southern Capital Funding 5.30% 2/1/07 1,000,000 1,021,535 ----------- 1,136,544 ----------- Financial/Other - 1.53% #Berkshire Hathaway Finance 144A 4.125% 1/15/10 5,000 4,975 o#Premium Asset Trust Series 2005-2 144A 3.23% 2/2/07 4,400,000 4,400,000 ----------- 4,404,975 ----------- TOTAL CORPORATE BONDS (cost $8,030,929) 8,914,850 ----------- MUNICIPAL BONDS - 0.29% oMassachusetts State Special Obligation Revenue Loan 3.711% 6/1/22 (FSA) 750,000 817,920 ----------- TOTAL MUNICIPAL BONDS (cost $830,305) 817,920 ----------- NON-AGENCY ASSET-BACKED SECURITIES - 5.99% AmeriCredit Automobile Receivables Trust Series 2001-C A4 5.01% 7/14/08 365,318 366,966 Series 2001-D A4 4.41% 11/12/08 549,527 551,068 CIT Equipment Collateral Series 2005-VT1 A4 4.36% 11/20/12 2,230,000 2,246,732 Countrywide Asset-Backed Certificates Series 2004-S1 A2 3.872% 3/25/20 775,000 767,356 Equity One ABS Series 2004-1 AF3 3.054% 4/25/34 1,510,000 1,495,571 oGMAC Mortgage Corp Loan Trust Series 2004-HE5 A2 3.685% 9/25/34 2,400,000 2,383,018 Harley-Davidson Motorcycle Trust Series 2003-4 Class A1 1.47% 4/15/08 475,091 472,023 oNovastar Home Equity Loan Series 2004-4 A2B 3.654% 3/25/35 1,225,000 1,229,144 Renaissance Home Equity Loan Trust Series 2004-4 AF2 3.856% 2/25/35 870,000 863,121 oResidential Asset Mortgage Products Series 2004-RZ2 AI3 4.30% 1/25/31 755,000 754,523 Residential Asset Securities Series 1999-KS1 AI8 6.32% 4/25/30 1,761,384 1,764,262 oResidential Funding Mortgage Securities II Series 2005-HI2 A1 3.466% 5/25/35 510,000 510,000 #Sierra Receivables Funding Company 144A Series 2003-1A 3.09% 1/15/14 635,541 621,975 Series 2003-2A A1 3.03% 12/15/15 497,831 489,254 Structured Asset Securities Series 2005-NC1 A2 3.92% 2/25/35 1,240,000 1,229,171 WFS Financial Owner Trust Series 2002-1 A4A 4.87% 9/20/09 1,418,484 1,425,259 ----------- TOTAL NON-AGENCY ASSET-BACKED SECURITIES (cost $17,344,543) 17,169,443 ----------- NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS - 8.79% Bank of America Alternative Loan Trust Series 2004-11 1CB1 6.00% 12/25/34 2,033,894 2,103,839 Series 2005-5 2CB1 6.00% 6/25/35 589,470 606,794 oBank of America Mortgage Securities Series 2004-E 1A1 3.528% 6/25/34 988,357 979,861 Series 2005-F 2A3 4.742% 7/25/35 1,235,000 1,236,351 Principal Market Amount Value NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (continued) oCountrywide Alternative Loan Trust Series 2004-J7 1A2 4.673% 8/25/34 $ 710,000 $ 711,848 Credit Suisse First Boston Mortgage Securities Series 2003-29 5A1 7.00% 12/25/33 841,344 868,688 oSeries 2003-AR22 2A3 4.107% 9/25/33 1,072,017 1,068,677 Series 2004-1 3A1 7.00% 2/25/34 394,611 406,810 oDeutsche Mortgage Securities Series 2004-4 1A2 4.01% 4/25/34 785,000 783,859 First Horizon Alternative Mortgage Securities Series 2004-FA1 1A1 6.25% 10/25/34 1,483,201 1,527,983 GSR Mortgage Home Loan Trust Series 2004-2F 9A1 6.00% 9/25/19 1,282,090 1,305,533 oJPMorgan Mortgage Trust Series 2004-A5 4A2 4.85% 12/25/34 836,694 838,672 #MASTR Reperforming Loan Trust Series 2005-1 1A5 144A 8.00% 8/25/35 958,904 1,036,855 MASTR Specialized Loan Trust Series 2005-2 A2 5.15% 6/1/35 1,195,000 1,194,996 Nomura Asset Acceptance oSeries 2004-AP2 A2 4.099% 7/25/34 920,000 918,446 Series 2005-WF1 2A2 4.786% 3/25/35 1,205,000 1,209,300 Residential Asset Mortgage Products Series 2004-SL1 A3 7.00% 11/25/31 724,281 743,294 Series 2004-SL4 A3 6.50% 7/25/32 698,475 720,611 oWashington Mutual Series 2003-AR4 A7 3.95% 5/25/33 1,388,023 1,373,575 Series 2005-AR3 A1 4.656% 3/25/35 1,524,059 1,524,921 Washington Mutual Alternative Mortgage Pass-Through Certificates Series 2005-1 5A2 6.00% 3/25/35 537,046 548,666 Series 2005-1 6A2 6.50% 3/25/35 143,762 146,525 oWells Fargo Mortgage Backed Securities Trust Series 2004-DD 2A3 4.54% 1/25/35 835,000 834,119 Series 2004-I 1A1 3.387% 7/25/34 2,509,473 2,518,486 ----------- TOTAL NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATIONS (cost $25,287,260) 25,208,709 ----------- U.S. TREASURY OBLIGATIONS - 15.00% U.S. Treasury Bond 12.00% 8/15/13 1,930,000 2,396,971 U.S. Treasury Inflation Index Notes 1.625% 1/15/15 10,189 10,155 2.00% 1/15/14 205,323 211,555 (infinity)2.00% 7/15/14 7,204,407 7,425,892 3.00% 7/15/12 1,596,053 1,753,539 4.25% 1/15/10 3,099,125 3,488,456 U.S. Treasury Notes 1.625% 2/28/06 1,445,000 1,428,349 3.625% 4/30/07 3,790,000 3,789,113 3.625% 6/15/10 40,000 637,400 3.75% 3/31/07 4,220,000 4,227,748 3.75% 5/15/08 4,040,000 4,050,104 3.875% 5/15/10 5,220,000 5,251,404 4.125% 5/15/15 8,230,000 8,352,809 ----------- TOTAL U.S. TREASURY OBLIGATIONS (cost $43,387,122) 43,023,495 ----------- 5 STATEMENT DELAWARE LIMITED-TERM GOVERNMENT FUND OF NET ASSETS (CONTINUED) Principal Market Amount Value REPURCHASE AGREEMENTS - 0.58% With BNP Paribas 2.70% 7/1/05 (dated 6/30/05, to be repurchased at $1,036,678, collateralized by $98,800 U.S. Treasury Bills due 7/7/05, market value $98,744, $192,100 U.S. Treasury Bills due 8/18/05, market value $191,293, $102,200 U.S. Treasury Bills due 9/15/05, market value $101,526, $432,800 U.S. Treasury Bills due 12/29/05, market value $425,791, $63,500 U.S. Treasury Notes 1.875% due 1/31/06, market value $63,431, $28,900 U.S. Treasury Notes 2.00% due 5/15/06, market value $28,559, $101,300 U.S. Treasury Notes 3.375% due 2/15/08, market value $101,841 and $46,200 U.S. Treasury Notes 3.50% due 11/15/06, market value $46,323) $ 1,036,600 $ 1,036,600 With UBS Warburg 2.70% 7/1/05 (dated 6/30/05, to be repurchased at $620,447, collateralized by $216,400 U.S. Treasury Bills due 10/13/05, market value $214,453, $57,300 U.S. Treasury Bills due 12/22/05, market value $56,422 and $360,700 U.S. Treasury Notes 2.00% due 8/31/05, market value $362,361) 620,400 620,400 ------------ TOTAL REPURCHASE AGREEMENTS (cost $1,657,000) 1,657,000 ------------ TOTAL MARKET VALUE OF SECURITIES - 100.72% (cost $288,360,400) 288,827,869 LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.72%) (2,073,995) ------------ NET ASSETS APPLICABLE TO 34,022,649 SHARES OUTSTANDING - 100.00% $286,753,874 ============ Net Asset Value - Delaware Limited-Term Government Fund Class A ($197,622,962 / 23,446,940 Shares) $8.43 ----- Net Asset Value - Delaware Limited-Term Government Fund Class B ($24,618,536 / 2,921,119 Shares) $8.43 ----- Net Asset Value - Delaware Limited-Term Government Fund Class C ($39,748,939 / 4,716,616 Shares) $8.43 ----- Net Asset Value - Delaware Limited-Term Government Fund Class R ($1,784,618 / 211,662 Shares) $8.43 ----- Net Asset Value - Delaware Limited-Term Government Fund Institutional Class ($22,978,819 / 2,726,312 Shares) $8.43 ----- COMPONENTS OF NET ASSETS AT JUNE 30, 2005: Shares of beneficial interest (unlimited authorization - no par) $315,567,650 Undistributed net investment income 41,250 Accumulated net realized loss on investments (29,183,750) Net unrealized appreciation of investments 328,724 ------------ Total net assets $286,753,874 ============ ^Zero coupon security. The interest rate shown is the yield at the time of purchase. #Security exempt from registration under Rule 144A of the Securities Act of 1933. See Note 10 in "Notes to Financial Statements." oVariable rate notes. The interest rate shown is the rate as of June 30, 2005. (infinity)Fully or partially pledged as collateral for financial futures contracts. SUMMARY OF ABBREVIATIONS: ARM - Adjustable Rate Mortgage FHAVA - Federal Housing Administration & Veterans Administration FSA - Insured by Financial Security Assurance GNMA - Government National Mortgage Association GPM - Graduate Payment Mortgage PRN - Principal Only Strip S.F. - Single Family SLMA - Student Loan Marketing Association TBA - To Be Announced yr - year NET ASSET VALUE AND OFFERING PRICE PER SHARE - DELAWARE LIMITED-TERM GOVERNMENT FUND Net asset value Class A (A) $8.43 Sales charge (2.75% of offering price) (B) 0.24 ----- Offering price $8.67 ----- (A) Net asset value per share, as illustrated, is the amount which would be paid upon redemption or repurchase of shares. (B) See the current prospectus for purchases of $100,000 or more. The following futures contracts were outstanding at June 30, 2005: FUTURES CONTRACTS(1) Contracts Notional Notional Expiration Unrealized to Sell Cost Value Date Depreciation - ---------------------- ------------ ------------ ---------- ------------ (13) U.S. Treasury 5 year notes $ (1,460,384) $ (1,475,094) 9/30/05 $ (14,710) (241) U.S. Treasury 10 year notes (26,118,606) (26,242,641) 9/30/05 (124,035) ---------- $ (138,745) ========== The use of futures contracts involves elements of market risk and risks in excess of the amount recognized in the financial statements. The notional amounts presented above represent the Fund's (as defined below) total exposure in such contracts, whereas only the net unrealized depreciation is reflected in the Fund's net assets. (1) See Note 7 in "Notes to Financial Statements." See accompanying notes 6 STATEMENT DELAWARE LIMITED-TERM GOVERNMENT FUND OF OPERATIONS Six Months Ended June 30, 2005 (Unaudited) INVESTMENT INCOME: Interest $6,080,783 ---------- EXPENSES: Management fees 737,087 Distribution expenses - Class A 297,916 Distribution expenses - Class B 129,315 Distribution expenses - Class C 225,400 Distribution expenses - Class R 5,642 Dividend disbursing and transfer agent fees and expenses 252,279 Reports and statements to shareholders 71,998 Accounting and administration expenses 47,610 Registration fees 45,460 Insurance fees 26,562 Legal and professional fees 18,711 Trustees' fees 7,334 Pricing fees 6,021 Custodian fees 4,603 Taxes (other than taxes on income) 435 Other 8,661 1,885,034 ---------- Less expenses absorbed or waived (234,371) Less waiver of distribution expenses -- Class A (148,958) Less expense paid indirectly (4,603) ---------- Total expenses 1,497,102 ---------- NET INVESTMENT INCOME 4,583,681 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on: Investments 602,711 Futures contracts (164,335) Swap agreements 104,671 ---------- Net realized gain 543,047 Net change in unrealized appreciation/depreciation of investments (1,290,052) ---------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (747,005) ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,836,676 ---------- See accompanying notes 7 STATEMENTS DELAWARE LIMITED-TERM GOVERNMENT FUND OF CHANGES IN NET ASSETS
Six Months Year Ended Ended 6/30/05 12/31/04 (Unaudited) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income $ 4,583,681 $ 9,074,325 Net realized gain (loss) on investments 543,047 (321,681) Net change in unrealized appreciation/depreciation of investments (1,290,052) (1,875,293) ------------ ------------ Net increase in net assets resulting from operations 3,836,676 6,877,351 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income: Class A (4,076,492) (8,983,172) Class B (420,105) (985,589) Class C (730,023) (1,847,269) Class R (34,333) (61,707) Institutional Class (502,586) (875,872) ------------ ------------ (5,763,539) (12,753,609) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold: Class A 17,015,317 41,878,039 Class B 1,956,491 4,214,315 Class C 1,882,994 9,856,959 Class R 254,948 636,522 Institutional Class 5,465,113 12,934,332 Net asset value of shares issued upon reinvestment of dividends and distributions: Class A 3,161,298 6,992,277 Class B 318,153 754,179 Class C 531,628 1,363,602 Class R 34,461 61,306 Institutional Class 491,926 867,592 ------------ ------------ 31,112,329 79,559,123 ------------ ------------ Cost of shares repurchased: Class A (25,327,308) (90,781,272) Class B (5,042,006) (14,660,215) Class C (12,062,983) (32,501,936) Class R (398,366) (261,687) Institutional Class (4,559,241) (8,349,764) ------------ ------------ (47,389,904) (146,554,874) ------------ ------------ Decrease in net assets derived from capital share transactions (16,277,575) (66,995,751) ------------ ------------ NET DECREASE IN NET ASSETS (18,204,438) (72,872,009) NET ASSETS: Beginning of period 304,958,312 377,830,321 ------------ ------------ End of period (including undistributed net investment income of $41,250 and $--, respectively) $286,753,874 $304,958,312 ============ ============
See accompanying notes 8 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 Year Ended Ended 6/30/05(2) 12/31/04 12/31/03 12/31/02 12/31/01(1) 12/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $8.480 $8.620 $8.770 $8.600 $8.430 $8.270 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.138 0.244 0.222 0.349 0.423 0.522 Net realized and unrealized gain (loss) on investments (0.016) (0.048) (0.039) 0.255 0.238 0.161 ------ ------ ------ ------ ------ ------ Total from investment operations 0.122 0.196 0.183 0.604 0.661 0.683 ------ ------ ------ ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.172) (0.336) (0.315) (0.434) (0.491) (0.523) Return of capital -- -- (0.018) -- -- -- ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.172) (0.336) (0.333) (0.434) (0.491) (0.523) ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $8.430 $8.480 $8.620 $8.770 $8.600 $8.430 ====== ====== ====== ====== ====== ====== TOTAL RETURN(3) 1.46% 2.31% 2.12% 7.08% 8.16% 8.59% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $197,623 $204,053 $249,845 $250,729 $208,152 $208,565 Ratio of expenses to average net assets 0.82% 0.75% 0.75% 0.75% 0.89% 1.13% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.16% 1.13% 1.14% 1.05% 1.08% 1.13% Ratio of net investment income to average net assets 3.30% 2.85% 2.57% 3.99% 4.92% 6.36% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.96% 2.47% 2.18% 3.69% 4.73% 6.36% Portfolio turnover 283% 313% 483% 313% 386% 273%
(1) As required, effective January 1, 2001, the Fund 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividend 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 distributor, as applicable. Performance would have been lower had the expense limitation not been in effect. 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 B - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Ended Ended 6/30/05(2) 12/31/04 12/31/03 12/31/02 12/31/01(1) 12/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $8.480 $8.620 $8.770 $8.600 $8.430 $8.270 Income (loss) from investment operations: Net investment income 0.103 0.170 0.152 0.274 0.348 0.453 Net realized and unrealized gain (loss) on investments (0.016) (0.047) (0.044) 0.255 0.238 0.160 ------ ------ ------ ------ ------ ------ Total from investment operations 0.087 0.123 0.108 0.529 0.586 0.613 ------ ------ ------ ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.137) (0.263) (0.244) (0.359) (0.416) (0.453) Return of capital -- -- (0.014) -- -- -- ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.137) (0.263) (0.258) (0.359) (0.416) (0.453) ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $8.430 $8.480 $8.620 $8.770 $8.600 $8.430 ====== ====== ====== ====== ====== ====== TOTAL RETURN(3) 1.03% 1.44% 1.25% 6.17% 7.22% 7.68% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $24,618 $27,559 $37,774 $50,326 $21,743 $8,600 Ratio of expenses to average net assets 1.67% 1.60% 1.60% 1.60% 1.74% 1.98% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.86% 1.83% 1.86% 1.90% 1.93% 1.98% Ratio of net investment income to average net assets 2.45% 2.00% 1.72% 3.14% 4.07% 5.51% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.26% 1.77% 1.46% 2.84% 3.88% 5.51% Portfolio turnover 283% 313% 483% 313% 386% 273%
(1) As required, effective January 1, 2001, the Fund 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividend 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 not been in effect. 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 Class C - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year Ended Ended 6/30/05(2) 12/31/04 12/31/03 12/31/02 12/31/01(1) 12/31/00 (Unaudited) Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430 $8.270 Income (loss) from investment operations: Net investment income 0.103 0.170 0.152 0.274 0.347 0.453 Net realized and unrealized gain (loss) on investments (0.016) (0.047) (0.044) 0.255 0.238 0.160 ------ ------ ------ ------ ------ ------ Total from investment operations 0.087 0.123 0.108 0.529 0.585 0.613 ------ ------ ------ ------ ------ ------ Less dividends and distributions from: Net investment income (0.137) (0.263) (0.244) (0.359) (0.415) (0.453) Return of capital -- -- (0.014) -- -- -- ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.137) (0.263) (0.258) (0.359) (0.415) (0.453) ------ ------ ------ ------ ------ ------ Net asset value, end of period $8.430 $8.480 $8.620 $8.770 $8.600 $8.430 ====== ====== ====== ====== ====== ====== Total return(3) 1.03% 1.44% 1.25% 6.16% 7.20% 7.68% Ratios and supplemental data: Net assets, end of period (000 omitted) $39,749 $49,709 $72,045 $71,189 $21,386 $4,506 Ratio of expenses to average net assets 1.67% 1.60% 1.60% 1.60% 1.74% 1.98% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.86% 1.83% 1.86% 1.90% 1.93% 1.98% Ratio of net investment income to average net assets 2.45% 2.00% 1.72% 3.14% 4.07% 5.51% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.26% 1.77% 1.46% 2.84% 3.88% 5.51% Portfolio turnover 283% 313% 483% 313% 386% 273%
(1) As required, effective January 1, 2001, the Fund 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividend 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 not been in effect. See accompanying notes 11 FINANCIAL HIGHLIGHTS (CONTINUED) Selected data for each share of the Fund outstanding throughout each period were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------ Delaware Limited-Term Government Fund Class R - ------------------------------------------------------------------------------------------------------------------------------------ Six Months Year 6/2/03(1) Ended Ended to 6/30/05(2) 12/31/04 12/31/03 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $8.490 $8.630 $8.800 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.119 0.205 0.074 Net realized and unrealized gain (loss) on investments (0.026) (0.048) (0.063) ------ ------ ------ Total from investment operations 0.093 0.157 0.011 ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.153) (0.297) (0.165) Return of capital -- -- (0.016) ------ ------ ------ Total dividends and distributions (0.153) (0.297) (0.181) ------ ------ ------ NET ASSET VALUE, END OF PERIOD $8.430 $8.490 $8.630 ====== ====== ====== TOTAL RETURN(3) 1.23% 1.73% 0.14% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $1,785 $1,905 $1,499 Ratio of expenses to average net assets 1.27% 1.20% 1.20% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 1.46% 1.43% 1.38% Ratio of net investment income to average net assets 2.85% 2.40% 1.86% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 2.66% 2.17% 1.68% Portfolio turnover 283% 313% 483%
(1) Date of commencement of operations. Ratios have been annualized and total return has not been annualized. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividend and distributions at net asset value. Total investment return reflects waivers and payment of fees by the manager. Performance would have been lower had the expense limitation not been in effect. See accompanying notes 12 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 Year Ended Ended 6/30/05(2) 12/31/04 12/31/03 12/31/02 12/31/01(1) 12/31/00 (Unaudited) NET ASSET VALUE, BEGINNING OF PERIOD $8.480 $8.620 $8.770 $8.600 $8.430 $8.270 INCOME (LOSS) FROM INVESTMENT OPERATIONS: Net investment income 0.144 0.256 0.234 0.364 0.437 0.534 Net realized and unrealized gain (loss) on investments (0.016) (0.047) (0.038) 0.255 0.238 0.161 ------ ------ ------ ------ ------ ------ Total from investment operations 0.128 0.209 0.196 0.619 0.675 0.695 ------ ------ ------ ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS FROM: Net investment income (0.178) (0.349) (0.328) (0.449) (0.505) (0.535) Return of capital -- -- (0.018) -- -- -- ------ ------ ------ ------ ------ ------ Total dividends and distributions (0.178) (0.349) (0.346) (0.449) (0.505) (0.535) ------ ------ ------ ------ ------ ------ NET ASSET VALUE, END OF PERIOD $8.430 $8.480 $8.620 $8.770 $8.600 $8.430 ====== ====== ====== ====== ====== ====== TOTAL RETURN3 1.53% 2.46% 2.27% 7.27% 8.34% 8.75% RATIOS AND SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $22,979 $21,732 $16,667 $13,289 $7,116 $4,514 Ratio of expenses to average net assets 0.67% 0.60% 0.60% 0.60% 0.74% 0.98% Ratio of expenses to average net assets prior to expense limitation and expenses paid indirectly 0.86% 0.83% 0.86% 0.90% 0.93% 0.98% Ratio of net investment income to average net assets 3.45% 3.00% 2.72% 4.14% 5.07% 6.51% Ratio of net investment income to average net assets prior to expense limitation and expenses paid indirectly 3.26% 2.77% 2.46% 3.84% 4.88% 6.51% Portfolio turnover 283% 313% 483% 313% 386% 273%
(1) As required, effective January 1, 2001, the Fund 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 of 0.80%. Per share data and ratios for periods prior to January 1, 2001 have not been restated to reflect these changes in accounting. (2) Ratios and portfolio turnover have been annualized and total return has not been annualized. (3) Total investment return is based on the change in net asset value of a share during the period and assumes reinvestment of dividend 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 not been in effect. See accompanying notes 13 NOTES DELAWARE LIMITED-TERM GOVERNMENT FUND TO FINANCIAL STATEMENTS June 30, 2005 (Unaudited) Delaware Group Limited-Term Government Funds (the "Trust") is organized as a Delaware statutory 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 5 years after purchase. Class C shares are sold with a contingent deferred sales charge of 1%, if redeemed, during the first 12 months. Class R and Institutional shares are not subject to a sales charge and are offered for sales 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 U.S. generally accepted accounting principles and are consistently followed by the Fund. Security Valuation - Long-term debt securities are valued by an independent pricing service and such prices are believed to reflect the fair value of such securities. 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. In determining whether market quotations are readily available or fair valuation will be used, various factors will be taken into consideration, such as market closures, or with respect to foreign securities, aftermarket trading or significant events after local market trading (e.g., government actions or pronouncements, trading volume or volatility on markets, exchanges among dealers, or news events). 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, 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 pursuant to an exemptive order issued by the Securities and Exchange Commission. 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 U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Other - Expenses common to all funds within the Delaware Investments Family of Funds are allocated amongst the funds on the basis of average net assets. Management fees and some other expenses are paid monthly. 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. The Fund may receive earnings credits from its custodian when positive cash balances are maintained, which are used to offset custody fees. The earnings credits for the six months ended June 30, 2005 were approximately $4,603. The expense paid under the above arrangement is included in custodian fees on the Statement of Operations with the corresponding expense offset shown as "expense 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 contractually agreed 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, certain insurance costs and extraordinary expenses, do not exceed 0.65% of average daily net assets of the Fund through April 30, 2006. 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. As of June 1, 2005, the Fund will pay DSC a monthly fee computed at an annual rate of 0.04% of the Fund's average net assets without an annual minimum. 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 distribution and service 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 asset of Class R shares. DDLP has contracted to waive distribution and service fees through April 30, 2006 in order to prevent distribution and service fees of Class A shares from exceeding 0.15% of average daily net assets. Effective August 1, 2005, DDLP has contracted to limit distribution and service fees through April 30, 2006 for Class R to no more than 0.50% of average daily net assets. Institutional Class shares paid no distribution and service expenses. At June 30, 2005, the Fund had liabilities payable to affiliates as follows: Investment management fee payable to DMC $131,896 Dividend disbursing, transfer agent, accounting and administration fees and other expenses payable to DSC 61,058 Other expenses payable to DMC and affiliates* 91,683 *DMC, as part of its administrative services, pays operating expenses on behalf of the Fund and is reimbursed on a periodic basis. Such expenses include items such as printing of shareholder reports, fees for audit, legal and tax services, registration fees and trustees' fees. 14 NOTES DELAWARE LIMITED-TERM GOVERNMENT FUND TO FINANCIAL STATEMENTS (CONTINUED) 2. INVESTMENT MANAGEMENT, ADMINISTRATION AGREEMENTS AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED) As provided in the investment management agreement, the Fund bears the cost of certain legal services expenses, including internal legal services, provided to the Fund by DMC employees. For the six months ended June 30, 2005, the Fund was charged $3,979 for internal legal services provided by DMC. For the six months ended June 30, 2005, DDLP earned $7,792 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 Fund. These officers and trustees are paid no compensation by the Fund. 3. INVESTMENTS For the six months ended June 30, 2005, the Fund made purchases of $185,169,671 and sales of $200,455,210 of investment securities other than long-term U.S. government securities and short-term investments. For the six months ended June 30, 2005, the Fund made purchases of $229,413,728 and sales of $228,100,425 of long-term U.S. government securities. At June 30, 2005, 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, 2005, the cost of investments was $289,366,211. At June 30, 2005, the net unrealized depreciation was $538,342 of which $1,620,092 related to unrealized appreciation of investments and $2,158,434 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 U.S. generally accepted accounting principles. Additionally, gains (losses) on net short-term gains on sales of investment securities are treated as ordinary income for federal income tax purposes. The tax character of dividends and distributions paid during the six months ended June 30, 2005 and the year ended December 31, 2004 was as follows: Six Months Year Ended Ended 6/30/05* 12/31/04 ---------- -------- Ordinary income $5,763,539 $12,753,609 *Tax information for the six months ended June 30, 2005 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, 2005, the estimated components of net assets on a tax basis were as follows: Shares of beneficial interest $315,567,650 Undistributed net investment income 41,250 Capital loss carryforwards (28,316,684) Unrealized depreciation of investments (538,342) ------------ Net assets $286,753,874 ============ For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. For the six months ended June 30, 2005, the Fund recorded an estimate of these differences since the final tax characteristics cannot be determined until fiscal year end. Reclassifications are primarily due to tax treatment of market discounts and premiums on certain debt instruments and paydown gain (loss) on mortgage- and asset-backed securities. Results of operations and net assets were not affected by these reclassifications. Undistributed net investment income $1,221,108 Accumulated realized gain (loss) (1,221,108) For federal income tax purposes, capital loss carryforwards may be carried forward and applied against future capital gains. Capital loss carryforwards remaining at December 31, 2004 will expire as follows: $9,442,127 expires in 2005, $5,505,504 expires in 2007, $5,888,621 expires in 2008 and $6,133,212 expires in 2012. For the six months ended June 30, 2005, the Fund had capital losses of $1,347,220, which may be added to the capital loss carryforwards. 5. CAPITAL SHARES Transactions in capital shares were as follows: Six Months Year Ended Ended 6/30/05 12/31/04 Shares sold: Class A 2,017,410 4,891,801 Class B 232,433 492,221 Class C 223,016 1,147,265 Class R 30,224 74,227 Institutional Class 646,659 1,506,249 Shares issued upon reinvestment of dividends and distributions: Class A 374,910 816,795 Class B 37,731 88,105 Class C 63,045 159,254 Class R 4,085 7,167 Institutional Class 58,345 101,468 ---------- ----------- 3,687,858 9,284,552 ---------- ----------- Shares repurchased: Class A (3,001,376) (10,623,056) Class B (598,160) (1,711,432) Class C (1,430,170) (3,799,848) Class R (47,212) (30,591) Institutional Class (540,618) (978,462) ---------- ----------- (5,617,536) (17,143,389) ---------- ----------- Net decrease (1,929,678) (7,858,837) ========== =========== For the six months ended June 30, 2005 and the year ended December 31, 2004, 44,125 Class B shares were converted to 44,125 Class A shares valued at $370,843 and 162,083 Class B shares were converted to 162,083 Class A shares valued at $1,390,225, 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. 15 NOTES DELAWARE LIMITED-TERM GOVERNMENT FUND TO FINANCIAL STATEMENTS (CONTINUED) 6. LINE OF CREDIT The Fund, along with certain other funds in the Delaware Investments Family of Funds (the "Participants"), participates in a $183,100,000 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, 2005, or at any time during the six months ended June 30, 2005. 7. 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. 8. OPTIONS WRITTEN The Fund may enter 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 Series 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 writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. The Fund had no options contract outstanding at June 30, 2005 or at any time during the six months ended June 30, 2005. 9. SWAP AGREEMENTS During the six months ended June 30, 2005, 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. 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. The Fund had no total return swap agreement outstanding at June 30, 2005. 10. 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. Prepayment of mortgages may shorten the stated maturity of the obligations and can result in a loss of premium, if any has been paid. Certain of these securities may be stripped (securities, which provide only the principal or interest feature of the underlying security). The yield to maturity on an interest-only CMO is extremely sensitive not only to changes in prevailing interest rates, but also to the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse affect on the Fund's yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, the Fund may fail to fully recoup its initial investment in these securities even if the securities are rated in the highest rating categories. 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. 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. At June 30, 2005, Rule 144A securities represented approximately 3.55% of total net assets. None of these securities has been determined to be illiquid under the Fund's Liquidity Procedures. While maintaining oversight, the Board of Trustees has delegated to the investment adviser the day-to-day functions of determining whether individual Rule 144A securities are liquid for purposes of the Fund's limitation on investments in illiquid assets. Illiquid securities, if any, have been denoted on the Statement of Net Assets. 11. CONTRACTUAL OBLIGATIONS The Fund enters into contracts in the normal course of business that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund's existing contracts and expects the risk of loss to be remote. 16 OTHER DELAWARE LIMITED-TERM GOVERNMENT FUND FUND INFORMATION PROXY RESULTS (Unaudited) The shareholders of Delaware Group Limited-Term Government Funds (the "Trust") approved the following proposals at the special meeting of shareholders on March 23, 2005 or as adjourned. The description of each proposal and number of shares voted are as follows: 1. To elect a Board of Trustees for the Trust (shareholders of all series of the Trust voting together). Shares Voted Shares Voted For Withhold Authority ---------------- ------------------ Thomas L. Bennett 22,633,717 395,673 Jude T. Driscoll 2,630,124 399,266 John A. Fry 22,634,769 394,620 Anthony D. Knerr 22,632,530 396,859 Lucinda S. Landreth 22,641,216 388,173 Ann R. Leven 22,620,212 409,177 Thomas F. Madison 22,626,369 403,020 Janet L. Yeomans 22,644,584 384,806 J. Richard Zecher 22,623,830 405,559 2. To approve the use of a "manager of managers" structure whereby the investment manager of the Fund will be able to hire and replace subadvisers without shareholder approval.
For Against Abstain Broker Non-Votes --- ------- ------- ---------------- Delaware Limited-Term Government Fund 18,076,231 864,960 691,209 3,396,990
BOARD CONSIDERATION OF DELAWARE LIMITED-TERM GOVERNMENT FUND INVESTMENT ADVISORY AGREEMENT At a meeting held on May 18-19, 2005 (the "Annual Meeting"), the Board of Trustees, including a majority of disinterested or independent Trustees, approved the renewal of the Investment Advisory Agreement for the Delaware Limited Term Government Fund (the "Fund"). In making its decision, the Board considered information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the Annual Meeting. Information furnished and discussed throughout the year included reports detailing Fund performance, investment strategies, expenses, compliance matters and other services provided by Delaware Management Company ("DMC"), the investment adviser. Information furnished specifically in connection with the Annual Meeting included materials provided by DMC and its affiliates ("Delaware Investments") concerning, among other things, the level of services provided to the Fund, the costs of such services to the Fund, economies of scale and the financial condition and profitability of Delaware Investments. In addition, in connection with the Annual Meeting, the Board separately received and reviewed independent historical and comparative reports prepared by Lipper Inc. ("Lipper"), an independent statistical compilation organization. The Lipper reports compared the Fund's investment performance and expenses with those of other comparable mutual funds. The Board also requested and received certain supplemental information regarding management's policy with respect to advisory fee levels and its philosophy with respect to breakpoints; the structure of portfolio manager compensation; the investment manager's profitability organized by client type, including the Fund; and any constraints or limitations on the availability of securities in certain investment styles which might inhibit the adviser's ability to fully invest in accordance with the Fund's policies. In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel and representatives from Lipper. At the meeting with representatives from Lipper, Jude Driscoll, Chairman of the Delaware Investments Family of Funds, and Chairman and Chief Executive Officer of the investment adviser, was present to respond to questions raised by Lipper and the independent Trustees. While the Board considered the Investment Advisory Agreements for all of the funds in the Delaware Investments Family of Funds at the same Board meeting, information was provided and considered by the Board for each fund individually. In approving the continuance of the Investment Advisory Agreement for the Fund, the Board, including a majority of independent Trustees, determined that the existing advisory fee structure was fair and reasonable and that the continuance of the Investment Advisory Agreement was in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses the primary factors relevant to the Board's deliberations and determination, including those relating to the selection of the investment adviser and the approval of the advisory fee. 17 OTHER DELAWARE LIMITED-TERM GOVERNMENT FUND FUND INFORMATION (CONTINUED) NATURE, EXTENT AND QUALITY OF SERVICE. Consideration was given to the services provided by Delaware Investments to the Fund and its shareholders. In reviewing the nature, extent and quality of services, the Board emphasized reports furnished to it throughout the year at regular Board meetings covering matters such as the compliance of portfolio managers with the investment policies, strategies and restrictions for the Fund, the compliance of management personnel with the Code of Ethics adopted throughout the Delaware Investments Family of Funds complex, the adherence to fair value pricing procedures as established by the Board, and the accuracy of net asset value calculations. The Board noted that it was pleased with the current staffing of the Fund's investment advisor during the past year, the emphasis on research and the compensation system for advisory personnel. Favorable consideration was given to DMC's efforts to maintain, and in some instances increase, financial and human resources committed to fund matters. Other factors taken into account by the Board were Delaware Investments' preparedness for, and response to, legal and regulatory matters. The Board also considered the transfer agent and shareholder services provided to Fund shareholders by Delaware Investments' affiliate, Delaware Service Company, Inc., noting the receipt by such affiliate of the DALBAR Pyramid Award in four of the last six years and the continuing expenditures by Delaware Investments to increase and improve the scope of shareholder services. Additionally, the Board noted the extent of benefits provided to Fund shareholders for being part of the Delaware Investments Family of Funds, including the privilege to exchange investments between the same class of funds without a sales charge, the ability to reinvest Fund dividends into other funds and the privilege to combine holdings in other funds to obtain a reduced sales charge. The Board was satisfied with the nature, extent and quality of the overall services provided by Delaware Investments. INVESTMENT PERFORMANCE. The Board considered the investment performance of DMC and the Fund. The Board was pleased by DMC's investment performance, noting Barron's ranking of the Delaware Investments Family of Funds in the top quartile of mutual fund families for 2002 - 2004. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the Annual Meeting. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a group of similar funds as selected by Lipper (the "Performance Universe"). A fund with the highest performance is ranked first, and a fund with the lowest is ranked last. The highest/best performing 25% of funds in the Performance Universe make up the first quartile; the next 25% - the second quartile; the next 25% - the third quartile; and the lowest/worst performing 25% of funds in the Performance Universe make up the fourth quartile. Comparative annualized performance for the Fund was shown for the past one, three, five and 10 year periods ended February 28, 2005. The Board noted its objective that the Fund's performance be at or above the median of its Performance Universe. The following paragraph summarizes the performance results for the Fund and the Board's view of such performance. The Performance Universe for this Fund consisted of the Fund and all retail and institutional short-intermediate U.S. government funds as selected by Lipper. The Lipper report comparison showed that the Fund's total return for the one year period was in the first quartile of such Performance Universe. The report further showed that the Fund's total return for the three and five year periods was in the second quartile and the Fund's total return for the 10 year period was in the third quartile. The Board was satisfied with such performance. COMPARATIVE EXPENSES. The Board considered expense comparison data for the Delaware Investments Family of Funds, Delaware Investments' institutional separate account business and other lines of business at Delaware Investments. The Board stated its belief that, given the differing level of service provided to Delaware Investments' various clients and other factors that related to the establishment of fee levels, variations in the levels of fees and expenses were justified. The Board placed significant emphasis on the comparative analysis of the management fees and total expense ratios of the Fund compared with those of a group of similar funds as selected by Lipper (the "Expense Group") and among the other Delaware Investments funds. In reviewing comparative costs, the Fund's contractual management fee and the actual management fee incurred by the Fund were compared with the contractual management fees (assuming all funds in the Expense Group were similar in size to the Fund) and actual management fees (as reported by each fund) of other funds within the Expense Group, taking into effect any applicable breakpoints and fee waivers. The Fund's total expenses were also compared with those of its Expense Group. The Lipper total expenses, for comparative consistency, were shown by Lipper for Class A shares and compared total expenses including 12b-1 and non-12b-1 service fees. The Board noted its objective to limit the Fund's total expense ratio to an acceptable range as compared to the median of the Expense Group. The following paragraph summarizes the expense results for the Fund and the Board's view of such expenses. Such expense comparisons for the Fund showed that its management fee and total expenses were in the quartile with the lowest expenses of its Expense Group. The Board was satisfied with the management fee and total expenses of the Fund in comparison to its Expense Group as shown in the Lipper report. 18 OTHER DELAWARE LIMITED-TERM GOVERNMENT FUND FUND INFORMATION (CONTINUED) MANAGEMENT PROFITABILITY. The Board considered the level of profits, if any, realized by Delaware Investments in connection with the operation of the Fund. In this respect, the Board reviewed the Investment Management Profitability Analysis that addressed the overall profitability of Delaware Investments' business in providing management and other services to each of the individual funds and the Delaware Investments Family of Funds as a whole. Specific attention was given to the methodology followed in allocating costs for the purpose of determining profitability. Management stated that the level of profits of Delaware Investments, to a certain extent, reflected operational cost savings and efficiencies initiated by Delaware Investments. The Board considered Delaware Investments' expenditures to improve services provided to fund shareholders and to meet additional regulatory and compliance requirements resulting from the Sarbanes-Oxley Act and recent SEC initiatives. The Board also considered the extent to which Delaware Investments might derive ancillary benefits from fund operations, including the potential for procuring additional business as a result of the prestige and visibility associated with its role as service provider to the Delaware Investments Family of Funds, the benefits from allocation of fund brokerage to improve trading efficiencies and the use of "soft" commission dollars to pay for proprietary and non-proprietary research. At the Board's request, management also provided information relating to Delaware Investments' profitability by client type. The information provided set forth the revenue, expenses and pre-tax income/loss attributable to the Delaware Investments Family of Funds, Delaware Investments' separate account business and other lines of business at Delaware Investments. Emphasis was given to the level and type of service provided to the various clients. The Board was satisfied with the level of profits realized by Delaware Investments from its relationships with the Fund and the Delaware Investments Family of Funds. ECONOMIES OF SCALE. The Trustees considered whether economies of scale are realized by Delaware Investments as the Fund's assets increase and the extent to which any economies of scale are reflected in the level of management fees charged. The Trustees took into account the standardized advisory fee pricing and structure approved by the Board and shareholders as part of a complex-wide shareholder meeting conducted in 1998/1999. At that time, Delaware Investments introduced breakpoints to account for management economies of scale. The Board noted that the fee under the Fund's management contract fell within the standard structure. Although the Fund has not reached a size at which it can take advantage of breakpoints, the Board recognized that the fee was structured so that when the Fund grows, economies of scale may be shared. 19 Delaware Investments(R) - ----------------------------------- A member of Lincoln Financial Group 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 that 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 Delaware Management Company, Delaware Investments Family of Funds Chief Financial Officer a Series of Delaware Management Business Trust Philadelphia, PA Delaware Investments Family of Funds Philadelphia, PA Philadelphia, PA THOMAS L. BENNETT NATIONAL DISTRIBUTOR Private Investor RICHELLE S. MAESTRO Delaware Distributors, L.P. Rosemont, PA Executive Vice President, Philadelphia, PA Chief Legal Officer and Secretary JOHN A. FRY Delaware Investments Family of Funds SHAREHOLDER SERVICING, DIVIDEND President Philadelphia, PA DISBURSING AND TRANSFER AGENT Franklin & Marshall College Delaware Service Company, Inc. Lancaster, PA JOHN J. O'CONNOR 2005 Market Street Senior Vice President and Treasurer Philadelphia, PA 19103-7094 ANTHONY D. KNERR Delaware Investments Family of Funds Managing Director Philadelphia, PA FOR SHAREHOLDERS Anthony Knerr & Associates 800 523-1918 New York, NY FOR SECURITIES DEALERS AND FINANCIAL LUCINDA S. LANDRETH INSTITUTIONS REPRESENTATIVES ONLY Former Chief Investment Officer 800 362-7500 Assurant, Inc. Philadelphia, PA WEB SITE www.delawareinvestments.com 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/Mergers & Acquisitions 3M Corporation St. Paul, MN J. RICHARD ZECHER Founder Investor Analytics Scottsdale, AZ
Delaware Investments is the marketing name for Delaware Management Holdings, Inc. and its subsidiaries. - -------------------------------------------------------------------------------- The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q, as well as 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 Web site at http://www.delawareinvestments.com; and (iii) on the Commission's Web site at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information (if any) regarding how the Fund voted proxies relating to portfolio securities during the most recently disclosed 12-month period ended June 30 is available without charge (i) through the Fund's Web site at http://www.delawareinvestments.com; and (ii) on the Commission's Web site at http://www.sec.gov. - -------------------------------------------------------------------------------- (9584) Printed in the USA SA-022 [6/05] IVES 8/05 MF-05-06-046 PO10237 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. Schedule of Investments Included as part of report to shareholders filed under Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers Not applicable. Item 10. Submission of Matters to a Vote of Security Holders Not applicable. Item 11. 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 second fiscal quarter of the period covered by the report to stockholders included herein (i.e., the registrant's second fiscal quarter) that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. 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. (3) Written solicitations to purchase securities pursuant to Rule 23c-1 under the Securities Exchange Act of 1934. Not applicable. (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. DELAWARE GROUP LIMITED-TERM GOVERNMENT FUNDS Jude T. Driscoll - --------------------------------- By: Jude T. Driscoll Title: Chief Executive Officer Date: September 8, 2005 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: Chief Executive Officer Date: September 8, 2005 Michael P. Bishof - --------------------------------- By: Michael P. Bishof Title: Chief Financial Officer Date: September 8, 2005 EX-99.CERT 2 ex99-cert.txt EX-99.CERT EXHIBIT 99.CERT CERTIFICATION ------------- I, Jude T. Driscoll certify that: 1. I have reviewed this report on Form N-CSR of Delaware Group Limited-Term Government Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 8, 2005 Jude T. Driscoll - ------------------------------------ By: Jude T. Driscoll Title: Chief Executive Officer EXHIBIT 99.CERT CERTIFICATION ------------- I, Michael P. Bishof, certify that: 1. I have reviewed this report on Form N-CSR of Delaware Group Limited-Term Government Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 8, 2005 Michael P. Bishof - ------------------------------------ By: Michael P. Bishof Title: Chief Financial Officer EX-99.906CERT 3 ex99-906cert.txt EX-99.906CERT EXHIBIT 99.906CERT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the attached report of the registrant on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the registrant does hereby certify, to the best of such officer's knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly represents, in all material respects, the financial condition and results of operations of the registrant as of, and for, the periods presented in the Report. Date: September 8, 2005 Jude T. Driscoll - -------------------------------------- By: Jude T. Driscoll Title: Chief Executive Officer Michael P. Bishof - -------------------------------------- By: Michael P. Bishof Title: Chief Financial Officer A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----