<PAGE>
GRAPHIC
1995
Annual
Report
- --------
Delaware
Group
Limited-Term
Government
Fund
- --------
[PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES APPEAR HERE]
A Tradition of Sound Investing Since 1929
DELAWARE
GROUP
========
Philadelphia o London
<PAGE>
LIMITED-TERM
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GOVERNMENT FUND
- ------------------
INVESTMENT
- ------------------
OBJECTIVE
- ------------------
To seek high, stable income by investing in a portfolio of short- and
intermediate-term securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities and instruments secured by such securities.
[PHOTO OF VARIOUS PHILADELPHIA HISTORICAL SITES APPEAR HERE]
About Our Cover
- ------------------
Headquartered in Philadelphia, Pennsylvania, Delaware Group shares in the
tradition of a city built on the vision of opportunity. Amidst the city's
historic sites, symbolic of our nation's freedom and prosperity, Delaware Group
provides both individual and institutional investors with a conservative,
disciplined approach to money management.
DELAWARE GROUP
- ------------------
A TRADITION OF
- ------------------
SOUND INVESTING
- ------------------
Delaware Management Company's investment experience dates back to 1929. Our
first mutual fund was established in 1938. Headquartered in Philadelphia with
an affiliate in London, Delaware provides a full range of mutual fund
investments, annuities and retirement plan services. Delaware International
Advisers Ltd., our London-based international affiliate, was established in
1990.
Delaware Group manages mutual funds with the same time-tested,
disciplined strategies demanded by the large public and private pension
plans, foundations and endowments that are among our clients. With over 60
years of experience, we have demonstrated our commitment to quality
investment management and service.
Today, Delaware manages some $28 billion in mutual funds and
institutional investment advisory accounts. We measure our success by the
financial success and satisfaction of our nearly 500,000 shareholders.
<PAGE>
January 23, 1996
DEAR
- -------------------------------------------
SHAREHOLDER:
- -------------------------------------------
Since its inception, Limited-Term Government Fund has strived for a high,
stable level of current income while minimizing fluctuations in principal and
providing maximum liquidity. Your Fund achieved these goals during the fiscal
year ended December 31, 1995, a strong period for the U.S. bond market.
During the year, Limited-Term Government Fund was able to provide as
much income as the longest term U.S. government securities even though, as
part of our efforts to maintain principal, we focused on securities maturing in
less than three years. Generally, longer-term securities have a greater
sensitivity to movement in investment rates.
In fact, as of year's end, your Fund's 30-day yield of 6.01% (for Class
A shares calculated according to Securities and Exchange Commission guidelines)
was higher than the 5.95% yield available on 30-year U.S. Treasury bonds.
(Interest and principal of U.S. Treasury securities are guaranteed while mutual
fund shares are not.)
Your Fund provided this high level of current income by focusing on
high-yielding, very high quality mortgage securities. Overall average quality
of bonds in the Fund's portfolio remains AAA, the highest available.
For the fiscal year ended December 31, 1995, Limited-Term Government
Fund A Class shares provided a total return of +8.71%, (capital change plus
reinvested dividends based on net asset value). As a result of 1995's strong
bond market, the Fund's share price appreciated, partially offsetting the
decline in bond prices that affected the Fund in 1994.
During the past three years, Limited-Term Government Fund on average
has provided an annual income that has outpaced the income available from
Three-Year U.S. Treasury notes, as you'll see in our performance review, which
follows a report on the Fund's positioning from Roger A. Early, the Fund's
senior portfolio manager.
This past year, as Limited-Term Government Fund marked its 10th year
in operation, the U.S. bond market was rejuvenated by a welcome change in the
direction of Federal Reserve Board interest policy. Concern about rising
inflation abated and the U.S. economy slowed but avoided recession.
<TABLE>
<CAPTION>
========================================================================================================
Average Annual Total Return
----------------------------------------------
January 1, 1995 November 24, 1985
to Dec. 31, 1995 to Dec. 31, 1995
<S> <C> <C>
Limited-Term Government Fund A Class +8.71% +6.58%
- ------------------------------------------------------------------------------------------------------
Lipper Short U.S. Government
Fund Average +11.25% (128 funds) +7.21% (9 funds)
- ------------------------------------------------------------------------------------------------------
Three-Year U.S. Treasury Notes +13.83% +8.24%
</TABLE>
Limited-Term Government Fund and the Lipper Fund Average performance are
calculated at net asset value. All performance quoted above assumes reinvestment
of all distributions. Interest and principal repayment at maturity for U.S.
Treasury securities are guaranteed by the U.S. government, unlike mutual fund
dividends and share values. Complete Fund performance for all Classes can be
found on page 7.
===============================================================================
<PAGE>
In February 1994, the Fed raised the Federal Funds rate - the rate
banks charge each other for overnight loans - by half a percentage point. It
then reversed course with quarter point (0.25%) rate cuts in July and December.
As of December 31, 1995, the Federal Funds rate - the Fed's tool for influencing
short-term interest rates - stood at 5.50%, exactly where it stood a year
earlier.
Amid relatively weak consumer spending during the Christmas shopping
season and faltering demand for new autos and homes, the bond market correctly
anticipated a short-term interest rate cut by the Fed of another quarter point
(0.25%) on January 31, 1996.
Your Fund continued its conservative, income-oriented strategy in 1995,
which limited the Fund's ability to benefit from capital appreciation. Given the
volatility in interest rates of the past two years, we believe this conservative
approach offers an attractive risk/reward profile for the months ahead.
For more than 30,000 shareholders, Limited-Term Government Fund
provides monthly dividends, helping investors meet current income needs. We wish
to thank you for your continued confidence in Delaware Group and Limited-Term
Government Fund as it enters its second decade.
Sincerely,
/s/ Wayne A. Stork
- ----------------------------------
Wayne A. Stork
Chairman, President
and Chief Executive Officer
PORTFOLIO
- -------------------------------------------
MANAGER'S
- -------------------------------------------
REVIEW
- -------------------------------------------
Short-Term Interest Rates
Remained High
During 1995, the interest rates available on shorter maturity (less
than one year) U.S. government securities stayed high relative to the 2.6%
annualized growth rate in U.S. consumer prices. Yields on three-month U.S.
Treasury bills, considered a "risk-free" investment, dropped only six-tenths
of a percentage point during 1995 to 5.07% as of December 31, 1995, while the
yield on 30-year U.S. Treasury bonds dropped almost two percentage points to
5.95%.
For income-oriented investors, this "flattening" of the bond yield
curve (as illustrated on page 3) means that shorter-term debt becomes more
attractive. In other words, high quality short-term bonds provide almost as
much income as is available from longer term securities of the same issuer at
considerably less risk to principal from any future rise in interest rates.
The Fund's Investment Strategy
Limited-Term Government Fund has historically focused on securities maturing in
less than five years. During the year, the Fund shortened its average effective
maturity from 4.4 years to 2.9 years, which limited the Fund's ability to
participate in the bond market's capital appreciation.
<PAGE>
===============================================================================
Portfolio Highlights
(As of December 31, 1995)
Average Effective Maturity 2.9 years
Average Effective Duration 2.1 years
Average Quality AAA
Current Yield* 6.01%
Largest Source of Income -
Government Mortgage-Backed Securities
* For Class A shares measured according to SEC guidelines
===============================================================================
In our opinion, this area of the bond market was the most attractive
given the Fund's objective of providing high, stable current income while
minimizing fluctuations in principal. Longer-term bonds, in our opinion, present
too many risks relative to the income they currently provide.
We also shortened the portfolio's average effective duration from 2.5
years to 2.1 years. Duration is the most common measure of a bond's sensitivity
to changes in interest rates. It indicates the approximate percentage of change
in a bond's price given a 1% change in interest rates.
Why We Chose A Conservative Path
Our conservative focus on shorter maturities reflected two concerns we had
during the past 12 months. First, November 1994 through February 1995, the
Federal Reserve Board raised short-term interest rates by increasing the rate
banks pay for overnight loans. We did not believe that "fighting the Fed" or
anticipating that the bond market would move in the opposite direction of the
Fed's most recent policy decision was not prudent.
Our reluctance to speculate meant that while the Fund provided a higher
level of income in 1995 than many funds with similar investment objectives, we
did not enjoy as much capital appreciation as fixed-income funds that bet rates
would fall substantially.
Second, we believed that U.S. economic growth would rebound in the
second half of 1995, and thus make continued interest rate cuts by the Fed
unnecessary. This forecast proved too optimistic.
Although selected export-oriented industries such as aviation, drugs
and tobacco saw rising demand for their products, domestic consumer spending,
which represents about two-thirds of the U.S. economy, remained lackluster.
Many retailers faced weak December sales.
U.S. Treasury Yields Declined in 1995
Yield Yield Yield
12/31/93 12/29/94 12/29/95
3 Month 3.075% 5.612% 5.072%
6 Month 3.287 6.456 5.147
1 Year 3.578 7.121 5.132
2 Year 4.234 7.673 5.150
3 Year 4.514 7.758 5.208
5 Year 5.197 7.825 5.374
10 Year 5.792 7.795 5.570
30 Year 6.346 7.839 5.949
Source: Bloomberg Business News
Yields on U.S. Treasury securities dropped from a range of 5.68% (on very short-
term bills) to 7.87% (on 30-year bonds) at the end of 1994 to a much narrower
range of 5.07% to 5.95% at the end of 1995. This flattening of the yield curve
occurred as long-term bond prices more than recovered from 1994's bond market
weakness. Note how the flatness of the curve compares with that of 1993, when
yields fell to historic lows.
<PAGE>
During the past three years, the yield advantage that Government National
Mortgage Association securities (Ginnie Maes) have enjoyed over comparable
maturity U.S. Treasuries has nearly doubled from 0.63% as of January 3, 1992, to
1.19% as of December 29, 1995. This means mortgages provided greater income
potential.
A Growing Income Advantage For Mortgages
Yield Advantage, GNMA Securities and 10-Year
U.S. Treasury Bonds, 1992 to 1995
Basis Points
1/3/92 63
1/10 70
1/17 80
1/24 87
1/31 95
2/7 77
2/14 84
2/21 79
2/28 66
3/6 84
3/13 82
3/20 82
3/27 83
4/3 88
4/10 79
4/17 75
4/24 75
5/1 73
5/8 75
5/15 82
5/22 76
5/29 79
6/5 68
6/12 71
6/19 65
6/26 69
7/3 74
7/10 66
7/17 53
7/24 55
7/31 65
8/7 72
8/14 69
8/21 70
8/28 72
9/4 84
9/11 89
9/18 90
9/25 89
10/2 106
10/9 102
10/16 89
10/23 106
10/30 103
11/6 102
11/13 103
11/20 99
11/27 93
12/4 91
12/11 91
12/18 92
12/25 93
1/1/93 90
1/8 84
1/15 85
1/22 79
1/29 83
2/5 82
2/12 86
2/19 85
2/26 87
3/5 90
3/12 81
3/19 90
3/26 99
4/2 99
4/9 90
4/16 98
4/23 88
4/30 92
5/7 98
5/14 91
5/21 87
5/28 92
6/4 88
6/11 89
6/18 86
6/25 85
7/2 83
7/9 86
7/16 82
7/23 80
7/30 83
8/6 84
8/13 84
8/20 81
8/27 83
9/3 98
9/10 91
9/17 74
9/24 83
10/1 89
10/8 104
10/15 90
10/22 81
10/29 98
11/5 90
11/12 97
11/19 98
11/26 101
12/3 101
12/10 92
12/17 89
12/24 92
12/31 90
1/7/94 92
1/14 90
1/21 75
1/28 72
2/4 88
2/11 84
2/18 81
2/25 82
3/4 96
3/11 101
3/18 93
3/25 99
4/1 115
4/8 111
4/15 102
4/22 107
4/29 112
5/6 110
5/13 111
5/20 98
5/27 107
6/3 108
6/10 100
6/17 104
6/24 101
7/1 112
7/8 105
7/15 105
7/22 106
7/29 101
8/5 108
8/12 105
8/19 105
8/26 100
9/2 107
9/9 103
9/16 102
9/23 101
9/30 100
10/7 112
10/14 107
10/21 106
10/28 103
11/4 105
11/11 101
11/18 102
11/25 109
12/2 111
12/9 115
12/16 108
12/23 111
12/30 108
1/6/95 110
1/13 106
1/20 103
1/27 103
2/3 102
2/10 109
2/17 96
2/24 99
3/3 103
3/10 99
3/17 103
3/24 104
3/31 103
4/7 107
4/14 107
4/21 105
4/28 104
5/5 96
5/12 103
5/19 105
5/26 114
6/2 108
6/9 117
6/16 115
6/23 118
6/30 123
7/7 112
7/14 112
7/21 110
7/28 116
8/4 116
8/11 118
8/18 112
8/25 113
9/1 116
9/8 118
9/15 116
9/22 120
9/29 115
10/6 120
10/13 123
10/20 126
10/27 123
11/3 123
11/10 121
11/17 121
11/24 126
12/1 128
12/8 123
12/15 119
12/22 117
12/29 119
Source: Bloomberg Business News. The above chart does not represent the yield of
Limited-Term Government Fund. Direct owners of GNMA securities may receive a
partial return of principal along with periodic interest payments. U.S. Treasury
bond holders receive a return of principal at maturity.
<PAGE>
Another factor affecting our decisions in 1995 was that the year-long
bond rally was unusually pronounced. Given the bond market's weak performance in
1994, we thought it prudent to remain cautious.
Mortgages Provide Higher Income
One recent indicator of continuing strength in the economy is that
November housing starts as measured by the U.S. government, while by no means
robust, outpaced the market's expectations. The housing market is of particular
importance to the Fund because 75% of the income generated by the portfolio for
the year ended December 31, 1995, was provided by pools of residential
mortgages.
These included collateralized mortgage obligations (CMOs), and
securities issued by the Federal Home Loan Mortgage Corp. (Freddie Mac), the
Government National Mortgage Association (Ginnie Mae) and the Federal National
Mortgage Association (Fannie Mae).
This emphasis on residential mortgages gave the Fund a
yield-to-maturity almost 1% higher than a U.S. Treasury note with a maturity
similar to Limited-Term Government Fund. As of December 31, 1995, the yield
advantage mortgages had over U.S. Treasuries was at its highest level in eight
years. We believe this makes mortgage-backed securities the most attractive
choice in the high-quality bond market for income-oriented investors. We expect
to maintain the Fund's focus on this higher-yielding sector.
As you can see in the chart above, the income potential of GNMA (Ginnie
Mae) securities relative to comparable U.S. Treasuries has increased during the
past three years even as the yields on both securities have fallen in the wake
of declining interest rates. As of December 31, 1995, the yield available on a
typical GNMA security was 6.76% compared to 5.57% for a 10-year U.S. Treasury
note.
For homeowners whose mortgages are pooled together by agencies such as
GNMA, 1995's interest rate environment was very favorable. Conventional 30-year
mortgage rates tumbled sharply from a December 1994 peak of 9.45% to an average
of 7.25% as of year's end. This is a two-edged sword which can help the Fund by
serving as an incentive for home buying but hurt it by encouraging mortgage
refinancing.
<PAGE>
Greater home buying tends to increase the amount of mortgage securities
available in the market, and thus increase investment opportunities for the
Fund. Increased mortgage refinancing (the prepayment of a previously held
mortgage), on the other hand, has a negative effect on the principal value of
mortgage securities. Due to our careful selection process, the Fund's mortgages
experienced a more modest increase in prepayments than the overall mortgage
market.
Because we tend to concentrate on older mortgages, much of our
portfolio includes loans that date from the 1986-1987 period, and involve
property that has already been through several periods of refinancing. We
believe that the better-than-market prepayment experience of our mortgage
holdings serves to enhance their long term value. Of course, we can't guarantee
that this better-than-market experience will continue.
Outlook
Going forward, we believe the bond market is anticipating more economic
weakness and more short-term interest rate cuts by the Fed than will actually
occur. In this environment, Limited-Term Government Fund will stand by its
strategy of maximizing income and minimizing fluctuations in principal.
We expect that the long-term trend in interest rates is still down but
are aware of the possibility that rates may move modestly higher at some time
before the end of the current economic expansion. We believe that the bond
market is overestimating the need for aggressive discounts in the Federal Funds
rate. As of this writing, two reasons for this concern are 1) the continuing
impasse over the federal budget and 2) economic growth is continuing, although
at a more subdued pace.
[PHOTO OF ROGER A. EARLY]
Roger A. Early
Generally, we will choose a relatively conservative posture for
Limited-Term Government Fund because we believe a recession is unlikely in the
months ahead. To benefit from the additional income available from mortgages,
more than half your Fund's portfolio was invested in mortgages at year's end, an
asset allocation strategy we expect to continue. Despite prepayment risks, we
believe high quality mortgage securities offer good value by providing the Fund
greater income potential than can be achieved through investments in U.S.
Treasury securities.
/s/ Roger A. Early
- -------------------------------------
Roger A. Early
Vice President and Senior Portfolio Manager
<PAGE>
A LOOK AT LIMITED-TERM
- -------------------------------------------------
GOVERNMENT FUND'S PERFORMANCE
- -------------------------------------------------
This past year Limited-Term Government Fund marked its 10th anniversary
of providing shareholders with high, stable current income. As you can see on
the next page, an investor who purchased $10,000 worth of Class A shares on
December 31, 1985, would have had holdings worth $18,857 as of December 31,
1995, if monthly dividends were reinvested.
The Fund's performance is compared to that of the Merrill Lynch One-to-
Three-Year Government Index, an unmanaged index that represents the performance
of a broad range of U.S. government securities maturing in less than three
years, including mortgages and U.S. Treasury notes. As with any unmanaged index,
performance does not include the "real world" costs of managing a mutual fund or
the cost of securities transactions.
Given Limited-Term Government Fund's average effective maturity of 2.9
years as of December 31, 1995, the Merrill Lynch One-to-Three Year Government
Index closely reflects the segment of the intermediate bond market in which the
Fund invests.
Though we have typically used this index as our benchmark, in last
year's report the Merrill Lynch One-to-Three Year and the Three-to-Five Year
Treasury Indexes were cited. For your information, the ending value of those
indexes for the time periods shown in the chart on the next page would have been
$21,046 and $23,563 respectively, based on a $10,000 investment on December 31,
1985.
Many shareholders have selected Limited-Term Government Fund for its
income potential. As you can see below, a $10,000 investment in the Fund would
have provided more income than a comparable maturity U.S. Treasury note since
1992. Of course, Fund dividends are not guaranteed by the U.S. government like
U.S. Treasury note interest.
Limited-Term Government A Class
vs. a Three-Year U.S. Treasury Note
Annual Income from a $10,000 Investment
Limited-Term Government Fund* Three-Year U.S. Treasury Note
Dec. '87 675.9 651.7
Dec. '88 710.79 651.7
Dec. '89 820.03 651.7
Dec. '90 791.77 785.6
Dec. '91 777.59 785.6
Dec. '92 719.88 785.6
Dec. '93 662.86 505.2
Dec. '94 648.94 505.2
Dec. '95 681.32 505.2
Limited-Term Three-Year
Government Fund U.S. Treasury Note
--------------- ------------------
Total income for nine Years: $6,490 $5,829
A $10,000 investment in Limited-Term Government Fund on December 31, 1986, and
held through December 31, 1995, would have provided a higher level of total
income than a Three-Year U.S. Treasury note purchased on December 31, 1986, and
repurchased every three years.
*Assumes Class A purchase at 3.0% sales charge with distributions paid in cash.
<PAGE>
Limited-Term Government Fund's
Long-Term Performance
Limited-Term Government Fund A Class vs.
Merrill Lynch 1-3 Year Government Index
Growth of a $10,000 Investment
December 31, 1985 to
December 31, 1995
Limited Term Merrill Lynch 1-3
Government Fund A Class Year Government Index
Jan. '86 9700 10000
Jan. '87 10466 11035
Jan. '88 11049 11659
Jan. '89 11769 12384
Jan. '90 12860 13730
Jan. '91 14088 15085
Dec. '91 15893 16824
Dec. '92 16786 17884
Dec. '93 17678 18852
Dec. '94 17346 18959
Dec. '95 18857 21410
Chart assumes $10,000 invested in A Class shares on January 1, 1985, and
includes the effect of a 3% sales charge and reinvestment of all distributions.
Performance of other classes of Limited-Term Government Fund will vary due to
differing charges and expenses.
Limited-Term Government Fund Performance
Average Annual Return Through December 31, 1995
<TABLE>
<CAPTION>
Lifetime Ten Years Five Years One Year
<S> <C> <C> <C> <C>
Class A (Est. 1985) +6.58% +6.55% +5.41% +5.43%
- --------------------------------------------------------------------------------------------------------------------------------
Class B (Est. 1994)
Excluding Sales Charge +4.32% -- -- +7.80%
Including Sales Charge +3.20% -- -- +5.80%
- --------------------------------------------------------------------------------------------------------------------------------
Class C* (Est. 1995)
Excluding Sales Charge +1.01% -- -- --
Including Sales Charge -0.01% -- -- --
</TABLE>
*Aggregate return November 29, 1995, through December 31, 1995
Return and share value will fluctuate with rising and falling interest rates so
that shares when redeemed may be worth more or less than the original cost. Past
performance is not a guarantee of future results.
Class A returns reflect the impact of the 3.00% maximum sales charge and the
12b-1 fee, and take into account the reinvestment of all distributions.
Class B performance reflects the reinvestment of all distributions. Class B
shares do not carry a front-end sales charge, but are subject to a 1% annual
distribution and service fee. They are subject to a deferred sales charge of up
to 2% if redeemed before the end of the fourth year. Lifetime performance
excluding sales charge assumes the investment was not redeemed. Class B was
initially offered on May 2, 1994.
Class C performance is for only a one month period and may not be representative
of longer term results. C shares have a 1% annual distribution and service fee.
If shares are redeemed within 12 months, a 1% contingent deferred sales charge
applies. Class C was initially offered on November 29, 1995.
The average annual total returns for the lifetime, 10-, five-year and one-year
periods ended December 31, 1995, for Limited-Term Government Fund's
Institutional Class, which is available without sales or asset-based
distribution charges only to certain eligible institutional accounts, were
+7.02%, +6.99%, +6.20% and +8.87%. The Institutional Class was initially made
available September 2, 1987; performance prior to that date was adjusted to
eliminate the effect of the sales charge, but not Class A's asset-based
distribution charge.
<PAGE>
FINANCIAL
- ---------------------------
STATEMENTS
- ---------------------------
Delaware Group
Limited-Term Government Funds, Inc. -
Limited-Term Government Fund*
Statement of Net Assets
December 31, 1995
Principal Market
Amount Value
U.S. TREASURY OBLIGATIONS - 22.00%
U.S. Treasury Notes 6.75% 5/31/97 ..... $24,000,000 $ 24,499,198
U.S. Treasury Notes 8.125% 2/15/98 .... 95,500,000 101,028,485
U.S. Treasury Strips 0.00% 11/15/10 ... 70,500,000 29,185,583
-----------
Total U.S. Treasury Obligations
(cost $152,916,104) ................. 154,713,266
-----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OBLIGATIONS (GNMA) - 17.74%
GNMA 8.00% 2016 to 2017................ 15,344,151 16,073,201
GNMA 9.00% 2016 to 2022................ 65,814,258 70,282,293
GNMA 10.00% 2016 to 2018............... 1,883,722 2,066,797
GNMA 10.50% 2015 to 2016............... 617,963 684,781
GNMA11.00% 2000 to 2020................ 8,229,432 9,263,515
GNMA 11.50% 2015 to 2019............... 143,060 162,194
GNMA GPM (Graduated Payment Mortgage)
11.50% 2010 to 2013................... 264,383 299,745
GNMA GPM 12.00% 2010 to 2012 .......... 121,106 138,553
GNMA GPM 12.25% 2013 to 2014 .......... 358,249 411,985
GNMA 12.50% 2010 to 2015............... 309,947 358,376
GNMA GPM 13.75% 2014................... 123,247 139,693
GNMA II 9.50% 2020 to 2021 ............ 7,630,067 8,162,294
GNMA II 9.75% 2016 to 2019 ............ 792,605 853,536
GNMA II 10.00% 2020.................... 5,131,862 5,592,737
GNMA II 10.50% 2020.................... 318,445 349,593
GNMA II 11.00% 2015.................... 2,580,320 2,848,028
GNMA II 11.50% 2017 to 2018 ........... 661,939 731,030
GNMA II 12.00% 2014 to 2016 ........... 4,543,167 5,050,012
GNMA II 12.50% 2013 to 2014 ........... 1,157,084 1,300,273
-----------
Total Government National Mortgage
Association Obligations
(cost $123,654,253) ................... 124,768,636
-----------
COLLATERALIZED MORTGAGE
OBLIGATIONS (CMO) - 31.33%
Citicorp Mortgage Securities 1990- 10
A5 9.50% 7/25/05 ..................... 1,370,332 1,393,643
Federal Home Loan Mortgage Corporation
31D 7.55% 5/15/20 .................... 953,843 978,406
* Formerly known as Delaware Group Treasury Reserves, Inc.-
Treasury Reserves Intermediate Series
<PAGE>
Principal Market
Amount Value
COLLATERALIZED MORTGAGE
OBLIGATIONS (CMO) (Continued)
Federal Home Loan Mortgage Corporation
1260E 8.00% 10/15/04.................. $3,481,631 $3,515,795
Federal Home Loan Mortgage Corporation
1276H 8.00% 9/15/06................... 20,413,000 21,194,342
Federal Home Loan Mortgage Corporation
1126I 8.50% 10/15/19.................. 15,000,000 15,251,897
Federal Home Loan Mortgage Corporation
69F 9.00% 12/15/05.................... 2,764,674 2,912,314
Federal Home Loan Mortgage Corporation
136D 9.00% 3/15/20.................... 3,872,300 4,004,842
Federal Home Loan Mortgage Corporation
26F 9.50% 2/15/20..................... 9,740,530 10,426,487
Federal Home Loan Mortgage Corporation
139F 9.50% 6/15/20.................... 7,305,334 7,587,985
Federal Home Loan Mortgage Corporation
1765B A 10.00% 1/15/17................ 15,950,075 16,588,078
Federal Home Loan Mortgage Corporation
1614 K 10.00% 6/15/20................. 32,433,460 35,103,914
Federal National Mortgage Association
G-1 6.50% 3/1/09...................... 938,736 944,603
Federal National Mortgage Association
1989-58E 8.50% 9/25/18................ 8,019,132 8,184,959
Federal National Mortgage Association
1990-128H 8.50% 12/25/19.............. 14,400,739 14,825,840
Federal National Mortgage Association
1993-39A 8.75% 3/25/18................ 14,457,477 14,884,251
Federal National Mortgage Association
1990-137D 9.00% 12/25/18.............. 15,000,000 15,246,192
Federal National Mortgage Association
1990-23G 9.20% 12/25/18............... 8,514,607 8,763,668
Federal National Mortgage Association
1989-15D 10.00% 9/25/18............... 1,780,921 1,851,222
Federal National Mortgage Association
1989-1C 10.30% 3/25/18................ 2,127,349 2,217,409
Federal National Mortgage Association
1989-19A 10.30% 4/25/19............... 7,665,059 8,450,075
Federal National Mortgage Association
46-2 11.00% 12/25/03.................. 5,143,688 5,510,176
Investors Securities Trust 1984-4 F5
10.875% 10/25/13...................... 233,990 256,328
PaineWebber Trust 1990-Q1
9.00% 3/20/97......................... 1,476,060 1,475,092
Prudential Home Mortgage Securities
1992-2 A17 8.30% 3/25/07.............. 3,051,314 3,067,486
Resolution Trust Mortgage Securities
1995-C1 6.55% 2/25/27................. 6,535,000 6,539,084
Travelers Mortgage Securities
1984-1Z2 12.00% 3/1/14................ 8,100,242 9,178,587
-----------
Total Collateralized Mortgage
Obligations (cost $219,512,264) ...... 220,352,675
-----------
<PAGE>
Statement of Net Assets (Continued)
Principal Market
Amount Value
ASSET-BACKED SECURITIES - 7.56%
Aames Mortgage Trust 1994
DI AIA 9.00% 2/15/27 ................... $ 16,956,257 $ 17,515,135
First Alliance Mortgage Trust 1994-3 A1
7.825% 10/25/25 ........................ 7,557,325 7,870,070
Firstbank Auto Receivables Trust
1995-B A 6.40% 7/17/00 ................. 8,172,271 8,237,469
Olympic Automobile Receivables Trust
1995-B A2 7.35% 10/15/01 ............... 5,088,931 5,217,073
UCFC Home Equity Loan Trust
1995-C1 A2 6.575% 6/10/11 ............... 9,200,000 9,298,440
World Omni Automobile Lease Securitization
Trust 1995-A A 6.05% 11/25/01 ........... 5,000,000 5,039,800
------------
Total Asset-Backed Securities
(cost $52,152,447) ..................... 53,177,987
------------
AGENCY OBLIGATIONS - 5.20%
Federal Home Loan Bank BN-02 1
6.297% 11/20/02 ........................ 25,000,000 25,167,969
Federal Home Loan Bank BI-02 A
6.457% 11/20/02 ........................ 11,300,000 11,420,063
------------
Total Agency Obligations
(cost $36,272,313) ..................... 36,588,032
------------
AGENCY MORTGAGE-BACKED SECURITIES - 15.27%
Federal Home Loan Mortgage Corporation
8.00% 5/1/09 to 7/1/11 ................. 12,363,161 12,904,296
Federal Home Loan Mortgage Corporation
8.50% 12/1/08 to 11/1/10 ............... 3,929,591 4,101,967
Federal Home Loan Mortgage Corporation
8.75% 5/1/10 ........................... 1,257,929 1,328,294
Federal Home Loan Mortgage Corporation
9.00% 6/1/09 to 1/1/24 ................. 11,235,200 11,948,015
Federal Home Loan Mortgage Corporation
9.50% 11/1/05 .......................... 6,034,742 6,287,447
Federal Home Loan Mortgage Corporation
11.00% 9/1/10 to 11/1/15 ............... 1,036,171 1,149,573
Federal Home Loan Mortgage Corporation
11.50% 3/1/01 to 3/1/16 ................ 8,211,776 9,157,383
Federal National Mortgage Association
8.00% 7/1/02 to 7/1/23 ................. 6,255,791 6,517,986
Federal National Mortgage Association
8.50% 8/1/07 to 8/1/17 ................. 17,859,191 18,823,619
Federal National Mortgage Association
9.00% 8/1/04 to 4/1/16 ................. 4,501,963 4,773,741
Federal National Mortgage Association
9.15% 4/10/98 .......................... 8,400,000 9,075,024
Federal National Mortgage Association
9.25% 7/1/08 to 8/1/16 ................. 3,181,292 3,398,462
<PAGE>
Principal Market
Amount Value
AGENCY MORTGAGE-BACKED SECURITIES
(Continued)
Federal National Mortgage Association
10.00% 1/1/19 .......................... $ 1,073,471 $ 1,180,147
Federal National Mortgage Association
11.00% 8/1/10 to 8/1/20 ................ 14,479,766 16,193,665
Federal National Mortgage Association
12.50% 2/01/11 ......................... 278,035 317,134
Federal National Mortgage Association
13.00% 7/01/15 ......................... 180,534 206,486
------------
Total Agency Mortgage-Backed Securities
(cost $105,234,093) .................... 107,363,239
------------
REPURCHASE AGREEMENTS - 0.11%
With Chase Manhattan 5.60%
1/2/96 (dated 12/29/95 collateralized
by $707,000 U.S. Treasury Notes 7.75%
due 11/30/99, market value
$769,621) .............................. 754,000 754,000
------------
Total Repurchase Agreements
(cost $754,000) ........................ 754,000
------------
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.21%
(cost $690,495,474) ................................... 697,717,835
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES
0.79% ................................................. 5,538,892
-------------
NET ASSETS APPLICABLE TO 72,231,489
LIMITED-TERM GOVERNMENT FUND A CLASS SHARES,
1,361,094 LIMITED-TERM GOVERNMENT FUND B
CLASS SHARES, 3,616 LIMITED-TERM GOVERNMENT
FUND C CLASS SHARES AND 4,140,745 LIMITED-TERM
GOVERNMENT INSTITUTIONAL CLASS SHARES ($.001
PAR VALUE) OUTSTANDING; EQUIVALENT TO $9.05
PER SHARE - 100.00% ................................... $703,256,727
=============
Components of Net Assets at December 31, 1995:
Common stock, $.001 par value, 2,000,000,000 shares
authorized to the Limited-Term Government Fund
with 950,000,000 shares allocated to Limited-Term
Government Fund A Class, 200,000,000 shares allocated
to Limited-Term Government Fund B Class, 50,000,000
shares allocated to Limited-Term Government Fund C Class
and 200,000,000 shares allocated to Limited-Term
Government Fund Institutional Class .................... $816,012,755
Accumulated undistributed:
Net realized loss on investments ...................... (119,978,389)
Net unrealized appreciation of investments ............ 7,222,361
-------------
Total Net Assets ....................................... $703,256,727
=============
See accompanying notes
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Statement of Operations
For the Year Ended December 31, 1995
INVESTMENT INCOME:
Interest ................................... $ 67,635,006
EXPENSES:
Management fees ($3,875,637) and
directors' fees ($8,999) ................. 3,884,636
Dividend disbursing and transfer
agent fees and expenses ................... 1,431,118
Distribution expenses ...................... 1,168,370
Reports and statements to shareholders ..... 268,026
Salaries ................................... 193,279
Custodian fees ............................. 118,798
Taxes (other than income) .................. 103,117
Registration fees .......................... 80,192
Professional fees .......................... 38,204
Other ...................................... 188,147 7,473,887
------------ ------------
NET INVESTMENT INCOME ...................... 60,161,119
------------
NET REALIZED LOSS AND
UNREALIZED GAIN ON INVESTMENTS:
Net realized loss from security
transactions ............................... (3,033,812)
Net realized loss on options ............... (26,700,560) (29,734,372)
------------
Net unrealized appreciation of
investments during the period ............. 3,845,517
------------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS ...................................... 5,111,145
--------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................................ $65,272,264
==============
Computation of net Asset Value and
Offering Price for the Limited-term
Government Fund A Class:
Net asset value per share (A) ............................ $9.05
Sales charges (3.00% of offering price or 3.09% of
amount invested per share) (B) .......................... 0.28
--------------
Offering price ............................................ $9.33
==============
- ------------------
(A)Net asset value per share, as illustrated, is the estimated amount
which would be paid upon the redemption or repurchase of shares.
(B)See Purchasing Shares in the current Prospectus, for purchases of $100,000
or more.
See accompanying notes
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Statement of Changes in Net Assets
Year Ended Year Ended
12/31/95 12/31/94
OPERATIONS:
Net investment income ................. $ 60,161,119 $ 71,534,054
Net realized loss from investment
transactions ......................... (29,734,372) (85,112,787)
Net unrealized appreciation
(depreciation) during the period ..... 34,845,517 (7,549,434)
--------------- ---------------
Net increase (decrease) in net assets
resulting from operations ............ 65,272,264 (21,128,167)
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income:
A Class .............................. (56,577,137) (67,899,145)
B Class .............................. (680,325) (145,627)
C Class .............................. (164) --
Institutional Class .................. (2,903,493) (3,489,282)
--------------- ---------------
(60,161,119) (71,534,054)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class .............................. 71,418,543 173,103,587
B Class .............................. 7,816,855 6,890,177
C Class .............................. 33,130 --
Institutional Class .................. 9,883,383 17,044,450
Net asset value of shares issued upon
reinvestment of dividends from net
investment income:
A Class .............................. 37,152,037 46,483,822
B Class .............................. 423,812 98,455
C Class .............................. 164 --
Institutional Class .................. 2,894,542 3,479,603
--------------- ---------------
129,622,466 247,100,094
--------------- ---------------
Cost of shares repurchased:
A Class .............................. (249,515,275) (468,009,117)
B Class .............................. (2,226,367) (550,004)
C Class .............................. (650) --
Institutional Class .................. (12,779,876) (26,564,816)
--------------- ---------------
(264,522,168) (495,123,937)
--------------- ---------------
Decrease in net assets derived from
capital share transactions ........... (134,899,702) (248,023,843)
--------------- ---------------
NET DECREASE IN NET ASSETS ............ (129,788,557) (340,686,064)
NET ASSETS:
Beginning of period ................... 833,045,284 1,173,731,348
--------------- ---------------
End of period ......................... $703,256,727 $ 833,045,284
=============== ===============
See accompanying notes
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Notes to Financial Statements
December 31, 1995
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund, (formerly known as Delaware Group Treasury Reserves, Inc. - Treasury
Reserves Intermediate Series)(the "Fund"), a series of Delaware Group
Limited-Term Government Funds, Inc., (the "Company"), is registered as a
diversified open-end investment company under the Investment Company Act of
1940. The Company is organized as a Maryland corporation. The Fund offers four
classes of shares. The investment objective of the Fund is to seek a high stable
level of income, while attempting to minimize fluctuations in principal and
provide maximum liquidity.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund for financial
statement preparation:
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of 4:00 p.m. on the valuation date. Securities not traded
or not listed on an exchange are valued at the mean of the last quoted bid and
asked prices. Long-term debt securities are valued by an independent pricing
service and are believed to reflect the fair value of such securities. Money
market instruments having less than 60 days to maturity are valued at amortized
cost.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the financial
statements.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregate daily balance of the
pooled cash account is invested in repurchase agreements secured by obligations
of the U.S. government. The respective collateral is held by the Fund's
custodian bank until the maturity of the repurchase agreements. Each repurchase
agreement is at least 100% collateralized. However, in the event of default or
bankruptcy by the counterparty to the agreement, realization of the collateral
may be subject to legal proceedings.
Class Accounting - Expenses directly attributable to a class are charged to that
class. Other common expenses are prorated between all classes of the Fund.
Other - Expenses common to all funds within the Delaware Group of funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Costs used in calculating realized gains and losses on the sale of
investment securities are those of the specific securities sold. Interest income
is recorded on an accrual basis. Original issue discounts are accreted to
interest income over the lives of the respective securities. The Fund declares
dividends daily from net investment income and pays such dividends monthly.
Certain Fund expenses are paid directly by brokers. The amount of these expenses
is less than 0.01% of the Fund's average net assets.
<PAGE>
2. Investment Management Fee and Distribution Agreements
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the investment manager of the
Fund, an annual fee which is calculated daily at 0.50% of the average daily net
assets of the Fund, less fees paid to the independent directors. At December 31,
1995, the Fund had a liability for Investment Management fees and other expenses
payable to DMC for $21,623.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual 12b-1 fee not to
exceed 0.30% (currently, no more than 0.15% pursuant to Board action) of the
average daily net assets of the A Class and 1.00% of the average daily net
assets of the B Class and the C Class. No distributions expenses are paid by the
Institutional Class. At December 31, 1995, the Fund had a liability for
distribution fees and other expenses payable to DDLP for $17,717. For the year
ended December 31, 1995, the Fund paid DDLP $167,595 for commissions earned on
sales of Limited-Term Government Fund A Class.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing and transfer agent for the Fund. For the year
ended December 31, 1995, the Fund expensed $1,431,118 for these services. At
December 31, 1995, the Fund had a liability for such fees and other expenses
payable to DSC for $5,434.
Certain officers of the Investment Manager are officers, directors and/or
employees of the Fund. These officers, directors and employees are paid no
compensation by the Fund.
On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger') became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the manner
in which DMC, DDLP or DSC have heretofore conducted their respective
relationships with the Fund.
<PAGE>
Notes to Financial Statements (Continued)
3. Investments
During the year ended December 31, 1995, the Fund made purchases of $223,605,695
and sales of $336,058,025 of investment securities other than direct U.S.
government securities and temporary cash investments.
At December 31, 1995, unrealized appreciation for federal income tax purposes
aggregated $7,222,361 of which $9,600,733 related to unrealized appreciation of
securities and $2,378,372 related to unrealized depreciation of securities.
The realized loss for federal income tax purposes was $29,779,768 for the year
ended December 31, 1995. For federal income tax purposes, the Fund had
accumulated capital losses of $119,978,389 at December 31, 1995 which may be
carried forward and applied against future capital gains. The capital loss
carryforward expires as follows: 1996 - $859,564, 1997 - $574,266, 1998 -
$707,105, 2001 - $2,978,605, 2002 - $85,079,081 and 2003 - $29,779,768. At
December 31, 1995, the Fund reclassified $2,146,972 from accumulated net
undistributed realized loss from security transactions to commonstock due to the
expiration of a capital loss carryforward.
Transactions in written call options for the year ended December 31, 1995, were
as follows:
<TABLE>
<CAPTION>
Call Options Terminated
-----------------------
No. of Premium Net Realized
Contracts Received Cost Gain/(Loss)
--------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Options outstanding December 31, 1994 . . . . . . . . . . . . . . . 1,150 $ 565,901
Contracts written . . . . . . . . . . . . . . . . . . . . . . . . . 11,850 9,884,330
--------- ----------
13,000 10,450,231
--------- ----------
Contracts terminated:
Closed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500 10,018,041 $25,082,805 (15,064,764)
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 432,190 -0- 432,190
---------- ----------
13,000 10,450,231 $25,082,805 $(14,632,574)
========== ========== ----------- ------------
Contracts outstanding December 31, 1995. . . . . . . . . . . . . . . -0- -0-
========== ==========
</TABLE>
Net realized loss on put options purchased for the year ended December 31,
1995, was $12,067,986.
4. Capital Stock
Transactions in capital stock shares were as follows:
Year Ended Year Ended
12/31/95 12/31/94
Shares sold:
A Class. . . . . . . . . . . . . . . . .. 7,879,835 18,177,057
B Class. . . . . . . . . . . . . . . . .. 861,864 747,755
C Class. . . . . . . . . . . . . . . . .. 3,670 --
Institutional Class. . . . . . . . . . . 1,090,957 1,776,208
Shares issued upon reinvestment of dividends
from net investment income:
A Class. . . . . . . . . . . . . . . . . 4,098,270 4,974,528
B Class. . . . . . . . . . . . . . . . . 46,761 10,824
C Class. . . . . . . . . . . . . . . . . 18 --
Institutional Class. . . . . . . . . . . 319,328 373,041
---------- ----------
14,300,703 26,059,413
---------- ----------
Shares repurchased:
A Class. . . . . . . . . . . . . . . . . (27,536,002) (49,806,031)
B Class. . . . . . . . . . . . . . . . . (246,005) (60,105)
C Class. . . . . . . . . . . . . . . . . (72) --
Institutional Class. . . . . . . . . . . (1,410,138) (2,856,655)
----------- -----------
(29,192,217) (52,722,791)
----------- -----------
Net decrease. . . . . . . . . . . . . . .. (14,891,514) (26,663,378)
=========== ===========
<PAGE>
5. Concentration of Credit Risk
The Fund invests in securities whose value is derived from an underlying
pool of mortgages or consumer loans. Prepayment of these loans may shorten
the stated maturity of the respective obligation and may result in a loss
of premium, if any has been paid.
As a writer of call options, the Fund receives a premium at the outset
which is recorded as a liability and is subsequently adjusted to the
current market value of the option written. The Fund bears the market risk
of unfavorable changes in the price of the financial instrument underlying
the option. Generally, the Fund would incur a gain, to the extent of the
premiums, if the price of the underlying financial instrument decreases
between the date the option is written and the date on which the option is
terminated. Generally, the Fund would realize a loss, if the price on the
financial instrument increases between those dates in an amount in excess
of premiums received..
As a purchaser of put options, the Fund pays a premium at the outset
which is recorded as an asset and is subsequently adjusted to the current
market value of the option purchased. The Fund bears the market risk of
unfavorable changes in the price of the financial instruments underlying
the option. Generally, the Fund would incur a loss, to the extent of the
premiums, if the price of the underlying financial instrument decreases
between the date the option is purchased and the date on which the option is
terminated. Generally, the Fund would realize a gain, if the price of the
financial instrument increases between those dates.
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Limited-Term Government Fund A Class(1)
--------------------------------------
Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period. . . . . . . . . . . . . . . . . . . $8.990 $9.840 $10.000 $10.190 $9.770
Income from investment operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . . . 0.699 0.667 0.681 0.740 0.799
Net realized and unrealized gain (loss) from security transactions. 0.060 (0.850) (0.160) (0.190) 0.420
----- ----- ----- ----- -----
Total from investment operations. . . . . . . . . . . . . . . . . . 0.759 (0.183) 0.521 0.550 1.219
Less distributions:
Dividends from net investment income. . . . . . . . . . . . . . . . (0.699) (0.667) (0.681) (0.740) (0.799)
Distributions from net realized gain from security transactions . . none none none none none
------ ------ ----- ----- -----
Total distributions. . . . . . . . . . . . . . . . . . . . . . . . (0.699) (0.667) (0.681) (0.740) (0.799)
Net asset value, end of period. . . . . . . . . . . . . . . . . . . . . .. $9.050 $8.990 $ 9.840 $10.000 $10.190
------ ------ ------- ------- -------
Total return (4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.71% (1.88%) 5.31% 5.62% 13.04%
Ratios/supplemental data:
Net assets, end of period (000 omitted). . . . . . . . . . . . . . $653,451 $789,525 $1,126,031 $861,829 $144,129
Ratio of expenses to average net assets. . . . . . . . . . . . . . 0.96% 0.91% 0.88% 0.87%(2) 0.90%(2)
Ratio of net investment income to average net assets. . . . . . . 7.71% 7.10% 6.77% 7.03%(3) 7.96%(3)
Portfolio turnover. . . . . . . . . . . . . . . . . . . . . . . .. 73% 148% 171% 77% 42%
</TABLE>
- --------------------
(1) Formerly known as Treasury Reserves Intermediate Fund A Class.
(2) Ratio of expenses to average net assets prior to expense limitation
was 0.90% for 1992 and 0.99% for 1991.
(3) Ratio of net investment income to average net assets prior to expense
limitation was 7.01% for 1992 and 7.87% for 1991.
(4) Does not include maximum sales charge of 3.00% nor the 1% limited
contingent deferred sales charge that would apply in the event of
certain redemptions within 12 months of purchase.
<PAGE>
Notes to Financial Statements (Continued)
6. Financial Highlights (Continued)
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
Limited-Term Limited-Term Limited-Term
Government Government Government Fund
Fund B Class(1) Fund C Class Institutional Class*
-------------- ------------- -------------------
Period Period
Year 5/2/94(4) 11/28/95(5) Year Ended December 31,
Ended to to ------------------------
1995 12/31/94 12/31/95 1995 1994 1993 1992(7) 1991
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $8.990 $9.430 $9.010 $8.990 $9.840 $10.000 $10.190 $9.770
Income from investment operations:
Net investment income ................... 0.622 0.399 0.051 0.712 0.681 0.696 0.754 0.816
Net realized and unrealized gain (loss)
from security transactions ............. 0.060 (0.440) 0.040 0.060 (0.850) (0.160) (0.190) 0.420
------ ------ ------ ------ ------ ------ ------ -----
Total from investment operations ......... 0.682 (0.041) 0.091 0.772 (0.169) 0.536 0.564 1.236
------ ------- ------ ----- ------ ------ ----- ------
Less distributions:
Dividends from net investment income (0.622) (0.399) (0.051) (0.712) (0.681) (0.696) (0.754) (0.816)
Distributions from net realized gain from
security transactions ............... none none none none none none none none
----- ----- ----- ----- ----- ---- ---- -----
Total distributions ..................... (0.622) (0.399) (0.051) (0.712) (0.681) (0.696) (0.754) (0.816)
------- ------ ------ ----- ----- ---- ----- ------
Net asset value, end of period .............. $9.050 $8.990 $9.050 $9.050 $8.990 $9.840 $10.000 $10.190
------ ----- ------ ------ ------ ------ ------- ------
Total return(6) ............................. 7.80% (0.44%) (5) 8.87 (1.74%) 5.44% 5.77% 13.21%
Ratios/supplemental data:
Net assets, end of period (000 omitted) . $12,313 $6,282 $33 $37,460 $37,238 $47,700 $52,403 $146,598
Ratio of expenses to average net assets. 1.81% 1.76% (5) 0.81% 0.76% 0.74% 0.75%(2) 0.75%(2)
Ratio of net investment income to average
net assets ........................ 6.86% 6.25% (5) 7.86% 7.25% 6.91% 7.58%(3) 8.11%(3)
Portfolio turnover ...................... 73% 148% (5) 73% 148% 171% 77% 42%
</TABLE>
- -------------------
* The per share data for the year ended 1991 is derived from data of the
Investors I class, which like the Limited-Term Government Fund
Institutional Class (formerly known as Treasury Reserves Intermediate Fund
Institutional Class), a new class of shares, was not subject to Rule 12b-1
distribution expenses. Shares of Investors I class were converted into
share of Investors II class, now referred to as Limited-Term Government
Fund A Class, on June 1, 1992, pursuant to a Plan of Recapitalization
approved by shareholders of Investors I class.
(1) Formerly known as Treasury Reserves Intermediate Fund B Class.
(2) Ratio of expenses to average net assets prior to expense limitation was
0.78% for 1992 and 0.84% for 1991 for the Limited-term Government Fund
Institutional Class.
(3) Ratio of net investment income to average net assets prior to expense
limitation was 7.54% for 1992 and 8.02% for 1991 for the Limited-Term
Government Institutional Class.
(4) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(5) Date of initial public offering; the ratios of expenses and net investment
income to average net assets, portfolio turnover and total return have been
omitted as management believes that such ratios and return for the
relatively short period are not meaningful.
(6) Does not include any applicable contingent deferred sales charge which
varies from 1%-2% for the Limited-Term Government Fund B Class and 1% for
the Limited-Term Government Fund C Class depending upon the holding period.
(7) The per share data and ratios for Investors I class and the Limited-Term
Government Institutional Class have been combined for 1992. For the five
months ended May 31, 1992, the Investors I class operating expenses and net
investment income per share were $0.031 and $0.325, respectively. For the
seven months ended December 31, 1992, the Limited-Term Government Fund
Institutional Class operating expenses and net investment income per share
were $0.045 and $0.429, respectively. All net investment income was
distributed to shareholders.
<PAGE>
Delaware Group Limited-Term Government Funds, Inc.-Limited-Term Government Fund
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund
We have audited the accompanying statement of net assets of the Delaware Group
Limited-Term Government Funds, Inc. - Limited-Term Government Fund as of
December 31, 1995, 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 five years in
the period then ended. These financial statements and the 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 generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. 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
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund at December 31, 1995, 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 the financial highlights for each of the five years in the
period then ended, in conformity with general accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
February 15, 1996
<PAGE>
A Report on Limited-Term Government Fund's Annual Meeting
At an annual meeting of shareholders held on March 29, 1995, the following
matters were submitted for shareholder vote: the election of directors, the
ratification of the selection of Ernst & Young LLP as independent auditors of
the Fund and the approval of a new investment management agreement. The new
investment management agreement was proposed in connection with the April 3,
1995, merger of Delaware Management Holdings, Inc. (the parent of Delaware
Management Company, Inc.) and a subsidiary of Lincoln National Corporation.
Whenever there is a change in control of an investment manager, the Investment
Company Act of 1940 requires shareholders to vote on a new investment management
agreement.
Below are the names of each director elected at the meeting as well as the
results of the other matters voted on by shareholders.
<TABLE>
<CAPTION>
Number of Votes+
-----------------------------------------------
For Against/Withheld Abstentions
<S> <C> <C> <C>
Election of Directors:
Wayne A. Stork ........................................... 63,772,321 1,734,614 --
Walter P. Babich ......................................... 63,791,470 1,715,464 --
Anthony D. Knerr ......................................... 63,791,558 1,715,376 --
Ann R. Leven ............................................. 63,789,806 1,717,128 --
W. Thacher Longstreth .................................... 63,782,327 1,724,607 --
Charles E. Peck .......................................... 63,791,470 1,715,464 --
Approval of the New Investment
Management Agreement ..................................... 50,349,959 906,946 2,992,463
Selection of Ernst & Young LLP as
Independent Auditors* .................................... 60,561,793 605,865 4,339,275
</TABLE>
- ----------
+Please note that the results of this meeting were not audited by Ernst & Young
LLP
*Voted upon by shareholders of Delaware Group Limited-Term Government Funds,
Inc.
<PAGE>
This annual report is for the information of Limited-Term Government Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Limited-Term Government Fund, which
sets forth details about charges, expenses, investment objectives and
operating policies of the Fund. You should read the prospectus carefully
before you invest. Summary investment results are documented in the Fund's
current Statement of Additional Information. The figures in this report
represent past results which are not a guarantee of future results. The
return and principal value of an investment in the Fund will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost.
- --------------------------------------------------------------------------------
BOARD
- ---------------------------
MEMBERS
- ---------------------------
Wayne A. Stork
Chairman, President and Chief Executive Officer
Delaware Group of Funds
Philadelphia, PA
Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Treasurer, National Gallery of Art
Washington, DC
W. Thacher Longstreth
Vice Chairman, Packquisition Corp.
Philadelphia, PA
Charles E. Peck
Secretary of Enterprise Homes, Inc.
Fredericksburg, VA
former Chairman and CEO
The Ryland Group, Inc.
Columbia, MD
AFFILIATED
- ---------------------------
OFFICERS
- ---------------------------
George M. Chamberlain, Jr.
Senior Vice President and Secretary,
Delaware Group of Funds
Philadelphia, PA
Keith E. Mitchell
President and CEO,
Delaware Distributors, L.P.
Philadelphia, PA
David K. Downes
Senior Vice President, Chief Financial Officer and
Chief Administrative Officer
Delaware Group of Funds
Philadelphia, PA
<PAGE>
DELAWARE GROUP
- --------------------------------------------------------------------------
OF FUNDS
- --------------------------------------------------------------------------
For Growth of Capital
Trend Fund
DelCap Fund
Value Fund
For Total Return
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
For Global Diversification
International Equity Fund
Global Assets Fund
Global Bond Fund
For Current Income
Delchester Fund
U.S. Government Fund
Limited-Term Government Fund
For Tax-Free Current Income
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Tax-Free Pennsylvania Fund
Money Market Funds
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund
Closed-End Equity/Income*
Dividend and Income Fund
Global Dividend and Income Fund
This report must be preceded or accompanied by a current Limited-Term
Government Fund prospectus and the Delaware Group Fund Performance Update for
the most recently completed calendar quarter. For a prospectus of any other
Delaware Group fund, contact your financial adviser or Delaware Group.
* Delaware Group Dividend and Income Fund and Delaware Group Global
Dividend and Income Fund purchases can be made through any registered
broker.
DELAWARE
GROUP
=============
<PAGE>
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
are not obligations of or deposits of any bank or any credit union, and
involve investment risk, including the possible loss of principal. Shares of
the Fund are not bank or credit union deposits.
Investment Manager
Delaware Management Company, Inc.
Philadelphia
International Affiliate
Delaware International Advisers Ltd.
London
National Distributor
Delaware Distributors, L.P.
Philadelphia
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640
Securities Dealers Only
Nationwide (800) 362-7500
(c)Delaware Distributors, L.P.
Printed in the U.S.A. on recycled paper.
AR-022[12/95]TKO2/96
<PAGE>
LOGO
1995
Annual
Report
-----------
Delaware
Group
U.S. Government
Money Fund
-----------
[PHOTO OF VARIOUS HISTORICAL SITES APPEARS HERE]
A Tradition of Sound Investing Since 1929
DELAWARE
GROUP
========
Philadelphia o London
<PAGE>
January 31, 1996
Dear
- --------------------
Shareholder:
- --------------------
We are pleased to report that in the fiscal year ended December 31, 1995, U.S.
Government Money Fund achieved its highest total return in four years. Class A
Shares provided a total return of +4.57%, about two percentage points more than
inflation during the year (as measured by the consumer price index).
Your Fund's 15-year lifetime has spanned a wide variety of economic and
interest rate cycles, and through each one, it has achieved the goals it set out
to accomplish - providing shareholders with relative safety, liquidity and
current income.
In 1995, despite a substantial drop in long-term interest rates and a
reversal of Federal Reserve Board monetary policy, short-term interest rates
held up well. At year's end, the Fund's seven-day annualized yield (for both
Class A and Consultant Class shares) was 4.79%, just 0.11% less than the
seven-day annualized yield at December 31, 1994.
A significant reduction in inflation expectations and a slowing U.S. economy
prompted the Fed to lower the Federal Funds rate -- the rate banks charge on
overnight loans between banks -- on July 6 and on December 19 by a total of half
a point (0.50%). This marked a sharp reversal of the policy the Fed implemented
in 1994 and early 1995, when it raised short-term interest rates a total of
seven times.
As of this writing, the future direction of interest rates is unclear.
Several indicators such as consumer spending and factory orders show signs of a
significant slowdown in economic growth, and thus a need for the Fed to cut
rates more than the additional quarter point (0.25%) reduction made on January
31, 1996.
No matter what the future holds, U.S. Government Money Fund will aim to
maintain the highest quality holdings to achieve its objective of current income
while preserving principal and maintaining liquidity through a diversified
portfolio. As of December 31, 1995, about 58% of the Fund's income was derived
from short-term mortgage securities and bank repurchase agreements.
While money market funds like U.S. Government Money Fund can be appropriate
places to place cash intended for future investment, they are not designed for
long-term growth. However, Delaware Group does offer a complete family of
fixed-income and equity funds. Together, you and your financial adviser can
determine which funds are most appropriate for your investment goals. We look
forward to serving your investment needs.
Sincerely,
/s/ Wayne A. Stork
- ------------------------
Wayne A. Stork
Chairman, President and
Chief Executive Officer
Money market funds strive to maintain a stable share value of $1. However, there
is no guarantee that this goal will be met. Yields fluctuate with changing
interest rates. Average annual rates of return for the 10-, five-and one-year
periods ended December 31, 1995 for U.S. Government Money Fund A Class are
+5.06%, +3.59% and +4.57%, respectively, and the returns for the Consultant
Class are +5.01%, +3.59% and +4.57%, respectively. These returns reflect the
reinvestment of all distributions.
1
<PAGE>
Financial
- --------------------
Statements
- --------------------
Delaware Group
Limited-Term Government Funds, Inc. -
U.S. Government Money Series*
Statement of Net Assets
December 31, 1995
Principal Market
Amount Value
FEDERAL AGENCY DISCOUNT NOTES - 51.55%
Federal Farm Credit Bank
5.45% 3/25/96. . . . . . . . . . . . . . . . $550,000 $ 543,006
Federal Farm Credit Bank
5.45% 5/03/96. . . . . . . . . . . . . . . . 600,000 588,827
Federal Home Loan Bank
5.42% 2/16/96. . . . . . . . . . . . . . . . 500,000 496,537
Federal Home Loan Bank
5.48% 3/07/96. . . . . . . . . . . . . . . . 375,000 371,233
Federal Home Loan Bank
5.50% 2/28/96. . . . . . . . . . . . . . . . 710,000 703,709
Federal Home Loan Bank
5.58% 1/29/96. . . . . . . . . . . . . . . . 200,000 199,132
Federal Home Loan Mortgage Corporation
5.47% 3/07/96. . . . . . . . . . . . . . . . 750,000 742,479
Federal Home Loan Mortgage Corporation
5.48% 3/06/96. . . . . . . . . . . . . . . . 750,000 742,579
Federal Home Loan Mortgage Corporation
5.55% 1/22/96. . . . . . . . . . . . . . . . 700,000 697,734
Federal National Mortgage Association
5.45% 8/09/96. . . . . . . . . . . . . . . . 100,000 96,654
Federal National Mortgage Association
5.51% 1/04/96. . . . . . . . . . . . . . . . 500,000 499,770
Federal National Mortgage Association
5.52% 2/16/96. . . . . . . . . . . . . . . . 500,000 496,473
Federal National Mortgage Association
5.57% 1/05/96. . . . . . . . . . . . . . . . 500,000 499,691
Federal National Mortgage Association
5.57% 1/09/96. . . . . . . . . . . . . . . . 600,000 599,257
---------
Total Federal Agency Discount Notes . . . . . 7,277,081
---------
FEDERAL AGENCY NOTES - 6.37%
Federal National Mortgage Association
5.50% 6/12/96. . . . . . . . . . . . . . . . 500,000 499,105
Federal National Mortgage Association
5.64% 9/09/96. . . . . . . . . . . . . . . . 400,000 399,511
---------
Total Federal Agency Notes . . . . . . . . . 898,616
---------
<PAGE>
Principal Market
Amount Value
FLOATING RATE NOTES - 25.15%
Federal Farm Credit Bank
5.95% 2/09/96. . . . . . . . . . . . . . . . . . . . $ 500,000 $ 499,974
Student Loan Marketing Association
5.20% 9/23/96. . . . . . . . . . . . . . . . . . . . 800,000 800,000
Student Loan Marketing Association
5.22% 2/08/96. . . . . . . . . . . . . . . . . . . . 500,000 500,000
Student Loan Marketing Association
5.25% 3/14/96. . . . . . . . . . . . . . . . . . . . 500,000 500,000
Student Loan Marketing Association
5.30% 5/09/96. . . . . . . . . . . . . . . . . . . . 250,000 250,000
Student Loan Marketing Association
5.30% 8/04/97. . . . . . . . . . . . . . . . . . . . 500,000 499,814
Student Loan Marketing Association
5.97% 10/04/96 . . . . . . . . . . . . . . . . . . . 500,000 500,000
----------
Total Floating Rate Notes . . . . . . . . . . . . . . 3,549,788
----------
REPURCHASE AGREEMENT - 16.56%
With Chase Manhattan 5.60%
1/02/96 (dated 12/29/95,
collateralized by $2,193,000
U.S. Treasury Notes 7.75% due
11/30/99, market value
$2,386,436). . . . . . . . . . . . . . . . . . . . 2,338,000 2,338,000
----------
Total Repurchase Agreement. . . . . . . . . . . . . . 2,338,000
----------
TOTAL MARKET VALUE OF SECURITIES OWNED - 99.63%
(WHICH APPROXIMATES COST FOR FINANCIAL
REPORTING AND INCOME TAX PURPOSES). . . . . . . . . 14,063,485
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 0.37% . . . . . . . . . . . . . . . . 52,018
----------
NET ASSETS APPLICABLE TO 13,786,436 U.S.
GOVERNMENT MONEY FUND A CLASS SHARES AND
329,069 U.S. GOVERNMENT MONEY FUND CONSULTANT
CLASS SHARES ($.001 PAR VALUE) OUTSTANDING;
EQUIVALENT TO $1.00 PER SHARE - 100.00. . . . . . . $14,115,503
===========
- ------------------
*Formerly known as Delaware Group Treasury Reserves, Inc. - U.S.
Government Money Series. It is known and does business as U.S. Government
Money Fund.
+For Floating Rate Notes, the maturity date shown is the next interest reset
date.
2
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
U.S. Government Money Series
Statement of Operations
For the Year-Ended December 31, 1995
INVESTMENT INCOME:
Interest. . . . . . . . . . . . . . . . . . . . . $925,451
EXPENSES:
Management fees ($70,149) and
directors' fees ($8,999). . . . . . . . . . . . $79,148
Dividend disbursing and transfer
agent fees and expense . . . . . . . . . . . . 46,287
Federal and state registration fees 32,922
Professional fees . . . . . . . . . . . . . . . . 15,174
Reports and statement to shareholders 14,765
Custodian fees. . . . . . . . . . . . . . . . . . 8,606
Taxes (other than income) . . . . . . . . . . . . 8,100
Salaries. . . . . . . . . . . . . . . . . . . . . 3,928
Other . . . . . . . . . . . . . . . . . . . . . . 11,349 220,279
------- --------
NET INVESTMENT INCOME . . . . . . . . . . . . . . $705,172
--------
See accompanying notes
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
U.S. Government Money Series
Statement of Changes in Net Assets
Year Ended Year Ended
12/31/95 12/31/94
----------- -----------
OPERATIONS:
Net investment income. . . . . . . . . . . . . $ 705,172 $ 594,338
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM NET INVESTMENT INCOME:
U.S. Government Money Fund A Class . . . . . . (668,878) (571,649)
U.S. Government Money Fund
Consultant Class. . . . . . . . . . . . . . . (36,294) (22,689)
----------- -----------
(705,172) (594,338)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
U.S. Government Money Fund A Class . . . . . 11,699,903 16,559,404
U.S. Government Money Fund
Consultant Class. . . . . . . . . . . . . . 732,776 942,446
Net asset value of shares issued upon
reinvestment of dividends from net
investment income:
U.S. Government Money Fund A Class . . . . . 641,733 537,560
U.S. Government Money Fund
Consultant Class . . . . . . . . . . . . . . 35,120 19,884
----------- -----------
13,109,532 18,059,294
----------- -----------
Cost of shares repurchased:
U.S. Government Money Fund A Class . . . . . (15,674,682) (20,896,267)
U.S. Government Money Fund
Consultant Class . . . . . . . . . . . . . . (1,515,439) (440,741)
----------- -----------
(17,190,121) (21,337,008)
----------- -----------
Decrease in net assets derived from
capital share transactions . . . . . . . . . . (4,080,589) (3,277,714)
----------- -----------
NET DECREASE IN NET ASSETS . . . . . . . . . . (4,080,589) (3,277,714)
----------- -----------
NET ASSETS:
Beginning of period. . . . . . . . . . . . . . . 18,196,092 21,473,806
----------- -----------
End of period. . . . . . . . . . . . . . . . . . $14,115,503 $18,196,092
=========== ===========
See accompanying notes
3
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
U.S. Government Money Series
Notes to Financial Statements
December 31, 1995
Delaware Group Limited-Term Government Funds, Inc. - U.S. Government Money
Series (formerly known as Delaware Group Treasury Reserves, Inc. U.S. Government
Money Series)(the "Fund"), is a series of Delaware Group Limited-Term Government
Funds, Inc., (the "Company"), a diversified open-end investment company
registered under the Investment Company Act of 1940. The Company is organized as
a Maryland corporation. The Fund offers two classes of shares. The Fund seeks to
provide maximum current income, while preserving principal and maintaining
liquidity.
1. Significant Accounting Policies
The accounting policies are in accordance with generally accepted accounting
principles and are consistently followed by the Fund for financial statement
preparation:
Security Valuation - Securities are valued at amortized cost which
approximates market value.
Federal Income Taxes - The Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes is required in the financial
statements.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Group of Funds. The aggregated 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 a least 100% collateralized. However,
in the event of default or bankruptcy by the counterparty to the agreement,
realization of the collateral may be subject to legal proceedings.
Class Accounting - Investment income and common expenses are allocated to the
two classes of the Fund on the basis of daily net assets of each class.
Other - Expenses common to all funds within the Delaware Group of Funds are
allocated amongst the funds on the basis of average net assets. Security
transactions are recorded on the date the securities are purchased or sold
(trade date). Premiums and discounts are amortized on a pro-rata basis and
included in interest income. The Fund declares dividends daily from net
investment income and pays such dividends monthly.
Certain Fund expenses are paid directly by brokers. The amount of these expenses
is less than 0.01% of the Fund's average net assets.
2. Investment Management Fee and Distribution Agreements
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, Inc. (DMC), the Investment Manager of the
Fund, an annual fee which is calculated daily at 0.50% of the average daily net
assets of the Fund, less fees paid to the independent directors. At December 31,
1995, the Fund had a liability for Investment Management fees and other expenses
payable to DMC for $189.
<PAGE>
Effective January 26, 1996, DMC has elected voluntarily to waive that portion,
if any, of the annual management fees payable by the Fund to the extent
necessary to ensure that the annual operating expenses exclusive of taxes,
interest, brokerage commissions, extraordinary expenditures and 12-b expenses
exceed 0.70% of average net assests for each Class through July 31, 1996.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual 12b-1 fee not to
exceed 0.30% of the average daily net assets of the Consultant Class. Effective
June 1, 1990, 12b-1 Plan payments from the Consultant Class to DDLP were
suspended but may be reinstated in the future.
The Fund has engaged Delaware Service Company, Inc. (DSC), an affiliate of DMC,
to serve as dividend disbursing and transfer agent for the Fund. For the year
ended December 31, 1995, the Fund expensed $38,054 for these services.
Certain officers of the Investment Manager are officers, directors, and/or
employees of the Fund. These officers, directors, and employees are paid no
compensation by the Fund.
On April 3, 1995, Delaware Management Holdings, Inc., the indirect parent of
DMC, DDLP and DSC, through a merger transaction (the "Merger') became a
wholly-owned subsidiary of Lincoln National Corporation. Other than the
resulting change in ownership, the Merger will not materially change the manner
in which DMC, DDLP and DSC have heretofore conducted their respective
relationships with the Fund.
3. Fund Shares
Transactions in capital stock shares of the Fund were as follows:
Year Ended Year Ended
12/31/95 12/31/94
Shares sold:
U.S. Government Money Fund A Class 11,699,903 16,559,404
U.S. Government Money Fund
Consultant Class. . . . . . . . . 732,776 942,446
Shares issued upon reinvestment of
dividends from net investment income:
U.S. Government Money Fund A Class 641,733 537,560
U.S. Government Money Fund
Consultant Class. . . . . . . . . 35,120 19,884
----------- -----------
13,109,532 18,059,294
----------- -----------
Shares repurchased:
U.S. Government Money Fund A Class (15,674,682) (20,896,267)
U.S. Government Money Fund
Consultant Class. . . . . . . . . (1,515,439) (440,741)
----------- -----------
(17,190,121) (21,337,008)
----------- -----------
Net decrease. . . . . . . . . . . (4,080,589) (3,277,714)
=========== ===========
4
<PAGE>
Notes to Financial Statements (Continued)
4. Financial Highlights
Selected data for each share of the Fund outstanding throughout each period
were as follows:
<TABLE>
<CAPTION>
U.S. Government Money Fund A Class
------------------------------------------------
Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period. . . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income from investment operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . . 0.0448 0.0289 0.0200 0.0308 0.0519
Net realized gain from security transactions. . . . . . . . . . none none none none none
-------- -------- -------- -------- --------
Total from investment operations. . . . . . . . . . . . . . . . 0.0448 0.0289 0.0200 0.0308 0.0519
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income. . . . . . . . . . . . . . (0.0448) (0.0289) (0.0200) (0.0308) (0.0519)
-------- -------- -------- -------- --------
Total distributions. . . . . . . . . . . . . . . . . . . . . . (0.0448) (0.0289) (0.0200) (0.0308) (0.0519)
-------- --------- -------- -------- --------
Net asset value, end of period. . . . . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
======== ======== ======== ======== ========
Total return. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.57% 2.93% 2.01% 3.13% 5.32%
Ratios/supplemental data:
Net assets, end of period (000 omitted). . . . . . . . . . . . . $13,787 $17,119 $20,919 $41,049 $45,933
Ratio of expenses to average net assets. . . . . . . . . . . . . 1.39% 1.26% 1.04% 0.91% 0.85%
Ratio of net investment income to average net assets. . . . . . . 4.45% 2.91% 2.06% 3.11% 5.23%
U.S. Government Money Fund Consultant Class
------------------------------------------------
Year Ended December 31,
1995 1994 1993 1992 1991
Net asset value, beginning of period. . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
Income from investment operations:
Net investment income. . . . . . . . . . . . . . . . . . . . . 0.0448 0.0289 0.0200 0.0308 0.0519
Net realized gain from security transactions. . . . . . . . . none none none none none
-------- -------- -------- -------- --------
Total from investment operations. . . . . . . . . . . . . . . 0.0448 0.0289 0.0200 0.0308 0.0519
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income. . . . . . . . . . . . . . (0.0448) (0.0289) (0.0200) (0.0308) (0.0519)
-------- -------- -------- -------- --------
Total distributions. . . . . . . . . . . . . . . . . . . . . . (0.0448) (0.0289) (0.0200) (0.0308) (0.0519)
-------- -------- -------- -------- --------
Net asset value, end of period. . . . . . . . . . . . . . . . . $1.0000 $1.0000 $1.0000 $1.0000 $1.0000
-------- -------- -------- -------- --------
Total return. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.57% 2.93% 2.01% 3.13% 5.32%
Ratios/supplemental data:
Net assets, end of period (000 omitted). . . . . . . . . . . . $329 $1,077 $555 $747 $1,399
Ratio of expenses to average net assets. . . . . . . . . . . . 1.39% 1.26% 1.04% 0.91% 0.85%
Ratio of net investment income to average net assets. . . . . . 4.45% 2.91% 2.06% 3.11% 5.23%
</TABLE>
5
<PAGE>
Delaware Group Limited-Term Government Funds, Inc.
Report of Independent Auditors
To the Shareholders and Board of Directors
Delaware Group Limited-Term Government Funds, Inc. - U.S. Government Money
Series
We have audited the accompanying statement of net assets of the Delaware Group
Limited-Term Government Funds, Inc. - U.S. Government Money Series as of
December 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and the 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 generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodi an and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides 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
Delaware Group Limited-Term Government Funds, Inc. - U.S. Govern ment Money
Series as of December 31, 1995, 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 the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
February 15, 1996
- -------------------------------------------------------------------------------
A Report on Limited-Term Government Funds, Inc.'s Annual Meeting
An annual meeting of shareholders was held on March 29, 1995. The matters
submitted to a vote of shareholders were the election of directors, the approval
of a new investment management agreement and the ratification of the selection
of Ernst & Young LLP as independent auditors of the Fund. The new investment
management agreement was submitted for shareholder approval in connection with
the Merger because the Investment Company of 1940 requires shareholders to vote
on a new investment management agreement whenever there is a change in control
of an investment manager.
The name of each director elected at the meeting along with the final vote
tabulation with respect to each nominee and each matter were as follows:
Number of Votes**
-------------------------------------------
For Against/Withheld Abstentions
Election of Directors*:
Wayne A. Stork. . . . . . . . . 63,772,321 1,734,614 --
Walter P. Babich. . . . . . . . 63,791,470 1,715,464 --
Anthony D. Knerr. . . . . . . . 63,791,558 1,715,376 --
Ann R. Leven. . . . . . . . . . 63,789,806 1,717,128 --
W. Thacher Longstreth . . . . . 63,782,327 1,724,607 --
Charles E. Peck . . . . . . . . 63,791,470 1,715,464 --
Approval of the New Investment
Management Agreement. . . . . . 10,549,246 140,512 567,806
Selection of Ernst & Young LLP as
Independent Auditors* . . . . . 60,561,793 605,865 4,339,275
- ------------------
* Voted upon by all shareholders of the Company.
** Please note that the results of this meeting were not audited
by Ernst & Young LLP.
6
<PAGE>
Delaware Group
- -------------------------
of Funds
- -------------------------
For Growth of Capital
Trend Fund
DelCap Fund
Value Fund
For Total Return
Devon Fund
Decatur Total Return Fund
Decatur Income Fund
Delaware Fund
For Global Diversification
International Equity Fund
Global Assets Fund
Global Bond Fund
For Current Income
Delchester Fund
U.S. Government Fund
Limited-Term Government Fund
For Tax-Free Current Income
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
Tax-Free Pennsylvania Fund
Money Market Funds
Delaware Cash Reserve
U.S. Government Money Fund
Tax-Free Money Fund
Closed-End Equity/Income*
Dividend and Income Fund
Global Dividend and Income Fund
This annual report is for the information of U.S. Government Money Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus, for the U.S. Government Money Fund, which
sets forth details about charges, expenses, investment objectives and operating
policies of the Fund. You should read the prospectus carefully before you
invest. Summary investment results are documented in the Fund's current
Statement of Additional Information. The figures in this report represent past
results which are not a guarantee of future results. For a prospectus of any
other Delaware Group fund, contact your financial adviser or Delaware Group.
*Delaware Group Dividend and Income Fund and Delaware Group Global Dividend and
Income Fund purchases can be made through any registered broker.
DELAWARE
GROUP
========
Philadelphia o London
<PAGE>
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
are not obligations of or deposits of any bank or any credit union, and involve
investment risk, including the possible loss of principal. Shares of the Fund
are not bank or credit union deposits.
THE GOAL OF A MONEY MARKET FUND IS TO MAINTAIN A CONSTANT SHARE PRICE OF $1.
HOWEVER, THERE CAN BE NO GUARANTEE THAT THIS GOAL WILL BE MET. THE FUND'S YIELD
AND RETURN FLUCTUATE AND ARE NOT GUARANTEED. AN INVESTMENT IN A MONEY MARKET
FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
Investment Manager
Delaware Management Company, Inc.
Philadelphia
International Affiliate
Delaware International Advisers Ltd.
London
National Distributor
Delaware Distributors, L.P.
Philadelphia
Shareholder Servicing,
Dividend Disbursing
and Transfer Agent
Delaware Service Company, Inc.
Philadelphia
1818 Market Street
Philadelphia, PA 19103-3682
Nationwide (800) 523-4640
Securities Dealers Only
Nationwide (800) 362-7500
Financial Institutions Reprepsentatives Only
Nationwide (800) 659-2265
Copy Rights Delaware Distributors, L.P.
[LOGO] Printed in the U.S.A. on recycled paper.
AR-005[12/95]TKO2/96
