<DOCUMENT>
<TYPE>N-CSR
<SEQUENCE>1
<FILENAME>d18653.txt
<TEXT>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
<TABLE>
<S> <C>
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: David F. Connor, 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: December 31, 2005
</TABLE>
<PAGE>
Item 1. Reports to Stockholders
[LOGO] Delaware
Investments(R)
-----------------------------------
A member of Lincoln Financial Group
FIXED INCOME
--------------------------------------------------------------------------------
Annual Report DECEMBER 31, 2005
--------------------------------------------------------------------------------
DELAWARE LIMITED-TERM GOVERNMENT FUND
[LOGO]POWERED BY RESEARCH(R)
<PAGE>
Table
OF CONTENTS
--------------------------------------------------
PORTFOLIO MANAGEMENT REVIEW 1
--------------------------------------------------
PERFORMANCE SUMMARY 4
--------------------------------------------------
DISCLOSURE OF FUND EXPENSES 6
--------------------------------------------------
SECTOR ALLOCATION 7
--------------------------------------------------
FINANCIAL STATEMENTS:
Statement of Net Assets 8
Statement of Operations 13
Statements of Changes in Net Assets 14
Financial Highlights 15
Notes to Financial Statements 20
--------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 23
--------------------------------------------------
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS 24
--------------------------------------------------
ABOUT THE ORGANIZATION 26
--------------------------------------------------
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)2006 Delaware Distributors, L.P.
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Portfolio January 10, 2006
--------------------------------------------------------------------------------
MANAGEMENT REVIEW
Fund Managers
Paul Grillo
Senior Portfolio Manager
Stephen R. Cianci
Senior Portfolio Manager
Q: Describe the general economic and market environment in which you managed the
Fund during the one-year period ended December 31, 2005.
A: During the year, Federal Reserve monetary policy remained unchanged, with
eight `measured' increases lifting the federal funds rate from 2.25% as the
period began to 4.25% by its close. The influence on the two-year Treasury note
was undeniable, as its yield rose 1.3 percentage points to end 2005 at 4.36%. In
times past, the Fed's actions might also have been followed by rising long-term
rates. With the current cycle, however, long-term rates have not followed suit.
The absence of appreciable inflationary pressures has contributed to modest
changes in long-term yields, and the bellwether 30-year Treasury bond actually
moved lower by 0.31% to end the year at the mid-four percent mark (source:
Bloomberg L.P.).
Economic expansion continued, with U.S. gross domestic product growth for 2005
likely to be approximately three and one half percent when the final quarter's
data is finally sorted out (source: Bloomberg L.P.).
Substantial headwinds included effects from the hurricanes that wrought havoc on
the Gulf Coast. In their wake, petroleum prices surged as several U.S.
refineries went off-line. While prices eased somewhat later in autumn, per
barrel prices were nonetheless higher for the year, having begun at $43 and
ended at $61 (source: Energy Information Administration). Precipitous rises in
such cornerstone commodities are generally deemed an unfavorable economic
harbinger for times to come. But all things considered, investors and consumers
accommodated the price hike reasonably well, and economic expansion was not
derailed.
Also noteworthy was an appreciating U.S dollar. The about-face from 2004 likely
surprised some investors, as much has been made of the nation's widening current
account deficit. Lastly, fixed income investors closely watched the yield curve
near year-end. The yield curve, which is a graph of interest rates along the
spectrum of possible maturities, "inverted" during the waning days of 2005. This
is an infrequent condition, in which short rates exceed their longer-term
counterparts. It last occurred more than five years ago and is associated by
many investors as a potential forecast of recession, although its ongoing
usefulness as a strong economic indicator has been hotly debated of late
(source: Bloomberg L.P.).
Q: How did Delaware Limited-Term Government Fund perform during its fiscal year,
which ended December 31, 2005?
A: Class A shares of Delaware Limited-Term Government Fund returned +1.76% at
net asset value and -1.04% at their maximum offer price (both figures reflect
all distributions reinvested). For complete, annualized performance of Delaware
Limited-Term Government Fund, please see the performance table on page 4.
Comparisons for the same period show the benchmark Merrill Lynch 1-3 Year
Treasury Index gained +1.67%, while peer investments, as measured by the Lipper
Short-Intermediate U.S. Government Funds Average, rose +1.01% (source: Lipper
Inc.).
1
<PAGE>
Q: Describe the actions you took that affected Fund performance during the
fiscal-year period.
A: Performance for Delaware Limited-Term Government Fund was driven by our
defensive portfolio positioning with regard to interest rates in the short end
of the yield curve - namely underweighting the two-year maturity segment of the
market. We also maintained a slight barbell portfolio structure, which means
heavier weightings at each end of the maturity spectrum than in the middle.
The Fund, which is managed for income, was able to garner a bit of total return
versus its benchmark index with investments in non-Treasury markets - chiefly
from asset-backed and mortgage-backed securities.
To limit downside risk in the Fund, we continued to pare back our small
allocation to investment grade corporate bonds throughout the year. Delaware
Investments credit research helped us arrive at the opinion that prospects for
high quality corporate bonds were weakening.
Q: What circumstances adversely influenced Fund return relative to the
performance benchmark?
A: Inflation-indexed securities played both positive and negative roles in
determining Fund return over the course of the year. During quarters one and
three especially, inflation-protected securities acted as a drag on the Fund's
performance relative to the benchmark index.
Q: What was your approach to Fund's duration during the year?
A: Duration speaks directly to a fixed income fund's potential volatility,
brought on by interest rate movements. To understand duration, it is important
to know that interest rates and the value of fixed income securities move
oppositely to one another. For example, when rates go up, bond prices move
lower. Duration, which is often quoted in "years," is a tool that quantifies
this inverse relationship. Fund volatility becomes amplified as duration
increases, while a decrease in duration is typically accompanied by reduced
volatility. Within Delaware Limited-Term Government Fund, we remained generally
neutral with regard to our interest rate posture. We have positioned the Fund's
duration at roughly two and a half years at fiscal year end - the midpoint of
our two- to three-year target band.
Q: With a new year under way, what long-term thoughts might you have for
shareholders and fixed income investors in general?
A: Most fixed income investors will continue to monitor the Fed this year under
its new chairman, Ben Bernanke. Many market watchers at the close of 2005 were
less-than-positive about the outlook for fixed income in general in 2006, but we
remind investors that no one can accurately predict the path of interest rates
or bond returns. We will continue to manage the Fund with an eye toward
generating income for conservative investors, and remind our shareholders that
their fixed income investment vehicles serve as key holdings in a well-balanced
asset allocation, providing balance for equity investments. We also remind
investors that asset allocation holds a key to managing return and risk over
time, and that income investments continue to play an important role in that
task.
2
<PAGE>
This page intentionally left blank.
<PAGE>
Performance Summary
DELAWARE LIMITED-TERM GOVERNMENT FUND
The performance data quoted represent past performance; past performance does
not guarantee future results. Investment return and principal value will
fluctuate so your shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. A rise/fall in interest rates can have a significant impact on bond
prices and the net asset value (NAV) of the Fund. Funds that invest in bonds can
lose their value as interest rates can rise and an investor can lose principal.
Please obtain the performance data for the most recent month end by calling 800
523-1918 or visiting our Web site at www.delawareinvestments.com/performance.
You should consider the investment objectives, risks, charges, and expenses of
the investment carefully before investing. The Delaware Limited-Term Government
Fund prospectus contains this and other important information about the
investment company. Please request a prospectus by calling 800 523-1918. Read it
carefully before you invest or send money.
<TABLE>
<CAPTION>
Fund Performance
Average Annual Total Returns
Through December 31, 2005 Lifetime 10 Years Five Years One Year
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 11/24/85)
Excluding Sales Charge +5.81% +4.71% +4.25% +1.76%
Including Sales Charge +5.66% +4.41% +3.66% -1.04%
----------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.40% +4.26% +3.36% +0.90%
Including Sales Charge +4.40% +4.26% +3.36% -1.05%
----------------------------------------------------------------------------------------
Class C (Est. 11/28/95)
Excluding Sales Charge +3.89% +3.82% +3.36% +0.90%
Including Sales Charge +3.89% +3.82% +3.36% -0.08%
----------------------------------------------------------------------------------------
</TABLE>
Returns reflect the reinvestment of all distributions and any applicable sales
charges as noted below. Performance for Class B and C shares, excluding sales
charges, assumes either that contingent deferred sales charges did not apply or
the investment was not redeemed.
The Fund offers Class A, B, C, R, and Institutional Class shares. Class A shares
are sold with a front-end sales charge of up to 2.75% and have an annual
distribution and service fee of up to 0.30%. The distributor has contracted to
limit this amount to 0.15% through April 30, 2006.
Class B shares are sold with a contingent deferred sales charge that declines
from 2% to zero depending upon the period of time the shares are held. Class B
shares will automatically convert to Class A shares on a quarterly basis
approximately five years after purchase. They are also subject to an annual
distribution and service fee of 1%. Lifetime and 10-year performance figures
reflect conversion to Class A shares after five years.
Class C shares are sold with a contingent deferred sales charge of 1% if
redeemed during the first 12 months. They are also subject to an annual
distribution and service fee of 1%.
The average annual total returns for the lifetime and one-year periods ended
December 31, 2005 for Delaware Limited-Term Government Fund's Class R shares
were +1.24% and +1.34%, respectively. Class R shares were first made available
on June 2, 2003, and are available only for certain retirement plan products.
They are sold without a sales charge and have an annual distribution and service
fee of 0.60%. The distributor has contracted to limit this amount to 0.50%
through April 30, 2006.
The average annual total returns for the lifetime (since 11/24/85), 10-year,
five-year, and one-year periods ended December 31, 2005 for Delaware
Limited-Term Government Fund's Institutional Class were +5.95%, +4.87%, +4.41%,
and +1.91%, respectively. The Institutional Class shares were first made
available on June 1, 1992 and are available without sales or asset-based
distribution charges only to certain eligible institutional accounts.
Institutional Class performance prior to June 1, 1992 is based on Class A
performance and was adjusted to eliminate the sales charges, but not the
asset-based distribution charge of Class A shares.
An expense limitation was in effect for all classes of Delaware Limited-Term
Government Fund during the periods shown. Performance would have been lower had
the expense limitation not been in effect.
The performance table does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
Nasdaq Institutional Class symbol: DTINX
Nasdaq Class R symbol: DLTRX
4
<PAGE>
Fund Basics
As of December 31, 2005
--------------------------------------------------------------------------------
FUND OBJECTIVE:
The Fund seeks to provide a high stable level of income, while attempting to
minimize fluctuations in principal and provide maximum liquidity.
--------------------------------------------------------------------------------
TOTAL FUND NET ASSETS:
$270 million
--------------------------------------------------------------------------------
NUMBER OF HOLDINGS:
407
--------------------------------------------------------------------------------
FUND START DATE:
November 24, 1985
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
YOUR FUND MANAGERS:
Paul Grillo, Senior Vice President/Senior Portfolio Manager, holds a BA in
business management from North Carolina State University and an MBA in finance
from Pace Univeristy. Prior to joining Delaware Investments in 1993, he served
as mortgage strategist and trader at Dreyfus Corporation. He also served as
mortgage strategist and portfolio manager at Chemical Investment Group and as
financial analyst at Chemical Bank. Mr. Grillo is also a CFA charterholder.
Stephen R. Cianci, Senior Vice President/Senior Portfolio Manager, holds a BS
and an MBA in finance from Widener Univeristy. He joined Delaware Investments in
1992 as an investment grade quantitative research analyst. In addition to his
quantitative research responsibilities, Mr. Cianci also served as a
mortgage-backed and asset-backed securities analyst. He also serves as an
adjunct professor of finance at Widener University and is a CFA charterholder.
--------------------------------------------------------------------------------
NASDAQ SYMBOLS:
Class A DTRIX
Class B DTIBX
Class C DTICX
--------------------------------------------------------------------------------
Performance of a $10,000 Investment
December 31, 1995 through December 31, 2005
[THE FOLLOWING DATA WAS REPRESENTED AS A LINE CHART IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Delaware Limited-Term Merrill Lynch 1 - 3 Year
Government Fund -- Class A Treasury Bond Index
Shares
<S> <C> <C>
Dec.'95 $9,725 $10,000
Dec.'96 $10,084 $10,508
Dec.'97 $10,611 $11,207
Dec.'98 $11,403 $11,988
Dec.'99 $11,525 $12,344
Dec.'00 $12,515 $13,352
Dec.'01 $13,536 $14,491
Dec.'02 $14,494 $15,362
Dec.'03 $14,797 $15,671
Dec.'04 $15,136 $15,839
Dec.'05 $15,403 $16,113
</TABLE>
Chart assumes $10,000 invested on December 31, 1995 and includes the effect of a
2.75% front-end sales charge and the reinvestment of all distributions.
Performance of other Fund classes will vary due to different charges and
expenses. Returns plotted on the chart were as of the last day of each month
shown. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged composite that
generally tracks the market for U.S. Treasury securities with maturities of one
to three years. An index is unmanaged and does not reflect the costs of
operating a mutual fund, such as the costs of buying, selling, and holding
securities. You cannot invest directly in an index. Past performance is not a
guarantee of future results.
An expense limitation was in effect for the period shown. Performance would have
been lower had the expense limitation not been in effect.
The performance graph does not reflect the deduction of taxes the shareholder
would pay on Fund distributions or redemptions of Fund shares.
5
<PAGE>
--------------------------------------------------------
Disclosure For the Period July 1, 2005 to December 31, 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 July 1, 2005 to December 31, 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 Funds' actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the Funds' 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
<TABLE>
<CAPTION>
Expenses
Beginning Ending Paid During
Account Account Annualized Period*
Value Value Expense 7/1/05 to
7/1/05 12/31/05 Ratio 12/31/05
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actual Fund Return
Class A $1,000.00 $1,002.90 0.82% $4.14
Class B 1,000.00 998.70 1.67% 8.41
Class C 1,000.00 998.70 1.67% 8.41
Class R 1,000.00 1,001.10 1.19% 6.00
Institutional Class 1,000.00 1,003.70 0.67% 3.38
----------------------------------------------------------------------
Hypothetical 5% Return (5% return before expenses)
Class A $1,000.00 $1,021.07 0.82% $4.18
Class B 1,000.00 1,016.79 1.67% 8.49
Class C 1,000.00 1,016.79 1.67% 8.49
Class R 1,000.00 1,019.21 1.19% 6.06
Institutional Class 1,000.00 1,021.83 0.67% 3.41
----------------------------------------------------------------------
</TABLE>
*Expenses are equal to the Fund's annualized expense ratio, multiplied by the
average account value over the period, multiplied by 184/365 (to reflect the
one-half year period).
6
<PAGE>
--------------------------------------------------------
Sector Allocation As of December 31, 2005
--------------------------------------------------------------------------------
DELAWARE LIMITED-TERM GOVERNMENT FUND
Sector designations may be different than the sector designations presented in
other Fund materials.
<TABLE>
<CAPTION>
Percentage
Sector of Net Assets
--------------------------------------------------------------
<S> <C>
Agency Asset-Backed Securities 2.87%
--------------------------------------------------------------
Agency Collateralized Mortgage Obligations 20.29%
--------------------------------------------------------------
Agency Mortgage-Backed Securities 33.73%
--------------------------------------------------------------
Agency Obligations 3.99%
--------------------------------------------------------------
Commercial Mortgage-Backed Securities 2.22%
--------------------------------------------------------------
Corporate Bonds 1.12%
--------------------------------------------------------------
Brokerage 0.56%
Consumer Non-Cyclical 0.15%
Electric 0.41%
--------------------------------------------------------------
Municipal Bonds 0.38%
--------------------------------------------------------------
Non-Agency Asset-Backed Securities 7.73%
--------------------------------------------------------------
Non-Agency Collateralized Mortgage Obligations 9.53%
--------------------------------------------------------------
U.S. Treasury Obligations 16.73%
--------------------------------------------------------------
Repurchase Agreements 2.89%
--------------------------------------------------------------
Total Market Value of Securities 101.48%
--------------------------------------------------------------
Liabilities Net of Receivables and Other Assets (1.48%)
--------------------------------------------------------------
Total Net Assets 100.00%
--------------------------------------------------------------
</TABLE>
7
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statement December 31, 2005
--------------------------------------------------------------------------------
OF NET ASSETS
<TABLE>
<CAPTION>
Principal Market
Amount Value
-------------------------------------------------------------------------
<S> <C> <C>
Agency Asset-Backed Securities - 2.87%
-------------------------------------------------------------------------
o Fannie Mae Grantor Trust
Series 2004-T4 A3 4.42% 8/25/24 $2,135,000 $ 2,125,872
o SLMA Student Loan Trust
Series 2004-1 A1 4.24% 1/26/15 3,670,108 3,671,485
Series 2004-5 A2 4.23% 4/25/14 1,793,803 1,794,634
Series 2004-6 A2 4.24% 1/25/13 146,336 146,420
---------
Total Agency Asset-Backed Securities
(cost $7,746,164) 7,738,411
---------
-------------------------------------------------------------------------
Agency Collateralized Mortgage Obligations - 20.29%
-------------------------------------------------------------------------
o E.F. Hutton Trust III Series 1 Class A
5.269% 10/25/17 190,733 190,809
Fannie Mae
Series 1993-18 PK 6.50% 2/25/08 1,102,351 1,112,558
Series 1993-71 PL 6.50% 5/25/08 425,969 428,510
Series 1996-46 ZA 7.50% 11/25/26 606,241 644,126
Series 2001-50 BA 7.00% 10/25/41 642,845 664,520
Series 2003-122 AJ 4.50% 2/25/28 464,383 454,362
Fannie Mae Grantor Trust
Series 2001-T8 A2 9.50% 7/25/41 1,769,743 1,924,266
Series 2001-T10 A1 7.00% 12/25/41 714,446 738,803
Series 2002-T1 A2 7.00% 11/25/31 401,832 415,778
Series 2003-T1 A 3.807% 11/25/12 1,174,063 1,132,847
Fannie Mae Whole Loan
Series 2002-W1 2A 7.50% 2/25/42 424,087 442,393
Series 2003-W3 2A3 4.16% 6/25/42 277,479 275,846
Series 2003-W12 2A3 2.42% 6/25/43 1,036,781 1,032,599
Series 2003-W14 1A5 4.71% 9/25/43 1,157,922 1,154,104
Series 2003-W18 1A5 4.61% 8/25/43 2,130,000 2,109,039
Series 2004-W3 A2 3.75% 5/25/34 1,335,000 1,319,896
Series 2004-W9 2A1 6.50% 2/25/44 486,458 498,265
Federal Home Loan Bank System
Series 6T-9009 1 3.84% 11/25/09 1,890,180 1,826,481
Freddie Mac
Series 1490 CA 6.50% 4/15/08 155,498 156,423
Series 2480 EH 6.00% 11/15/31 587,388 588,875
Series 2550 QX 4.75% 6/15/27 700,000 696,973
Series 2552 KB 4.25% 6/15/27 1,217,939 1,208,558
Series 2575 PT 4.50% 6/15/24 2,783,665 2,765,894
Series 2627 KP 2.87% 12/15/16 841,770 793,432
Series 2662 MA 4.50% 10/15/31 815,260 800,685
Series 2915 KP 5.00% 11/15/29 640,000 628,882
Series 3063 PC 5.00% 2/15/29 1,035,000 1,021,728
Freddie Mac Stated Final Series 5 GC
2.95% 12/15/09 3,013,125 2,920,916
Freddie Mac Structured Pass
Through Securities
Series T-42 A5 7.50% 2/25/42 151,374 158,475
Series T-56 A3B 4.406% 8/25/39 3,257,539 3,236,122
Series T-58 2A 6.50% 9/25/43 2,597,495 2,661,078
GNMA
Series 2002-28 B 5.779% 7/16/24 6,000,000 6,151,255
Series 2002-61 BA 4.648% 3/16/26 2,325,394 2,302,795
Series 2003-43 B 4.374% 4/16/33 5,000,000 4,835,811
Series 2003-72 C 4.86% 2/16/30 2,500,000 2,479,569
Series 2003-78 B 5.11% 10/16/27 5,000,000 4,991,738
---------
Total Agency Collateralized Mortgage
Obligations (cost $55,438,396) 54,764,411
----------
-------------------------------------------------------------------------
Agency Mortgage-Backed Securities - 33.73%
-------------------------------------------------------------------------
Fannie Mae
4.50% 3/1/14 $2,440,876 $ 2,400,449
5.50% 5/15/09 to 1/1/13 2,412,193 2,433,807
6.00% 9/1/12 2,051,709 2,094,025
6.215% 6/1/08 1,235,942 1,259,116
6.50% 8/1/17 504,954 518,051
6.52% 1/1/08 570,891 581,595
6.765% 1/1/07 2,481,451 2,498,511
7.00% 11/15/16 1,647,342 1,685,951
7.41% 4/1/10 4,823,806 5,241,367
8.00% 8/15/07 115,892 118,463
9.00% 11/1/15 242,399 261,261
10.00% 10/1/30 176,558 197,469
10.50% 6/1/30 91,233 102,951
16.00% 11/15/12 296,381 370,604
o Fannie Mae ARM
3.025% 6/1/34 1,136,144 1,117,885
3.779% 8/1/34 1,137,562 1,132,237
4.406% 12/1/33 1,662,679 1,695,136
4.943% 11/1/33 3,504,255 3,421,099
5.07% 8/1/35 876,744 861,670
Fannie Mae Balloon 7 yr
4.00% 8/1/10 2,071,420 2,004,099
5.00% 8/1/11 2,866,722 2,856,868
Fannie Mae FHAVA
7.25% 4/1/09 9,986 10,236
7.50% 3/1/25 73,946 77,735
8.50% 8/1/09 11,868 12,351
10.00% 1/1/19 69,586 78,024
11.00% 8/1/10 to 12/1/15 621,299 680,760
Fannie Mae GPM 11.00% 11/1/10 21,387 23,145
Fannie Mae Relocation 15 yr
4.00% 9/1/20 1,163,160 1,114,453
Fannie Mae Relocation 30 yr
5.00% 9/1/33 865,849 848,261
Fannie Mae S.F. 15 yr
4.50% 11/1/19 1,580,996 1,541,471
5.00% 7/1/19 673,628 666,892
6.00% 12/1/08 to 6/1/17 3,047,342 3,109,902
7.50% 4/1/11 19,094 19,923
8.00% 10/1/09 to 10/1/16 1,802,861 1,906,432
8.50% 3/1/08 22,559 22,608
Fannie Mae S.F. 15 yr TBA
4.50% 1/1/21 255,000 248,147
5.00% 1/1/21 855,000 845,916
5.50% 1/1/21 1,275,000 1,282,969
Fannie Mae S.F. 20 yr 6.50% 2/1/22 653,998 676,275
Fannie Mae S.F. 30 yr
5.50% 3/1/29 to 4/1/29 2,203,511 2,189,051
6.00% 8/1/35 1,336,016 1,348,959
7.00% 8/1/32 to 9/1/32 610,422 637,129
7.50% 12/1/10 to 11/1/31 374,803 390,108
8.00% 6/1/07 to 5/1/24 813,051 866,267
8.50% 11/1/07 to 8/1/17 493,200 520,706
9.00% 8/1/22 642,659 697,084
9.25% 3/1/09 to 3/1/20 80,742 87,108
10.00% 2/1/25 1,264,477 1,421,302
11.00% 7/1/12 to 8/1/20 326,835 366,671
11.50% 11/1/16 115,150 129,436
12.50% 2/1/11 3,412 3,710
13.00% 7/1/15 37,984 41,866
</TABLE>
8
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statement
--------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Amount Value
-------------------------------------------------------------------------
<S> <C> <C>
Agency Mortgage-Backed Securities (continued)
-------------------------------------------------------------------------
Fannie Mae S.F. 30 yr TBA
5.00% 1/1/36 $ 705,000 $ 683,189
6.00% 1/25/36 810,000 817,594
7.00% 1/1/36 830,000 866,053
Freddie Mac
6.00% 1/1/17 784,743 797,004
6.50% 6/17/14 to 3/1/16 1,458,785 1,493,576
9.00% 3/17/08 7,945 7,943
o Freddie Mac ARM
3.733% 4/1/34 634,389 637,957
3.905% 4/1/33 1,759,994 1,795,991
Freddie Mac Balloon 5 yr
4.00% 3/1/08 to 8/1/08 2,551,046 2,492,054
4.50% 1/1/10 195,449 192,395
Freddie Mac Balloon 7 yr
4.50% 12/1/10 1,288,656 1,266,104
5.00% 6/1/11 to 11/1/11 795,271 791,544
6.00% 4/1/09 70,593 70,968
Freddie Mac FHAVA
8.00% 3/1/08 27,528 28,044
8.50% 1/1/09 13,236 13,704
9.50% 2/1/10 64,162 66,127
11.00% 2/1/14 to 11/1/15 24,856 26,824
Freddie Mac Relocation 15 yr
3.50% 9/1/18 to 10/1/18 4,870,482 4,558,467
Freddie Mac Relocation 30 yr
5.00% 9/1/33 2,996,394 2,941,148
6.50% 10/1/30 2,990 3,064
Freddie Mac S.F. 15 yr
4.00% 2/1/14 4,978,727 4,770,242
6.00% 10/1/10 27,995 28,564
6.50% 6/1/11 44,799 46,017
7.50% 4/1/11 100,525 104,986
8.00% 7/1/16 346,812 369,138
Freddie Mac S.F. 20 yr 5.50% 9/1/24 2,418,715 2,417,960
Freddie Mac S.F. 30 yr
7.00% 11/1/33 1,298,313 1,353,086
8.00% 10/1/07 to 5/1/31 1,280,560 1,335,493
8.25% 3/1/09 101,895 103,646
8.50% 12/1/08 to 11/1/10 135,248 139,192
8.75% 5/1/10 75,302 78,831
9.00% 6/1/09 to 9/1/30 555,070 608,390
9.50% 6/1/16 12,428 13,049
9.75% 12/1/08 16,509 17,288
11.00% 11/1/19 to 5/1/20 41,925 46,796
11.50% 6/1/15 to 3/1/16 603,273 677,469
GNMA I Buydown 30 yr 10.50% 11/15/15 97,893 108,998
GNMA I GPM
11.00% 7/15/10 22,658 24,477
11.50% 4/15/10 16,347 17,802
12.25% 1/15/14 17,728 19,606
GNMA I Mobile Home 6.50% 9/15/10 26,681 27,531
GNMA I S.F. 15 yr
6.00% 2/15/09 to 6/15/09 262,357 267,212
7.50% 7/15/10 to 9/15/10 406,685 417,846
9.00% 11/15/06 3,053 3,064
-------------------------------------------------------------------------
Agency Mortgage-Backed Securities (continued)
-------------------------------------------------------------------------
GNMA I S.F. 30 yr
6.00% 4/15/33 $ 694,430 $ 712,008
7.00% 5/15/28 553,839 582,396
7.50% 12/15/23 to 12/15/31 710,105 749,107
8.00% 6/15/30 30,637 32,810
9.00% 10/15/09 to 2/15/17 194,379 206,465
9.50% 6/15/16 to 11/15/17 56,415 62,017
11.00% 12/15/09 to 5/15/20 332,673 365,488
GNMA II GPM
9.75% 12/20/16 to 9/20/17 22,544 24,824
GNMA II S.F. 15 yr 7.50% 3/20/09 18,785 19,413
GNMA II S.F. 30 yr
9.50% 11/20/20 to 11/20/21 256,555 283,278
10.50% 6/20/20 2,524 2,839
11.00% 9/20/15 to 10/20/15 147,854 161,978
11.50% 12/20/17 to 10/20/18 88,738 98,344
12.00% 4/20/14 to 5/20/16 306,453 343,417
12.50% 10/20/13 to 1/20/14 103,750 115,570
----------
Total Agency Mortgage-Backed Securities
(cost $91,574,959) 91,023,898
----------
-------------------------------------------------------------------------
Agency Obligations - 3.99%
-------------------------------------------------------------------------
Federal Home Loan Bank
3.50% 9/15/06 670,000 664,583
3.625% 2/16/07 1,500,000 1,481,759
4.875% 11/15/06 115,000 115,133
Freddie Mac 4.625% 12/19/08 2,690,000 2,685,405
^Freddie Mac Principal Strip
3.57% 10/15/08 6,630,000 5,829,461
----------
Total Agency Obligations
(cost $10,923,950) 10,776,341
----------
-------------------------------------------------------------------------
Commercial Mortgage-Backed Securities - 2.22%
-------------------------------------------------------------------------
Bank of America Commercial Mortgage
Securities Series 2005-1 A3
4.877% 11/10/42 785,000 779,034
oCitigroup/Deutsche Bank Commercial
Mortgage Trust Series 2005-CD1 AJ
5.225% 7/15/44 300,000 299,731
General Electric Capital Commercial
Mortgage Series 2005-C2 A2
4.706% 5/10/43 790,000 778,752
Greenwich Capital Commercial Funding
Series 2005-GG3 A2 4.305% 8/10/42 135,000 131,457
Series 2005-GG5 A2 5.117% 4/10/37 1,225,000 1,227,975
LB-UBS Commercial Mortgage Trust
Series 2005-C5 A2 4.885% 9/15/30 1,030,000 1,022,610
Merrill Lynch Mortgage Trust
Series 2005-CIP1 A2 4.96% 7/12/38 270,000 268,458
oSeries 2005-CIP1 B 5.101% 7/12/38 340,000 337,047
Morgan Stanley Capital I
Series 1998-XL1 A2 6.45% 6/3/30 138,498 138,468
Series 2005-HQ6 A2A 4.882% 8/13/42 475,000 471,494
oSeries 2005-HQ7 A4 5.205% 11/14/42 535,000 539,459
----------
Total Commercial Mortgage-Backed Securities
(cost $6,041,789) 5,994,485
----------
</TABLE>
9
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statement
--------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Amount Value
-------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds - 1.12%
-------------------------------------------------------------------------
Brokerage - 0.56%
Merrill Lynch
o5.49% 3/12/07 $ 500,000 $ 495,710
6.00% 2/17/09 500,000 515,983
o Morgan Stanley 4.54% 11/24/06 490,000 490,687
----------
1,502,380
----------
Consumer Non-Cyclical - 0.15%
Kraft Foods 4.625% 11/1/06 400,000 398,823
----------
398,823
----------
Electric - 0.41%
FPL Group Capital 4.086% 2/16/07 115,000 113,885
Southern Capital Funding 5.30% 2/1/07 1,000,000 999,933
----------
1,113,818
----------
Total Corporate Bonds (cost $3,094,013) 3,015,021
----------
-------------------------------------------------------------------------
Municipal Bonds - 0.38%
-------------------------------------------------------------------------
o Massachusetts State Special Obligation
Revenue Loan 5.17% 6/1/22 (FSA) 950,000 1,037,429
----------
Total Municipal Bonds (cost $1,047,522) 1,037,429
----------
-------------------------------------------------------------------------
Non-Agency Asset-Backed Securities - 7.73%
-------------------------------------------------------------------------
AmeriCredit Automobile Receivables Trust
Series 2001-C A4 5.01% 7/14/08 240,002 240,013
Series 2001-D A4 4.41% 11/12/08 360,535 360,438
Chase Funding Mortgage Loan Certificates
Series 2003-4 1A4 3.303% 11/25/29 675,000 663,958
CIT Equipment Collateral
Series 2005-VT1 A4 4.36% 11/20/12 2,230,000 2,206,633
Countrywide Asset-Backed Certificates
Series 2004-S1 A2 3.872% 3/25/20 775,000 761,713
oSeries 2005-12 2A2 4.898% 2/25/36 670,000 665,365
Equity One ABS Series 2004-1 AF3
3.054% 4/25/34 1,249,222 1,239,678
#Falcon Franchise Loan
Series 1999-1 A1 144A 7.578% 6/5/09 1,569,415 1,614,441
o GMAC Mortgage Corporation Loan Trust
Series 2004-HE5 A2 3.685% 9/25/34 2,400,000 2,380,118
Harley-Davidson Motorcycle Trust
Series 2003-4 A1 1.47% 4/15/08 189,754 189,020
o Novastar Home Equity Loan
Series 2004-4 A2B 4.719% 3/25/35 1,225,000 1,227,276
Renaissance Home Equity Loan Trust
Series 2004-4 AF2 3.856% 2/25/35 870,000 859,359
Series 2005-4 A2 5.399% 2/25/36 405,000 405,000
Series 2005-4 A3 5.565% 2/25/36 255,000 255,000
o Residential Asset Mortgage Products
Series 2004-RS12 AII2 4.609% 12/25/34 565,000 565,613
Series 2004-RZ2 AI3 4.30% 1/25/31 755,000 747,099
Residential Funding Mortgage Securities II
Series 2003-HS2 AI3 3.17% 3/25/18 2,007,000 1,968,465
oSeries 2005-HI2 A1 4.519% 5/25/35 337,901 337,947
#Sierra Receivables Funding Company 144A
Series 2003-1A 3.09% 1/15/14 489,497 480,012
Series 2003-2A A1 3.03% 12/15/15 389,007 377,714
-------------------------------------------------------------------------
Non-Agency Asset-Backed Securities (continued)
-------------------------------------------------------------------------
Structured Asset Securities
Series 2005-4XS 1A2B 4.67% 3/25/35 $1,685,000 $ 1,668,477
Series 2005-NC1 A1 3.645% 2/25/35 413,843 412,401
Series 2005-NC1 A2 3.92% 2/25/35 1,240,000 1,224,856
----------
Total Non-Agency Asset-Backed Securities
(cost $20,949,377) 20,850,596
----------
-------------------------------------------------------------------------
Non-Agency Collateralized Mortgage Obligations - 9.53%
-------------------------------------------------------------------------
o American Home Mortgage Investment Trust
Series 2004-2 4A2 3.635% 2/25/44 355,684 354,961
Bank of America Alternative Loan Trust
Series 2004-11 1CB1 6.00% 12/25/34 1,863,954 1,884,037
Series 2005-5 2CB1 6.00% 6/25/35 537,988 541,745
o Bank of America Mortgage Securities
Series 2004-E 1A1 3.516% 6/25/34 838,287 824,120
Series 2005-F 2A3 4.731% 7/25/35 1,161,738 1,146,127
o Bear Stearns Adjustable Rate Mortgage
Trust Series 2005-7 1A2 4.75% 8/25/35 365,615 358,017
o Countrywide Alternative Loan Trust
Series 2004-J7 1A2 4.673% 8/25/34 700,165 697,640
Credit Suisse First Boston Mortgage Securities
Series 2003-29 5A1 7.00% 12/25/33 540,399 552,220
oSeries 2003-AR22 2A3 4.107% 9/25/33 433,967 431,773
Series 2004-1 3A1 7.00% 2/25/34 281,326 286,439
First Horizon Alternative Mortgage Securities
Series 2004-FA1 1A1 6.25% 10/25/34 1,158,036 1,172,069
#GSMPS Mortgage Loan Trust 144A
Series 1998-2 A 7.75% 5/19/27 446,819 469,549
Series 1999-3 A 8.00% 8/19/29 1,130,332 1,196,379
Series 2005-RP1 1A4 8.50% 1/25/35 1,280,525 1,381,891
GSR Mortgage Home Loan Trust
Series 2004-2F 9A1 6.00% 9/25/19 943,591 950,324
o J.P. Morgan Mortgage Trust
Series 2004-A5 4A2 4.85% 12/25/34 640,657 633,847
Lehman Mortgage Trust
Series 2005-2 2A2 5.50% 12/25/35 932,005 936,374
#MASTR Reperforming Loan Trust
Series 2005-1 1A5 144A 8.00% 8/25/34 822,525 872,547
#MASTR Specialized Loan Trust
Series 2005-2 A2 144A 5.15% 7/25/35 945,888 932,173
Nomura Asset Acceptance
oSeries 2004-AP2 A2 4.099% 7/25/34 50,285 50,138
Series 2005-WF1 2A2 4.786% 3/25/35 1,205,000 1,190,236
Residential Asset Mortgage Products
Series 2004-SL1 A3 7.00% 11/25/31 560,162 572,833
Series 2004-SL4 A3 6.50% 7/25/32 559,100 571,659
o Washington Mutual
Series 2003-AR4 A7 3.95% 5/25/33 1,184,149 1,158,201
Series 2004-AR4 A2 2.98% 6/25/34 1,720,000 1,696,112
Series 2005-AR3 A1 4.65% 3/25/35 1,396,016 1,374,553
Washington Mutual Alternative
Mortgage Pass-Through Certificates
Series 2005-1 5A2 6.00% 3/25/35 487,366 487,585
Series 2005-1 6A2 6.50% 3/25/35 114,236 115,639
o Wells Fargo Mortgage Backed Securities Trust
Series 2004-DD 2A3 4.521% 1/25/35 835,000 820,835
Series 2004-I 1A1 3.39% 7/25/34 2,065,821 2,066,222
----------
Total Non-Agency Collateralized Mortgage
Obligations (cost $26,107,363) 25,726,245
----------
</TABLE>
10
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statement
--------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Amount Value
-------------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Obligations - 16.73%
-------------------------------------------------------------------
U.S. Treasury Bond 12.00% 8/15/13 $ 1,930,000 $ 2,290,368
U.S. Treasury Inflation Index Notes
0.875% 4/15/10 431,082 409,949
1.875% 7/15/15 1,024,050 1,007,410
82.00% 1/15/14 to 7/15/14 5,821,340 5,790,628
3.00% 7/15/12 6,840,850 7,235,273
4.25% 1/15/10 3,172,879 3,440,594
U.S. Treasury Notes
1.625% 2/28/06 7,545,000 7,519,068
3.375% 2/28/07 1,340,000 1,324,089
3.625% 4/30/07 2,065,000 2,044,028
4.125% 8/15/10 2,730,000 2,703,980
4.375% 11/15/08 to 12/15/10 3,560,000 3,562,982
4.50% 11/15/15 240,000 242,044
^U.S. Treasury Strip 4.254% 11/15/13 10,735,000 7,580,798
------------
Total U.S. Treasury Obligations
(cost $46,299,176) 45,151,211
------------
-------------------------------------------------------------------
Repurchase Agreements - 2.89%
-------------------------------------------------------------------
With BNP Paribas 3.30% 1/03/06
(dated 12/30/05, to be repurchased
at $4,918,803, collateralized by
$101,000 U.S. Treasury Bills
due 1/26/06, market value $100,700,
$69,000 U.S. Treasury Bills
due 2/23/06, market value $68,836,
$137,000 U.S. Treasury Bills
due 5/4/06, market value $134,706,
$910,000 U.S. Treasury Bills
due 6/1/06, market value $894,171,
$2,550,000 U.S. Treasury Bills
due 6/29/06, market value $2,497,526,
$905,000 U.S. Treasury Notes 2.625%
due 5/15/08, market value $873,100,
$454,000 U.S. Treasury Notes 3.125%
due 5/15/07, market value $448,266) 4,917,000 4,917,000
With UBS Warburg 3.40% 1/03/06
(dated 12/30/05, to be repurchased
at $2,871,084,collateralized by
$334,000 U.S. Treasury Notes
2.00% due 5/15/06, market value
$331,543, $2,511,000 U.S. Treasury
Notes 5.625% due 5/15/08, market
value $2,598,737) 2,870,000 2,870,000
------------
Total Repurchase Agreements
(cost $7,787,000) 7,787,000
------------
Total Market Value of Securities - 101.48%
(cost $277,009,709) 273,865,048
Liabilities Net of Receivables and Other Assets -
(1.48%) (3,998,482)
------------
Net Assets Applicable to 32,644,709 Shares
Outstanding - 100.00% $269,866,566
------------
-------------------------------------------------------------------
-------------------------------------------------------------------
Net Asset Value - Delaware Limited-Term Government Fund
Class A ($189,845,025 / 22,964,114 Shares) $8.27
-----
Net Asset Value - Delaware Limited-Term Government Fund
Class B ($19,856,629 / 2,402,288 Shares) $8.27
-----
Net Asset Value - Delaware Limited-Term Government Fund
Class C ($32,235,411 / 3,900,002 Shares) $8.27
-----
Net Asset Value - Delaware Limited-Term Government Fund
Class R ($1,859,766 / 224,890 Shares) $8.27
-----
Net Asset Value - Delaware Limited-Term Government Fund
Institutional Class ($26,069,735 / 3,153,415 Shares) $8.27
-----
Components of Net Assets at December 31, 2005:
Shares of beneficial interest
(unlimited authorization - no par) $294,710,865
Accumulated net realized loss on investments (21,640,651)
Net unrealized depreciation of investments (3,203,648)
------------
Total net assets $269,866,566
------------
</TABLE>
^ 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. At December 31, 2005, the aggregate amount of Rule 144A securities
equals $7,324,706, which represented 2.71% of the Fund's net assets. See
Note 9 in "Notes to Financial Statements."
o Variable rate securities. The interest rate shown is the rate as of
December 31, 2005.
~ Fully or partially pledged as collateral for financial futures contracts.
<TABLE>
<CAPTION>
Summary of Abbreviations:
<S> <C>
ARM - Adjustable Rate Mortgage
FHAVA - Federal Housing Administration & Veterans Administration
FSA - Insured by Financial Security Assurance
GMAC - General Motors Acceptance Corporation
GNMA - Government National Mortgage Association
GPM - Graduated Payment Mortgage
S.F. - Single Family
SLMA - Student Loan Marketing Association
TBA - To Be Announced
yr - Year
</TABLE>
<TABLE>
<CAPTION>
Net Asset Value and Offering Price per Share -
Delaware Limited-Term Government Fund
<S> <C>
Net asset value Class A (A) $8.27
Sales charge (2.75% of offering price) (B) 0.23
Offering price $8.50
</TABLE>
(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.
11
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statement
--------------------------------------------------------------------------------
OF NET ASSETS (CONTINUED)
Futures Contracts(1)
The following futures contracts were outstanding at December 31, 2005:
<TABLE>
<CAPTION>
Contracts Notional Notional Expiration Unrealized
to Sell Proceeds Value Date Depreciation
-------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C>
(137)
U.S. Treasury
2 year notes $(28,104,445) $(28,110,688) 3/31/06 $ (6,243)
(76)
U.S. Treasury
10 year notes (8,262,131) (8,314,875) 3/31/06 (52,744)
--------
$(58,987)
--------
</TABLE>
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 total exposure in such contracts,
whereas only the net unrealized appreciation (depreciation) is reflected in the
Fund's net assets.
(1)See Note 7 in "Notes to Financial Statements."
See accompanying notes
12
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statement Year Ended December 31, 2005
--------------------------------------------------------------------------------
OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest $11,933,645
Expenses:
Management fees 1,441,456
Distribution expenses -- Class A 592,832
Distribution expenses -- Class B 241,220
Distribution expenses -- Class C 406,762
Distribution expenses -- Class R 11,276
Dividend disbursing and transfer agent fees and expenses 520,576
Accounting and administration expenses 105,038
Reports and statements to shareholders 96,841
Registration fees 79,831
Legal and professional fees 47,932
Custodian fees 31,582
Insurance fees 24,267
Trustees' fees 15,270
Pricing fees 11,986
Taxes (other than taxes on income) 1,056
Other 13,667 3,641,592
---------
Less expenses absorbed or waived (436,890)
Less waiver of distribution expenses -- Class A (296,416)
Less waiver of distribution expenses -- Class R (784)
Less expense paid indirectly (28,727)
---------
Total expenses 2,878,775
---------
Net Investment Income 9,054,870
---------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Currencies:
Net realized gain (loss) on:
Investments 25,801
Futures contracts 177,514
Swap agreements (110,800)
---------
Net realized gain 92,515
Net change in unrealized appreciation/depreciation of investments (4,822,424)
---------
Net Realized and Unrealized Loss on Investments and Foreign Currencies (4,729,909)
---------
Net Increase in Net Assets Resulting from Operations $ 4,324,961
---------
</TABLE>
See accompanying notes
13
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Statements
--------------------------------------------------------------------------------
OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended
12/31/05 12/31/04
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 9,054,870 $ 9,074,325
Net realized gain (loss) on investments 92,515 (321,681)
Net change in unrealized appreciation/depreciation of investments (4,822,424) (1,875,293)
------------ -----------
Net increase in net assets resulting from operations 4,324,961 6,877,351
------------ -----------
Dividends and Distributions to Shareholders from:
Net investment income:
Class A (8,396,279) (8,983,172)
Class B (816,183) (985,589)
Class C (1,372,384) (1,847,269)
Class R (72,128) (61,707)
Institutional Class (1,067,500) (875,872)
------------ -----------
(11,724,474) (12,753,609)
------------ -----------
Capital Share Transactions:
Proceeds from shares sold:
Class A 34,387,014 41,878,039
Class B 3,150,546 4,214,315
Class C 3,011,996 9,856,959
Class R 547,094 636,522
Institutional Class 9,632,155 12,934,332
Net asset value of shares issued upon reinvestment of dividends and distributions:
Class A 6,548,109 6,992,277
Class B 618,044 754,179
Class C 1,009,404 1,363,602
Class R 72,128 61,306
Institutional Class 1,052,442 867,592
------------ -----------
60,028,932 79,559,123
------------ -----------
Cost of shares repurchased:
Class A (50,052,174) (90,781,272)
Class B (10,860,982) (14,660,215)
Class C (20,462,764) (32,501,936)
Class R (617,750) (261,687)
Institutional Class (5,727,495) (8,349,764)
------------ -----------
(87,721,165) (146,554,874)
------------ -----------
Decrease in net assets derived from capital share transactions (27,692,233) (66,995,751)
------------ -----------
Net Decrease in Net Assets (35,091,746) (72,872,009)
Net Assets:
Beginning of year 304,958,312 377,830,321
------------ -----------
End of year (there was no undistributed net investment income at either year end) $269,866,566 $304,958,312
------------ -----------
</TABLE>
See accompanying notes
14
<PAGE>
Financial
HIGHLIGHTS
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Delaware Limited-Term Government Fund Class A
------------------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430
Income (loss) from investment operations:
Net investment income 0.278 0.244 0.222 0.349 0.423
Net realized and unrealized gain (loss) on investments (0.132) (0.048) (0.039) 0.255 0.238
------ ------ ------ ------ ------
Total from investment operations 0.146 0.196 0.183 0.604 0.661
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income (0.356) (0.336) (0.315) (0.434) (0.491)
Return of capital -- -- (0.018) -- --
------ ------ ------ ------ ------
Total dividends and distributions (0.356) (0.336) (0.333) (0.434) (0.491)
------ ------ ------ ------ ------
Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
====== ====== ====== ====== ======
Total return(1) 1.76% 2.31% 2.12% 7.08% 8.16%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $189,845 $204,053 $249,845 $250,729 $208,152
Ratio of expenses to average net assets 0.82% 0.75% 0.75% 0.75% 0.89%
Ratio of expenses to average net assets prior to expense limitation
and
expenses paid indirectly 1.12% 1.13% 1.14% 1.05% 1.08%
Ratio of net investment income to average net assets 3.32% 2.85% 2.57% 3.99% 4.92%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.02% 2.47% 2.18% 3.69% 4.73%
Portfolio turnover 259% 313% 483% 313% 386%
---------------------------------------------------------------------
</TABLE>
(1) 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
15
<PAGE>
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Delaware Limited-Term Government Fund Class B
------------------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430
Income (loss) from investment operations:
Net investment income 0.207 0.170 0.152 0.274 0.348
Net realized and unrealized gain (loss) on investments (0.132) (0.047) (0.044) 0.255 0.238
------ ------ ------ ------ ------
Total from investment operations 0.075 0.123 0.108 0.529 0.586
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income (0.285) (0.263) (0.244) (0.359) (0.416)
Return of capital -- -- (0.014) -- --
------ ------ ------ ------ ------
Total dividends and distributions (0.285) (0.263) (0.258) (0.359) (0.416)
------ ------ ------ ------ ------
Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
====== ====== ====== ====== ======
Total return(1) 0.90% 1.44% 1.25% 6.17% 7.22%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $19,857 $27,559 $37,774 $50,326 $21,743
Ratio of expenses to average net assets 1.67% 1.60% 1.60% 1.60% 1.74%
Ratio of expenses to average net assets prior to expense limitation
and expenses paid indirectly 1.82% 1.83% 1.86% 1.90% 1.93%
Ratio of net investment income to average net assets 2.47% 2.00% 1.72% 3.14% 4.07%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 2.32% 1.77% 1.46% 2.84% 3.88%
Portfolio turnover 259% 313% 483% 313% 386%
---------------------------------------------------------------------
</TABLE>
(1) 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. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
16
<PAGE>
Financial
highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Delaware Limited-Term Government Fund Class C
------------------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430
Income (loss) from investment operations:
Net investment income 0.207 0.170 0.152 0.274 0.347
Net realized and unrealized gain (loss) on investments (0.132) (0.047) (0.044) 0.255 0.238
------ ------ ------ ------ ------
Total from investment operations 0.075 0.123 0.108 0.529 0.585
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income (0.285) (0.263) (0.244) (0.359) (0.415)
Return of capital -- -- (0.014) -- --
------ ------ ------ ------ ------
Total dividends and distributions (0.285) (0.263) (0.258) (0.359) (0.415)
------ ------ ------ ------ ------
Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
====== ====== ====== ====== ======
Total return(1) 0.90% 1.44% 1.25% 6.16% 7.20%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $32,235 $49,709 $72,045 $71,189 $21,386
Ratio of expenses to average net assets 1.67% 1.60% 1.60% 1.60% 1.74%
Ratio of expenses to average net assets prior to expense limitation
and
expenses paid indirectly 1.82% 1.83% 1.86% 1.90% 1.93%
Ratio of net investment income to average net assets 2.47% 2.00% 1.72% 3.14% 4.07%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 2.32% 1.77% 1.46% 2.84% 3.88%
Portfolio turnover 259% 313% 483% 313% 386%
---------------------------------------------------------------------
</TABLE>
(1) 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. Performance would have been lower had the expense limitation not
been in effect.
See accompanying notes
17
<PAGE>
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Delaware Limited-Term Government Fund Class R
------------------------------------------------------------------------------------------------------------------------------------
6/2/03(1)
Year Ended to
12/31/05 12/31/04 12/31/03
<S> <C> <C> <C>
Net asset value, beginning of period $8.490 $8.630 $8.800
Income (loss) from investment operations:
Net investment income 0.244 0.205 0.074
Net realized and unrealized loss on investments (0.142) (0.048) (0.063)
------ ------ ------
Total from investment operations 0.102 0.157 0.011
------ ------ ------
Less dividends and distributions from:
Net investment income (0.322) (0.297) (0.165)
Return of capital -- -- (0.016)
------ ------ ------
Total dividends and distributions (0.322) (0.297) (0.181)
====== ====== ======
Net asset value, end of period $8.270 $8.490 $8.630
Total return(2) 1.34% 1.73% 0.14%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $1,860 $1,905 $1,499
Ratio of expenses to average net assets 1.23% 1.20% 1.20%
Ratio of expenses to average net assets prior to expense limitation and
expenses paid indirectly 1.42% 1.43% 1.38%
Ratio of net investment income to average net assets 2.91% 2.40% 1.86%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 2.72% 2.17% 1.68%
Portfolio turnover 259% 313% 483%
-----------------------------------------------------------------------
</TABLE>
(1) Date of commencement of operations. Ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of dividend and
distributions at net asset value. 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
18
<PAGE>
Financial
HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Delaware Limited-Term Government Fund Institutional Class
------------------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/05 12/31/04 12/31/03 12/31/02 12/31/01
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.480 $8.620 $8.770 $8.600 $8.430
Income (loss) from investment operations:
Net investment income 0.291 0.256 0.234 0.364 0.437
Net realized and unrealized gain (loss) on investments (0.132) (0.047) (0.038) 0.255 0.238
------ ------ ------ ------ ------
Total from investment operations 0.159 0.209 0.196 0.619 0.675
------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income (0.369) (0.349) (0.328) (0.449) (0.505)
Return of capital -- -- 0.018) -- --
------ ------ ------ ------ ------
Total dividends and distributions (0.369) (0.349) (0.346) (0.449) (0.505)
------ ------ ------ ------ ------
Net asset value, end of period $8.270 $8.480 $8.620 $8.770 $8.600
====== ====== ====== ====== ======
Total return(1) 1.91% 2.46% 2.27% 7.27% 8.34%
Ratios and supplemental data:
Net assets, end of period (000 omitted) $26,070 $21,732 $16,667 $13,289 $7,116
Ratio of expenses to average net assets 0.67% 0.60% 0.60% 0.60% 0.74%
Ratio of expenses to average net assets prior to expense limitation
and
expenses paid indirectly 0.82% 0.83% 0.86% 0.90% 0.93%
Ratio of net investment income to average net assets 3.47% 3.00% 2.72% 4.14% 5.07%
Ratio of net investment income to average net assets prior to expense
limitation and expenses paid indirectly 3.32% 2.77% 2.46% 3.84% 4.88%
Portfolio turnover 259% 313% 483% 313% 386%
---------------------------------------------------------------------
</TABLE>
(1) 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.
See accompanying notes
19
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Notes December 31, 2005
--------------------------------------------------------------------------------
TO FINANCIAL STATEMENTS
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.
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. Futures contracts and
options on futures contracts are valued at the daily quoted settlement prices.
Swap agreements and 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
income tax purposes as a regulated investment company and make the requisite
distributions to shareholders. Accordingly, no provision for federal income
taxes has been made in the financial statements.
Class Accounting -- Investment income and common expenses are allocated to the
classes of the Fund on the basis of "settled shares" of each class in relation
to the net assets of the Fund. Realized and unrealized gain (loss) on
investments are allocated to the various classes of the Fund on the basis of
daily net assets of each class. Distribution expenses relating to a specific
class are charged directly to that class.
Repurchase Agreements -- The Fund may invest in a pooled cash account along with
other members of the Delaware Investments(R) 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) for
financial reporting purposes. 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 receives earnings credits from its custodian when positive cash
balances are maintained, which are used to offset custody fees. 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. Effective May
19, 2005, the Fund pays DSC a monthly fee computed at the annual rate of 0.04%
of the Fund's average daily net assets for accounting and administration
services. Prior to May 19, 2005, the Fund paid 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.
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 shares
to no more than 0.50% of average daily net assets. Institutional Class shares
paid no distribution and service expenses.
20
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Notes
--------------------------------------------------------------------------------
TO FINANCIAL STATEMENTS (CONTINUED)
2. Investment Management, Administration Agreements and Other Transactions with
Affiliates (continued)
At December 31, 2005, the Fund had liabilities payable to
affiliates as follows:
<TABLE>
<CAPTION>
<S> <C>
Investment management fee payable to DMC $77,286
Dividend disbursing, transfer agent, accounting
and administration fees and other
expenses payable to DSC 56,196
Distribution fee payable to DDLP 140,619
Other expenses payable to DMC and affiliates* 43,005
</TABLE>
* 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.
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 year ended December 31, 2005, the Fund was
charged $14,057 for internal legal services provided by DMC.
For the year ended December 31, 2005, DDLP earned $15,463 for commissions on
sales of the Fund's Class A shares. For the year ended December 31, 2005, DDLP
received gross contingent deferred sales charge commissions of $70, $44,312 and
$6,340 on redemption of the Fund's Class A, Class B and Class C shares,
respectively, and these commissions were entirely used to offset up-front
commissions previously paid by DDLP to broker-dealers on sales of those 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 year ended December 31, 2005, the Fund made purchases of $298,887,863
and sales of $326,302,309 of long-term investment securities other than
long-term U.S. government securities and short-term investments. For the year
ended December 31, 2005, the Fund made purchases of $439,219,212 and sales of
$447,513,979 of long-term U.S. government securities.
At December 31, 2005, the cost of investments for federal income tax purposes
was $278,017,537. At December 31, 2005, the net unrealized depreciation was
$4,152,489 of which $492,202 related to unrealized appreciation of investments
and $4,644,691 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, 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 years
ended December 31, 2005 and 2004 was as follows:
<TABLE>
<CAPTION>
Year Ended
12/31/05 12/31/04
-------- --------
<S> <C> <C>
Ordinary income $11,724,474 $ 12,753,609
As of December 31, 2005, the components of net
assets on a tax basis were as follows:
Shares of beneficial interest $294,710,865
Undistributed ordinary income 2,358
Post-October Losses (1,075,541)
Capital loss carryforwards (19,618,627)
Unrealized depreciation of investments (4,152,489)
------------
Net assets $269,866,566
============
</TABLE>
The differences between book basis and tax basis components of net assets are
primarily attributable to tax deferral of losses on wash sales, mark-to-market
of futures contracts, and tax treatment of market discount and premium on debt
instruments and contingent payment debt instruments.
Post-October losses represent losses realized on investments from November 1,
2005 through December 31, 2005 that, in accordance with federal income tax
regulations, the Fund has elected to defer and treat as having arisen in the
following fiscal year.
For financial reporting purposes, capital accounts are adjusted to reflect the
tax character of permanent book/tax differences. Reclassifications are primarily
due to expiration of capital loss carryforwards, 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. For the year ended December 31, 2005,
the Fund recorded the following permanent reclassifications.
<TABLE>
<CAPTION>
<S> <C>
Undistributed net investment income $2,669,604
Accumulated net realized gain (loss) 6,772,523
Paid-in capital (9,442,127)
</TABLE>
For federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains. $9,442,127 expired in 2005.
Remaining capital loss carryforwards expire as follows: $5,505,504 expires in
2007, $5,888,621 expires in 2008, $6,133,212 expires in 2012 and $2,091,290
expires in 2013.
5. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Year Ended
12/31/05 12/31/04
Shares sold:
<S> <C> <C>
Class A 4,103,629 4,891,801
Class B 376,467 492,221
Class C 358,771 1,147,265
Class R 65,299 74,227
Institutional Class 1,146,686 1,506,248
Shares issued upon reinvestment
of dividends and distributions:
Class A 781,759 816,795
Class B 73,748 88,106
Class C 120,425 159,254
Class R 8,613 7,166
Institutional Class 125,695 101,468
--------- ---------
7,161,092 9,284,551
--------- ---------
Shares repurchased:
Class A (5,977,270) (10,623,056)
Class B (1,297,042) (1,711,432)
Class C (2,439,919) (3,799,848)
Class R (73,587) (30,591)
Institutional Class (680,892) (978,461)
----------- -----------
(10,468,710) (17,143,388)
----------- -----------
Net decrease (3,307,618) (7,858,837)
========= =========
</TABLE>
For the years ended December 31, 2005 and 2004, 123,282 Class B shares were
converted to 123,282 Class A shares valued at $1,027,637 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.
21
<PAGE>
--------------------------------------------------------
Delaware Limited-Term Government Fund
Notes
--------------------------------------------------------------------------------
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 $225,000,000 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 December 31, 2005, or at any time during
the year.
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. Risks of entering into futures contracts include potential
imperfect correlation between the futures contracts and the underlying
securities and the possibility of an illiquid secondary market for these
instruments. The open futures are presented in the Statement of Net Assets.
8. Swap Agreements
During the year ended December 31, 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. There were no
swap agreements outstanding at December 31, 2005.
9. Credit and Market Risk
The Fund invests in fixed-income securities whose value is derived from an
underlying pool of mortgages or consumer loans. Investors receive principal and
interest payments as the underlying mortgages and consumer loans are paid back.
Some of these securities are collateralized mortgage obligations (CMOs). CMOs
are debt securities issued by U.S. government agencies or by financial
institutions and other mortgage lenders, which are collateralized by a pool of
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 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.
While maintaining oversight, the Board of Trustees has delegated to DMC the
day-to-day functions of determining whether individual securities are liquid for
purposes of the Fund's limitation on investments in illiquid assets. At December
31, 2005, no securities have been determined to be illiquid under the Fund's
Liquidity Procedures.
10. 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.
11. Tax Information (Unaudited)
For the fiscal year ended December 31, 2005, the Fund designates distributions
paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
Long-Term Ordinary
Capital Gains Income Total
Distributions Distributions* Distributions
(Tax Basis) (Tax Basis) (Tax Basis)
------------- -------------- -------------
<S> <C> <C> <C>
-- 100% 100%
</TABLE>
(A) and (B) are based on a percentage of the Fund's total distributions.
* For the fiscal year ended December 31, 2005, certain interest income paid
by the Fund is determined to be Qualified Interest Income and may be
subject to relief from U.S. withholding for foreign shareholders, as
provided by the American Jobs Creation Act of 2004. The Fund has a
Qualified Interest Income percentage of 94.9391% of ordinary income
distribution, which results in $11,131,105 of Qualified Interest Income.
22
<PAGE>
Report
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees Delaware Group Limited-Term Government
Funds - Delaware Limited-Term Government Fund
We have audited the accompanying statement of net assets of the Delaware
Limited-Term Government Fund (the sole series of Delaware Group Limited-Term
Government Funds) (the "Fund") as of December 31, 2005, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware Limited-Term Government Fund of Delaware Group Limited-Term Government
Funds at December 31, 2005, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and its financial highlights for each of the periods indicated
therein, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 10, 2006
23
<PAGE>
Delaware Investments(R) Family of Funds
BOARD OF TRUSTEES/DIRECTORS AND OFFICERS ADDENDUM
A mutual fund is governed by a Board of Trustees/Directors ("Trustees"), which
has oversight responsibility for the management of a fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others who perform services for the
fund. The independent fund trustees, in particular, are advocates for
shareholder interests. Each trustee has served in that capacity since he or she
was elected to or appointed to the Board of Trustees, and will continue to serve
until his or her retirement or election of a new trustee in his or her place.
The following is a list of the Trustees and Officers with certain background and
related information.
<TABLE>
<CAPTION>
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee Trustee
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INTERESTED TRUSTEES
Jude T. Driscoll(2) Chairman, 5 Years - Since August 2000, 87 None
2005 Market Street President, Executive Officer Mr. Driscoll has served in
Philadelphia, PA Chief Executive various executive capacities
19103 Officer and 2 Years - at different times at
Trustee Trustee Delaware Investments(1)
March 10, 1963
-----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
Thomas L. Bennett Trustee Since Private Investor - 87 None
2005 Market Street March 23, 2005 (March 2004 - Present)
Philadelphia, PA
19103 Investment Manager -
Morgan Stanley & Co.
October 4, 1947 (January 1984 - March 2004)
-----------------------------------------------------------------------------------------------------------------------------------
John A. Fry Trustee 4 Years President - 87 Director -
2005 Market Street Franklin & Marshall College Community Health
Philadelphia, PA (June 2002 - Present) Systems
19103
Executive Vice President -
May 28, 1960 University of Pennsylvania
(April 1995 - June 2002)
-----------------------------------------------------------------------------------------------------------------------------------
Anthony D. Knerr Trustee 12 Years Founder/Managing Director - 87 None
2005 Market Street Anthony Knerr & Associates
Philadelphia, PA (Strategic Consulting)
19103 (1990 - Present)
December 7, 1938
-----------------------------------------------------------------------------------------------------------------------------------
Lucinda S. Landreth Trustee Since Chief Investment Officer - 87 None
2005 Market Street March 23, 2005 Assurant, Inc.
Philadelphia, PA (Insurance)
19103 (2002 - 2004)
June 24, 1947
-----------------------------------------------------------------------------------------------------------------------------------
Ann R. Leven Trustee 16 Years Treasurer/Chief Fiscal 87 Director and
Officer -
2005 Market Street National Gallery of Art Audit Committee
Philadelphia, PA (1994 - 1999) Chairperson - Andy
19103 Warhol Foundation
November 1, 1940 Director and Audit
Committee Member -
Systemax Inc.
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Number of Other
Principal Portfolios in Fund Directorships
Name, Position(s) Occupation(s) Complex Overseen Held by
Address Held with Length of Time During by Trustee Trustee
and Birthdate Fund(s) Served Past 5 Years or Officer or Officer
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INDEPENDENT TRUSTEES (CONTINUED)
Thomas F. Madison Trustee 11 Years President/Chief 87 Director -
2005 Market Street Executive Officer - Banner Health
Philadelphia, PA MLM Partners, Inc.
19103 (Small Business Investing Director -
and Consulting) CenterPoint Energy
February 25, 1936 (January 1993 - Present)
Director and Audit
Committee Member -
Digital River Inc.
Director and Audit
Committee Member -
Rimage
Corporation
Director - Valmont
Industries, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
Janet L. Yeomans Trustee 6 Years Vice President 87 None
2005 Market Street (January 2003 - Present)
Philadelphia, PA and Treasurer
19103 (January 2006 - Present)
3M Corporation
July 31, 1948
Ms. Yeomans
has held
various
management
positions at
3M Corporation
since 1983.
-----------------------------------------------------------------------------------------------------------------------------------
J. Richard Zecher Trustee Since Founder - 87 Director and Audit
2005 Market Street March 23, 2005 Investor Analytics Committee Member -
Philadelphia, PA (Risk Management) Investor Analytics
19103 (May 1999 - Present)
Director and Audit
July 3, 1940 Committee Member -
Oxigene, Inc.
-----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Michael P. Bishof Senior Chief Financial Mr. Bishof has served in 87 None(3)
2005 Market Street Vice President Officer since various executive capacities
Philadelphia, PA and February 17, 2005 at different times at
19103 Chief Financial Delaware Investments.
Officer
August 18, 1962
------------------------------------------------------------------------------------------------------------------------------------
David F. Connor Vice President, Vice President Mr. Connor has served as 87 None(3)
since Vice President and Deputy
2005 Market Street Deputy General September 21, 2000 General Counsel of Delaware
Philadelphia, PA Counsel and Secretary and Secretary Investments since 2000.
19103 since
October 25, 2005
December 2, 1963
------------------------------------------------------------------------------------------------------------------------------------
David P. O' Connor Senior Vice Senior Vice Mr. O'Connor has served in 87 None(3)
President, various executive and legal
2005 Market Street President, General Counsel capacities at different
Philadelphia, PA General Counsel and Chief Legal times at Delaware
Officer since Investments.
19103 and Chief October 25, 2005
Legal Officer
February 21, 1966
------------------------------------------------------------------------------------------------------------------------------------
John J. O'Connor Senior Vice President Treasurer Mr. O'Connor has served in 87 None(3)
2005 Market Street and Treasurer since various executive capacities
Philadelphia, PA February 17, 2005 at different times at
19103 Delaware Investments.
June 16, 1957
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Delaware Investments is the marketing name for Delaware Management
Holdings, Inc. and its subsidiaries, including the Fund's(s') investment
advisor, principal underwriter and its transfer agent.
(2) Mr. Driscoll is considered to be an "Interested Trustee" because he is an
executive officer of the Fund's(s') manager and distributor.
(3) Mr. Bishof, Mr. Connor, Mr. David P. O'Connor and Mr. John J. O'Connor
serve in similar capacities for the six portfolios of the Optimum Fund
Trust, which have the same investment advisor, principal underwriter, and
transfer agent as the registrant. Mr. John J. O'Connor also serves in a
similar capacity for Lincoln Variable Insurance Products Trust, which has
the same investment advisor as the registrant.
The Statement of Additional Information for the Fund(s) includes additional
information about the Trustees and Officers and is available, without charge,
upon request by calling 800 523-1918.
25
<PAGE>
About
--------------------------------------------------------------------------------
THE ORGANIZATION
This annual 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(R) 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.
<TABLE>
<CAPTION>
<S> <C> <C>
Board of Affiliated Officers Contact Information
Trustees
Jude T. Driscoll Michael P. Bishof Investment Manager
Chairman Senior Vice President and Delaware Management Company,
Delaware Investments(R) Family of Funds Chief Financial Officer a Series of Delaware Management Business Trust
Philadelphia, PA Delaware Investments(R) Family of Funds Philadelphia, PA
Philadelphia, PA
Thomas L. Bennett National Distributor
Private Investor David F. Connor Delaware Distributors, L.P.
Rosemont, PA Vice President, Deputy General Counsel Philadelphia, PA
and Secretary
John A. Fry Delaware Investments(R) Family of Funds Shareholder Servicing, Dividend
President Philadelphia, PA Disbursing and Transfer Agent
Franklin & Marshall College Delaware Service Company, Inc.
Lancaster, PA David P. O'Connor 2005 Market Street
Senior Vice President, General Counsel Philadelphia, PA 19103-7094
Anthony D. Knerr Managing and Chief Legal Officer
Director Delaware Investments(R) Family of Funds For Shareholders
Anthony Knerr & Associates Philadelphia, PA 800 523-1918
New York, NY
John J. O'Connor For Securities Dealers and Financial
Lucinda S. Landreth Senior Vice President and Treasurer Institutions Representatives Only
Former Chief Investment Officer Delaware Investments(R) Family of Funds 800 362-7500
Assurant, Inc. Philadelphia, PA
Philadelphia, PA Web site
www.delawareinvestments.com
Ann R. Leven Former
Treasurer/Chief Fiscal Officer
National Gallery of Art
Washington, DC
Delaware Investments is the
Thomas F. Madison marketing name for Delaware
President and Chief Executive Officer Management Holdings, Inc. and its
MLM Partners, Inc. subsidiaries.
Minneapolis, MN
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, MN
J. Richard Zecher
Founder
Investor Analytics
Scottsdale, AZ
</TABLE>
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
<PAGE>
This page intentionally left blank.
<PAGE>
This page intentionally left blank.
<PAGE>
[LOGO] Delaware
Investments
-----------------------------------
A member of Lincoln Financial Group
--------------------------------------------------------------------------------
Contact Information
Web Site
www.delawareinvestments.com
E-mail
service@delinvest.com
Shareholder Service Center
800 523-1918
Call the Shareholder Service Center Monday to Friday, 8 a.m. to 7 p.m. Eastern
Time:
o For fund information, literature, price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments, wire redemptions, telephone
redemptions and telephone exchanges.
Delaphone Service
800 362-FUND (800 362-3863)
o For convenient access to account information or current performance
information on all Delaware Investments(R) Funds seven days a week, 24
hours a day, use this Touch-Tone(R) service.
--------------------------------------------------------------------------------
(182) Printed in the USA
AR-022 [12/05] CGI 2/06 ANN-Limited-Term PO10751
<PAGE>
Item 2. Code of Ethics
The registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. A copy of the registrant's Code of Business Ethics has been posted
on Delaware Investments' internet website at www.delawareinvestments.com. Any
amendments to the Code of Business Ethics, and information on any waiver from
its provisions granted by the registrant, will also be posted on this website
within five business days of such amendment or waiver and will remain on the
website for at least 12 months.
Item 3. Audit Committee Financial Expert
The registrant's Board of Trustees/Directors has determined that each
member of the registrant's Audit Committee is an audit committee financial
expert, as defined below. For purposes of this item, an "audit committee
financial expert" is a person who has the following attributes:
a. An understanding of generally accepted accounting principles and
financial statements;
b. The ability to assess the general application of such principles in
connection with the accounting for estimates, accruals, and reserves;
c. Experience preparing, auditing, analyzing, or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the registrant's financial statements, or
experience actively supervising one or more persons engaged in such activities;
d. An understanding of internal controls and procedures for financial
reporting; and
e. An understanding of audit committee functions.
An "audit committee financial expert" shall have acquired such attributes
through:
a. Education and experience as a principal financial officer, principal
accounting officer, controller, public accountant, or auditor or experience in
one or more positions that involve the performance of similar functions;
b. Experience actively supervising a principal financial officer, principal
accounting officer, controller, public accountant, auditor, or person performing
similar functions;
c. Experience overseeing or assessing the performance of companies or
public accountants with respect to the preparation, auditing, or evaluation of
financial statements; or
d. Other relevant experience.
The registrant's Board of Trustees/Directors has also determined that each
member of the registrant's Audit Committee is independent. In order to be
"independent" for purposes of this item, the Audit Committee member may not: (i)
other than in his or her capacity as a member of the Board of Trustees/Directors
or any
<PAGE>
committee thereof, accept directly or indirectly any consulting, advisory or
other compensatory fee from the issuer; or (ii) be an "interested person" of the
registrant as defined in Section 2(a)(19) of the Investment Company Act of 1940.
The names of the audit committee financial experts on the registrant's
Audit Committee are set forth below:
Thomas L. Bennett (1)
Thomas F. Madison
Janet L. Yeomans (1)
J. Richard Zecher
Item 4. Principal Accountant Fees and Services
(a) Audit fees.
The aggregate fees billed for services provided to the registrant by its
independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $20,100 for
the fiscal year ended December 31, 2005.
The aggregate fees billed for services provided to the registrant by its
independent auditors for the audit of the registrant's annual financial
statements and for services normally provided by the independent auditors in
connection with statutory and regulatory filings or engagements were $26,030 for
the fiscal year ended December 31, 2004.
(b) Audit-related fees.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended December 31, 2005.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $44,200 for the registrant's fiscal year ended
December 31, 2005. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of reports concerning
transfer agent's system of internal accounting control pursuant to Rule 17Ad-13
of the Securities Exchange Act and issuance of agreed upon procedures reports to
the registrant's Board in connection with the annual transfer agent and fund
accounting service agent contract renewals and the pass through of internal
legal cost relating to the operations of the registrant.
-----------------------
(1) The instructions to Form N-CSR require disclosure on the relevant experience
of persons who qualify as audit committee financial experts based on "other
relevant experience." The Board of Trustees/Directors has determined that Mr.
Bennett qualifies as an audit committee financial expert by virtue of his
education, Chartered Financial Analyst designation, and his experience as a
credit analyst, portfolio manager and the manager of other credit analysts and
portfolio managers. The Board of Trustees/Directors has determined that Ms.
Yeomans qualifies as an audit committee financial expert by virtue of her
education and experience as the Treasurer of a large global corporation.
<PAGE>
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the registrant's financial
statements and not reported under paragraph (a) of this Item were $0 for the
fiscal year ended December 31, 2004.
The aggregate fees billed by the registrant's independent auditors for
services relating to the performance of the audit of the financial statements of
the registrant's investment adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $164,700 for the registrant's fiscal year ended
December 31, 2004. The percentage of these fees relating to services approved by
the registrant's Audit Committee pursuant to the de minimis exception from the
pre-approval requirement in Rule 2-01(c)(7)(i)(C) of Regulation S-X was 0%.
These audit-related services were as follows: issuance of reports concerning
transfer agent's system of internal accounting control pursuant to Rule 17Ad-13
of the Securities Exchange Act, issuance of agreed upon procedures reports to
the registrant's Board in connection with the annual transfer agent and fund
accounting service agent contract renewals and the pass through of internal
legal cost relating to the operations of the registrant; and preparation of
report on controls Placed in Operation and Tests of Operating Effectiveness
Relating to the Retirement Plan Services Division ("SAS 70 report")..
(c) Tax fees.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $3,900 for the fiscal year
ended December 31, 2005. The percentage of these fees relating to services
approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax return and review of annual excise distribution calculation.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's investment adviser and other
service providers under common control with the adviser and that relate directly
to the operations or financial reporting of the registrant were $0 for the
registrant's fiscal year ended December 31, 2005.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant were $1,750 for the fiscal year
ended December 31, 2004. The percentage of these fees relating to services
approved by the registrant's Audit Committee pursuant to the de minimis
exception from the pre-approval requirement in Rule 2-01(c)(7)(i)(C) of
Regulation S-X was 0%. These tax-related services were as follows: review of
income tax return and review of annual excise distribution calculation.
The aggregate fees billed by the registrant's independent auditors for
tax-related services provided to the registrant's adviser and other service
providers under common control with the adviser and that relate directly to the
operations or financial reporting of the registrant were $0 for the registrant's
fiscal year ended December 31, 2004..
(d) All other fees.
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended December 31, 2005.
The aggregate fees, billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
December 31, 2005.
<PAGE>
The aggregate fees billed for all services provided by the independent
auditors to the registrant other than those set forth in paragraphs (a), (b) and
(c) of this Item were $0 for the fiscal year ended December 31, 2004.
The aggregate fees billed for all services other than those set forth in
paragraphs (b) and (c) of this Item provided by the registrant's independent
auditors to the registrant's adviser and other service providers under common
control with the adviser and that relate directly to the operations or financial
reporting of the registrant were $0 for the registrant's fiscal year ended
December 31, 2004.
(e) The registrant's Audit Committee has established pre-approval policies
and procedures as permitted by Rule 2-01(c)(7)(i)(B) of Regulation S-X (the
"Pre-Approval Policy") with respect to services provided by the registrant's
independent auditors. Pursuant to the Pre-Approval Policy, the Audit Committee
has pre-approved the services set forth in the table below with respect to the
registrant up to the specified fee limits. Certain fee limits are based on
aggregate fees to the registrant and other registrants within the Delaware
Investments Family of Funds.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Service Range of Fees
---------------------------------------------------------------------------------------------------------------------------
<S> <C>
Audit Services
---------------------------------------------------------------------------------------------------------------------------
Statutory audits or financial audits for new Funds up to $25,000 per Fund
---------------------------------------------------------------------------------------------------------------------------
Services associated with SEC registration statements (e.g., Form N-1A, Form up to $10,000 per Fund
N-14, etc.), periodic reports and other documents filed with the SEC or other
documents issued in connection with securities offerings (e.g., comfort letters
for closed-end Fund offerings, consents), and assistance in responding to SEC
comment letters
---------------------------------------------------------------------------------------------------------------------------
Consultations by Fund management as to the accounting or disclosure treatment of up to $25,000 in the
transactions or events and/or the actual or potential impact of final or proposed aggregate
rules, standards or interpretations by the SEC, FASB, or other regulatory
or standard-setting bodies (Note: Under SEC rules, some consultations may
be considered "audit-related services" rather than "audit services")
---------------------------------------------------------------------------------------------------------------------------
Audit-Related Services
---------------------------------------------------------------------------------------------------------------------------
Consultations by Fund management as to the accounting or disclosure treatment of up to $25,000 in the
transactions or events and /or the actual or potential impact of final or proposed aggregate
rules, standards or interpretations by the SEC, FASB, or other
regulatory or standard-setting bodies (Note: Under SEC rules, some
consultations may be considered "audit services" rather than "audit-related
services")
---------------------------------------------------------------------------------------------------------------------------
Tax Services
---------------------------------------------------------------------------------------------------------------------------
U.S. federal, state and local and international tax planning and advice (e.g.,
consulting on
statutory, regulatory or administrative developments, evaluation of Funds' tax compliance up to $25,000 in the
function, etc.) aggregate
---------------------------------------------------------------------------------------------------------------------------
U.S. federal, state and local tax compliance (e.g., excise distribution reviews, etc.) up to $5,000 per Fund
---------------------------------------------------------------------------------------------------------------------------
Review of federal, state, local and international income, franchise and other tax returns up to $5,000 per Fund
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Under the Pre-Approval Policy, the Audit Committee has also pre-approved
the services set forth in the table below with respect to the registrant's
investment adviser and other entities controlling, controlled by or under common
control with the investment adviser that provide ongoing services to the
registrant (the "Control Affiliates") up to the specified fee limit. This fee
limit is based on aggregate fees to the investment adviser and its Control
Affiliates.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Service Range of Fees
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-Audit Services
---------------------------------------------------------------------------------------------------------------------------
Services associated with periodic reports and other documents filed with the SEC up to $10,000 in the
and assistance in responding to SEC comment letters aggregate
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Pre-Approval Policy requires the registrant's independent auditors to
report to the Audit Committee at each of its regular meetings regarding all
services initiated since the last such report was rendered, including those
services authorized by the Pre-Approval Policy.
(f) Not applicable.
<PAGE>
(g) The aggregate non-audit fees billed by the registrant's independent
auditors for services rendered to the registrant and to its investment adviser
and other service providers under common control with the adviser were $209,460
and $364,209 for the registrant's fiscal years ended December 31, 2005 and
December 31, 2004, respectively.
(h) In connection with its selection of the independent auditors, the
registrant's Audit Committee has considered the independent auditors' provision
of non-audit services to the registrant's investment adviser and other service
providers under common control with the adviser that were not required to be
pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit
Committee has determined that the independent auditors' provision of these
services is compatible with maintaining the auditors' independence.
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
Company 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
fourth fiscal quarter) that have materially affected, or are reasonably likely
to materially affect, the registrant's internal control over financial
reporting.
<PAGE>
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 LIMITED-TERM GOVERNMENT FUNDS
Jude T. Driscoll
------------------------------------
By: Jude T. Driscoll
Title: Chief Executive Officer
Date: February 28, 2006
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: February 28, 2006
Michael P. Bishof
------------------------------------
By: Michael P. Bishof
Title: Chief Financial Officer
Date: February 28, 2006
</TEXT>
</DOCUMENT>