<PAGE>
For Current Income
Limited-Term
Government Fund
(photo of illustration for Current Income brochure)
service and guidance
professional management
goals
1999
Semi-Annual
Report
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
<PAGE>
professional management
professional management
(Various photos demonstrating service,
guidance, professional management and goals)
More Than 70 Years
of investment experience has taught us
that disciplined strategies and prudent risk
management are a sound approach to any
market environment.
goals
goals
Whatever Your Goals,
the years ahead will be shaped by choices
you make today. Delaware offers many
options that can be an appropriate part of a
sound investment plan.
service and guidance
service and guidance
Delaware Believes That The Guidance
of a professional financial adviser is vital to your
long-term success. We are committed to providing
you and your adviser with the highest quality
information and service.
<PAGE>
July 6, 1999 for current
income
1
Dear Shareholder:
Economic activity in the United
States continues to move along ahead of consensus expectations. This robust
economic growth invigorated the stock market during the winter and spring. In
addition, a healthy U.S. economy helped support global economic recovery,
especially in emerging markets regions.
An improving global outlook reduced demand for U.S. government debt over
the last six months, pushing U.S. bond prices lower and yields higher. Long-term
U.S. Treasury yields increased from 5.09% on December 31, 1998 to 5.96% on June
30, 1999. Last October, the 30-year Treasury bond had a yield as low as 4.7%
(source: Bloomberg). This presented a challenge to many investors seeking to
strike a balance between income and capital appreciation.
The main short-term rate controlled by the Federal Reserve Board, the
Federal funds target rate for overnight loans between banks, had been 4.75
percent for six months. On June 30, however, the Federal Reserve raised this
rate a quarter of a percentage point to 5.00 percent at a meeting of the Federal
Open Market Committee. The Treasury market improved as a result and posted solid
gains into the first week of July as long-term yields dipped back under 6.00
percent. U.S. equity indexes hit new records even after the Fed raised interest
rates for the first time since March 1997.
Limited-Term Government Fund provided a total return of -0.15% (for A Class
shares with distributions reinvested at net asset value) for the six months
ended June 30, 1999. Although this was a negative return, your Fund faired
better than its peer group, the Lipper Short-Intermediate Government Fund
Average.
An improving global outlook reduced demand
for U.S. government debt over the last
six months, reducing U.S. bond prices and
pushing yields higher.
CUMULATIVE RETURNS
- ------------------------------------------------------------------------------
Six Months Ended
June 30, 1999
- ------------------------------------------------------------------------------
Limited-Term Government Fund A Class -0.15%
- ------------------------------------------------------------------------------
Merrill Lynch U.S. Treasury Three Year Index -0.11%
Merrill Lynch One-to-Three Year Government Bond Index +1.17%
Lipper Short-Intermediate Government Fund Average (100 funds) -0.39%
- ------------------------------------------------------------------------------
Performance is calculated at net asset value without effect of sales charges and
assumes reinvestment of distributions. For U.S. Treasury securities, 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 which are
not guaranteed. The Merrill Lynch U.S. Treasury Three Year Index is an index of
U.S. Treasury bonds with three year maturities. The Merrill Lynch One-to-Three
Year Government Bond Index is an index of government bonds with one-to-three
year maturities. The Lipper Short-Intermediate Government Fund Average is an
index of 100 limited-term government mutual funds. Complete Fund performance for
all classes can be found on page 6. Past performance does not guarantee future
results.
<PAGE>
for current
income
2
As of June 30, 1999, your Fund's 30-day current yield measured by the
Securities and Exchange Commission's (SEC) guidelines was 5.13% (For A Class
shares).
Over the last six months, the overwhelming majority of your Fund's assets
were invested in non-Treasury securities. Of this group, 55.1% was invested in
mortgage-backed securities and collateralized mortgage obligations. These
securities performed well throughout the last six months. Higher yields on bonds
translated into a slight decrease in mortgage prepayment activity. This helped
increase the value of many mortgage bonds we held during the six months ended
June 30, 1999.
Though bonds may remain in the shadow of stocks as long as economic growth
continues in 1999, we still believe they have a role in well-balanced
portfolios. We feel that for investors who seek both current income and some
preservation of principal, Limited-Term Government Fund offers an attractive
balance between the two.
On the pages that follow, Paul Grillo and Stephen Cianci, your Fund's
portfolio managers, explain Limited-Term Government Fund's positioning during
the period and provide an outlook for the rest of 1999. Thank you for your
continued confidence in Delaware Investments.
Sincerely,
/S/ Wayne A. Stork
- --------------------------------------
Wayne A. Stork
Chairman, Delaware Investments
Family of Funds
/S/ David K. Downes
- --------------------------------------
David K. Downes
President and Chief Executive Officer,
Delaware Investments Family of Funds
<PAGE>
for current
income
3
Portfolio Manager's Review
Paul Grillo
Stephen Cianci
Portfolio Managers
Delaware Management Co.
Mortgage Backed Securities
and CMOs Helped Strike
A Balance
Three Federal Reserve interest rate cuts provided the key economic backdrop for
the fourth quarter of 1998 and the first quarter of 1999. In order to maximize
Limited-Term Government Fund's income stream in a lower rate environment, we
invested 56.1% of your Fund's net assets in mortgage-backed securities and
collateralized mortgage obligations (CMOs). These securities delivered better
income than Treasury securities during the last six months.
Complementing the mortgage-backed holdings in your Fund's portfolio were
U.S. Treasury bonds, which represented 25.2% of the portfolio. This combination
allowed us to strike a balance between income and safety of principal. In
addition, the average credit quality of your Fund's holdings continues to be the
highest available.
Mortgage-backed securities generally yield more than Treasuries of
comparable maturity. However, when interest rates fall, mortgage-backed
securities carry the risk that homeowners will refinance their mortgages,
requiring bondholders like the Fund to reinvest principal at current rates.
During this time period we believed the yield of mortgage-backed securities more
than compensated investors for any prepayment risks
We increased your Fund's investment in collateralized mortgage obligations
(CMOs) significantly from December 31, 1998. This past December, CMOs
represented only 13.0% of the portfolio. As of June 30, 1999, they grew to 18.7%
of the Fund's total holdings. CMOs are mortgage-backed bonds that separate
mortgage pools into different maturity classes, called tranches. CMOs are
usually backed by government-guaranteed mortgages or other top grade mortgages.
PORTFOLIO HIGHLIGHTS AND ASSET ALLOCATION
- ---------------------------------------------------------------------------
As of June 30, 1999
Mortgage-Backed Securities 37.4%
Cash 1.5%
Corporate Bonds 9.2%
Asset-Backed Securities 8.0%
U.S. Treasuries 25.2%
Collateralized Mortgage Obligations 18.7%
June 30, December 31,
1999 1998
- ---------------------------------------------------------------------------
Average Effective Duration 2.6 years 2.4 years
Average Effective Maturity 5.0 years 3.8 years
Average Quality AAA AAA
Thirty-Day Current SEC Yield* 5.13% 5.00%
*For A Class shares measured according to the Securities and Exchange Commission
guidelines. For B Class, C Class and the Institutional Class shares, the 30-day
SEC current yields as of April 30, 1999 were 4.42%, 4.42% and 5.43%,
respectively.
<PAGE>
for current
income
4
We slightly increased your Fund's allocation to U.S. Treasuries from 24.1% on
December 31, 1998 to 25.2% as of June 30, 1999. These securities retreated
significantly during the last six months, and then subsequently rebounded.
Improved global economic conditions in late 1998 decreased demand for U.S.
government securities and their inherent high credit quality. We took note of
this decline early on and began reducing our position in U.S Treasuries steadily
over the first three months of 1999, and have added back to it since then as
more of a value investment.
Your Fund's Investment Strategy
In managing your Fund's sensitivity to interest rate changes, our goal is to
provide a degree of stability for the share price, without giving up income
potential. To do so, we keep the Fund's duration within a range of two to three
years. We consider 2 1/2 years to be the neutral point when we anticipate
neither a significant rise nor a significant decline in interest rates.
Duration measures a bond's sensitivity to interest rates, which indicates the
approximate percentage of change in a bond or bond fund's price given a 1%
change in interest rates.
For the six months ending June 30, 1999, your Fund's duration stood at 2.6
years. This positioning, slightly longer than our mid-point, reflects our
conservative outlook for the first six months of the year. The bond market may
have to absorb some very strong reports on the U.S. economy and with the stock
market still going strong as of this writing, we think the bond market may be a
bit weak.
We plan to continue to focus on mortgage-backed securities, including
collateralized mortgage obligations. We will apply quantitative analysis to help
us identify mortgage-backed securities that:
o Offer high income potential
o Are less likely to be prepaid
o Are not well-followed by other
investment professionals
We think bonds with this combination of characteristics will be effective
investments for the portfolio, offering both income and relative safety.
Your Fund invests primarily in securities issued or guaranteed by the U.S.
government, its agencies, instrumentalities or government-sponsored enterprises.
However, the Fund is also allowed to invest up to 20% of its assets in
non-government securities, such as high-quality corporate bonds, asset-backed
securities, certificates of deposit and commercial paper, among others.
The last six months, we invested significantly in non-government securities,
very close to the Fund's 20% limit. Our most significant weighting in
non-government securities was high-quality corporate bonds, 9.2% of assets.
These bonds looked especially attractive to us in December, because they
suffered from last year's liquidity crisis, and in our view offered exceptional
yields and values. They continued to look attractive throughout the first half
of fiscal 1999.
Asset-backed securities represented 8.0% of the Fund. These securities
represent loans that are pooled by credit providers such as banks, who then pass
principal and income along to investors such as your Fund. Given the strong
economic scenario in the U.S., we believe asset-backed securities will continue
to perform well for us.
<PAGE>
for current
income
5
Outlook
For the remainder of fiscal 1999, we see strong economic growth. The U.S. seems
to be the engine of growth for the entire world at this time. For the U.S.,
strong forward momentum is likely to result in solid growth (about 3%) this
year. We don't think this will create an inflationary environment if labor
productivity can maintain respectable gains.
We also don't foresee any stampede into fixed income securities as long as
the stock market continues to perform well. That means we have little
expectation that increased demand will push bond prices higher. We believe a
bond's income will be the key driver of return in the rest of 1999, just as it
has historically been over longer term periods. Considering the contribution of
income to bond returns, a continued low inflation environment bodes well for
fixed income investors.
We plan to maintain our conservative stance in the second half of fiscal
1999. We may extend our average duration later in the year, but only if we begin
to see slower economic growth.
We do anticipate one market condition that could raise Treasury prices as we
near the third and fourth quarters of 1999: Year 2000 concerns may create an
increasing appetite for bonds of higher credit quality. Regardless, we foresee
the 30-year Treasury bond staying in a relatively narrow 5.75% to 6.25% yield
range for the remainder of the year.
The taxable fixed income arena endured a great deal of turbulence throughout
1998. We expect 1999 to be less exciting, based on two key factors:
o Although U.S. economic growth has continued, it appears to us that weaker
growth outside U.S. borders has offset it, preventing our economy from
overheating.
o Immediately following the Russian crisis, virtually all taxable fixed-income
markets suffered. In contrast, the response to the subsequent difficulties in
South America was much more subdued (Source: Salomon Smith Barney).
We think investors are reacting more judiciously to situations in foreign
countries.
We believe the Federal Reserve's 0.25 percent rate increase on June 30
represented fine-tuning, rather than a fundamental change in policy.
Limited-Term Government Fund is a potentially safe harbor during times of
market volatility. Your Fund is designed to pay higher income than short-term
securities with less risk to principal than longer term, fixed income
investments. In addition, your Fund strives to offer its shareholders a
relatively steady level of current income, making it an attractive choice for
investors who look for income from their investments to help meet certain
expenses.
We intend to keep a watchful eye on changes in consumer and producer prices
to gauge their potential effects on markets, monetary policy and your Fund's
performance for the remainder of the year.
<PAGE>
for current
income
6
Performance Summary
Limited-Term Government Fund Performance
- --------------------------------------------------------------------------------
Average Annual Returns Through June 30, 1999
<TABLE>
<CAPTION>
Lifetime Ten Years Five Years One Year
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A Class (Est. 11/24/85)
Excluding Sales Charge +6.31% +6.02% +5.09% +4.75%
Including Sales Charge +6.09% +5.72% +4.51% +1.89%
- ----------------------------------------------------------------------------------------------------------
B Class (Est. 5/2/94)
Excluding Sales Charge +3.92% +4.21% +3.86%
Including Sales Charge +3.92% +4.21% +1.89%
- ----------------------------------------------------------------------------------------------------------
C Class (Est. 11/28/95)
Excluding Sales Charge +3.92% +3.86%
Including Sales Charge +3.92% +2.87%
</TABLE>
All performance includes reinvestment of distributions and applicable sales
charge as described below. Return and share value will fluctuate so that shares
when redeemed may be worth more or less than their original cost. Past
performance is not a guarantee of future results. Performance for Class B and C
shares excluding sales charge assumes either the investment was not redeemed or
that contingent sales charges did not apply.
A Class shares have a 2.75% maximum sales charge and a 12b-1 fee.
B Class shares do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a deferred sales
charge of up to 2% if redeemed before the end of the third year.
C Class shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
Limited-Term Government Fund's Institutional Class is available without sales or
asset-based distribution charges only to certain eligible institutional
accounts. As of June 30, 1999, the average annual total returns for the
lifetime, 10-year, five-year and one-year periods and cumulative six-month
return were +6.44%, +6.17%, +5.25%, 4.90% and -0.07% respectively.
<PAGE>
for current income 7
Financial Statements
Delaware Group Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Statement of Net Assets
June 30, 1999 (Unaudited)
- -----------------------------------------------------------------------------
Principal Market
Amount Value
-----------------------
AGENCY MORTGAGE-BACK SECURITIES - 26.17%
Federal Home Loan Mortgage Corporation
6.00% 11/1/26 ................................. $ 2,363,008 $ 2,249,288
7.00% 4/1/29 ................................. 2,471,714 2,449,314
8.00% 5/1/05 to 7/1/11 ........................ 5,937,520 6,088,840
8.50% 12/1/08 to 11/1/10 ...................... 1,775,244 1,858,489
8.75% 5/1/10 .................................. 672,608 719,481
9.00% 6/1/09 to 1/1/24 ........................ 3,813,287 4,034,964
9.50% 11/1/05 to 2/15/20 ...................... 4,417,393 4,645,579
11.00% 9/1/10 to 11/1/15 ...................... 389,227 431,247
11.50% 3/1/01 to 3/1/16........................ 3,015,801 3,408,754
Federal National Mortgage Association
6.00% 5/1/11 to 11/1/13 ....................... 10,682,358 10,353,533
7.00% 2/1/26 to 5/1/29 ........................ 17,461,100 17,312,456
7.50% 12/1/27 ................................. 632,928 640,840
8.00% 7/1/02 to 1/1/23 ........................ 1,100,153 1,129,828
8.50% 8/1/07 to 2/1/29 ........................ 13,614,471 14,288,511
9.00% 8/1/04 to 4/1/16 ........................ 1,866,361 1,984,493
9.25% 7/1/08 to 8/1/16 to 3/1/20 .............. 1,436,009 1,536,457
10.00% 1/1/19 ................................. 423,286 457,281
11.00% 12/25/03 to 8/1/20 ..................... 7,229,562 7,949,730
12.50% 2/1/11.................................. 100,174 114,918
13.00% 7/1/15 ................................. 163,030 190,389
----------
Total Agency Mortgaged-Backed Securities
(cost $81,496,542) ............................ 81,844,392
----------
ASSET BACKED SECURITIES - 7.95%
AFC Home Equity Loan Trust series 1992-5 A
7.20% 2/15/08 ................................ 1,423,986 1,428,828
EQCC 1999-4 A3F 5.915% 11/20/24 ................. 5,000,000 4,908,025
EQCC 1996-4 A6 6.88% 7/15/14 .................... 3,500,000 3,517,500
MetLife Capital Equipment Loan Trust
6.85% 5/20/08 ................................ 4,088,000 4,123,157
Peco 1999-A A4 5.80% 3/1/07 ..................... 5,000,000 4,828,125
Standard Credit Card Trust Series 1995-1
8.25% 1/7/07 ................................. 5,622,000 6,082,965
----------
Total Asset Backed Securities
(cost $25,304,870) ........................... 24,888,600
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - 18.72%
Advanta Home Equity Loan Trust 1992-4 A1
7.20% 11/25/08 ............................... 405,837 407,866
Federal Home Loan Mortgage Corporation
Series 2113 QD 6.00%2/15/23 .................. 8,467,000 8,270,923
Series 2115 PC 6.00% 5/15/11 ................. 10,000,000 9,779,422
Series 2121 MD 6.00% 2/1/29 .................. 6,500,000 6,346,207
Series 69 F 9.00% 12/15/05 ................... 873,709 902,035
Series 1068 Class GA 9.00% 6/15/21 ........... 8,663,941 9,110,211
<PAGE>
- -----------------------------------------------------------------------------
Principal Market
Amount Value
-----------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) (Continued)
Federal National Mortgage Association
7.50% 2/25/06 ................................ $ 8,375,000 $ 8,567,800
Government National Mortgage Association
1998-9 B 6.85% 12/20/25 ...................... 5,356,721 5,231,730
1999-23 6.50% 7/20/29 ........................ 10,000,000 9,832,031
Investor GNMA Mortgage-Backed Securities
Trust Series 84-F5 10.875% 10/25/13 .......... 84,323 92,814
----------
Total Collateralized Mortgage Obligations
(cost $60,075,295) ........................... 58,541,039
----------
CORPORATE BONDS - 9.21%
Bear Stearns 6.15% 3/2/04 ....................... 3,400,000 3,327,750
Credit Foncier de France 8.00% 1/14/02 .......... 5,230,000 5,393,435
Daimler-Benz North 7.375% 9/15/06 ............... 6,700,000 6,926,125
General Electric Capital 8.85% 3/1/07............ 3,000,000 3,386,250
Heller Financial 6.00% 3/19/04 .................. 1,500,000 1,462,500
Northwest Natural Gas 9.75% 7/1/15............... 3,200,000 3,440,000
United Health Care 144A 6.60% 12/1/03............ 5,000,000 4,862,500
----------
Total Corporate Bonds
(cost $29,567,933) ........................... 28,798,560
----------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OBLIGATIONS - 11.28%
GNMA
7.625% 2/15/22 ............................... 1,794,109 1,901,195
8.00% 11/15/16 to 5/15/17 .................... 7,510,555 7,812,709
9.00% 4/15/16 to 9/15/17 ..................... 12,136,054 13,022,183
9.50% 6/15/16 to 11/15/17..................... 904,678 985,404
11.00% 10/15/00 to 5/15/20 ................... 2,133,863 2,391,514
11.50% 7/15/15 ............................... 38,983 44,088
GNMA GPM 11.50% 4/15/10 ......................... 118,017 133,618
GNMA II
9.50% 11/20/20 to 10/20/21 ................... 2,363,742 2,541,228
9.75% 11/20/16 ............................... 260,665 282,089
10.00% 1/20/20 to 11/20/20 ................... 1,243,461 1,372,470
10.50% 11/15/15 to 6/20/20 ................... 374,468 407,583
11.00% 12/15/09 to 1/15/18.................... 1,113,202 1,251,047
11.50% 12/20/17 to 10/20/18 .................. 189,816 210,281
12.00% 10/15/10 to 5/20/16 ................... 1,727,107 1,979,054
12.25% 9/15/13 to 1/15/14 .................... 194,556 223,615
12.50% 12/15/10 to 1/20/14 ................... 579,288 667,359
13.75% 9/15/14 ............................... 49,242 57,060
----------
Total Government National Mortgage
Association Obligations (cost $34,750,916).... 35,282,497
----------
<PAGE>
8 for current income
Statement of Net Assets (Continued)
- -----------------------------------------------------------------------------
Principal Market
Amount Value
-----------------------
U.S. TREASURY OBLIGATIONS - 25.18%
US Treasury Note
4.25% 11/15/03 ............................... $ 4,500,000 $ 4,238,715
4.50% 1/31/01 ................................ 4,190,000 4,130,854
5.25% 5/15/04 ................................ 30,500,000 30,009,963
6.125% 12/31/01............................... 7,400,000 7,482,506
7.50% 11/15/01 ............................... 12,200,000 12,698,873
*10.75% 8/15/05 ................................ 16,275,000 20,186,280
-----------
Total U.S. Treasury Obligations
(cost $80,510,080) ........................... 78,747,191
-----------
REPURCHASE AGREEMENTS - 15.26%
With Chase Manhattan 4.65% 7/1/99
(dated 6/30/99, collateralized by $8,281,000
U.S. Treasury Notes 5.375% due 2/15/01,
market value $8,406,451 and $4,140,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $4,255,079 and $3,548,000
U.S. Treasury Notes 6.125% due 12/31/01,
market value $3,572,621) ..................... 15,833,000 15,833,000
With J.P. Morgan Securities 4.70% 7/1/99
(dated 6/30/99, collateralized by $4,572,000
U.S. Treasury Notes 6.375% due
8/15/02, market value $4,744,400 and
$4,140,000 U.S. Treasury Notes 6.25% due
8/31/02, market value $4,268,125, and
$2,863,000 U.S. Treasury Bills 5.75%
due 11/30/02, market value $2,864,309 and
$4,140,000 U.S. Treaury Notes 5.50%
due 1/31/03, market value $4,181,598) ........ 15,735,000 15,735,000
With PaineWebber 4.80% 7/1/99
(dated 6/30/99, collateralized by $3,908,000
U.S. Treasury Notes 7.125% due 2/29/00,
market value $4,045,516 and $4,140,000
U.S. Treasury Notes 5.625% due 11/30/00,
market value $4,158,084 and $8,281,000
U.S. Treasury Bills 5.75% due 11/30/02,
market value $8,283,376) ..................... 16,147,000 16,147,000
-----------
Total Repurchase Agreements
(cost $47,715,000) ........................... 47,715,000
-----------
<PAGE>
TOTAL MARKET VALUE OF SECURITIES
(COST $359,420,636) - 113.77% ............................. $355,817,279
LIABILITIES NET OF RECEIVABLES
AND OTHER ASSETS - (13.77%)** ............................ (43,079,121)
------------
NET ASSETS APPLICABLE TO 37,088,217 SHARES
($0.001 PAR VALUE) OUTSTANDING - 100.00% .................. $312,738,158
============
NET ASSET VALUE - LIMITED-TERM GOVERNMENT FUND A CLASS
($286,990,240 / 34,034,678) ............................... $8.43
=====
NET ASSET VALUE - LIMITED-TERM GOVERNMENT FUND B CLASS
($14,248,610 / 1,689,793) ................................. $8.43
=====
NET ASSET VALUE - LIMITED-TERM GOVERNMENT FUND C CLASS
($6,830,606 / 810,068) ................................... $8.43
=====
NET ASSET VALUE - LIMITED-TERM GOVERNMENT FUND
INSTITUTIONAL CLASS ($4,668,702 / 553,678)................. $8.43
=====
COMPONENTS OF NET ASSETS AT JUNE 30, 1999:
Common stock, ($0.001 par value), 2,000,000,000 shares
authorized to the Limited-Term Government Fund with
950,000,000 shares allocated to the Limited-Term Government
Fund A Class, 200,000,000 shares allocated to the
Limited-Term Government Fund B Class, 50,000,000
shares allocated to the Limited-Term Government Fund C Class,
200,000,000 shares allocated to the Limited-Term Government
Institutional Class ....................................... $459,131,848
Undistributed net investment income .......................... 28,530
Accumulated net realized loss on investments ................. (142,670,675)
Net unrealized depreciation of investments and options ....... (3,751,545)
------------
Total net assets ............................................. $312,738,158
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
LIMITED-TERM GOVERNMENT FUND A CLASS
Net asset value (A) .......................................... $8.43
Sales Charge (2.75% of offering price or 2.85% of amount
invested per share) (B) ................................... 0.24
-----
Offering price .............................................. $8.67
=====
- ------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the Current Prospectus for purchases of $100,000
or more.
- -----------------
GPM - Graduate Payment Mortgage
*Principal amount of $5,000,000 pledged as collateral for futures.
**Of this amount, $30,544,273 represents payables for securities purchased at
June 30,1999.
See accompanying notes
<PAGE>
for current income 9
Delaware Group
Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Statement of Operations
Six Months Ended June 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $12,101,703
EXPENSES:
Management fees ..................................... $856,925
Dividend disbursing
and transfer agent fees and expenses .............. 421,742
Distribution expense ................................. 325,270
Accounting and administration ........................ 81,904
Reports and statements to shareholders ............... 36,953
Registration fees .................................... 22,514
Taxes (other than taxes on income).................... 16,461
Professional fees .................................... 14,288
Directors' fees ...................................... 5,140
Other ................................................ 14,895 1,796,092
--------
Less expenses paid indirectly ........................ (7,967)
Total expenses ....................................... 1,788,125
-----------
NET INVESTMENT INCOME ................................ $10,313,578
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on investments ..................... (2,511,151)
Net realized gain on futures contracts
and written options ............................... 319,853
-----------
Net realized loss on investments ..................... (2,191,298)
Net change in unrealized appreciation/depreciation
of investments and written options ................ (8,381,384)
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS .................................... (10,572,682)
-----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS ......................... ($259,104)
===========
See accompanying notes
<PAGE>
Delaware Group
Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Statements of Changes in Net Assets
- -------------------------------------------------------------------------------
Six Months Ended Year
6/30/99 Ended
(Unaudited) 12/31/98
-----------------------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ............................. $ 10,313,578 $22,987,243
Net realized loss (gain) on investments ........... (2,191,298) 3,061,740
Net change in unrealized appreciation/depreciation
of investments and written options ............. (8,381,384) 16,068
------------ ------------
Net decrease (increase) in net assets resulting
from operations ................................ (259,104) 26,065,051
------------ ------------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ....................................... (9,168,296) (20,661,739)
B Class ........................................ (364,910) (679,520)
C Class ........................................ (155,813) (163,243)
Institutional Class ............................ (644,844) (1,443,922)
------------ ------------
(10,333,863) (22,948,424)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ........................................ 79,019,610 169,666,637
B Class ........................................ 4,206,220 6,046,049
C Class ........................................ 6,610,626 4,674,211
Institutional Class ............................ 4,186,948 4,602,819
Net asset value of shares issued upon reinvestment
of dividends from net investment income
A Class ........................................ 6,319,865 13,943,162
B Class ........................................ 254,956 463,336
C Class......................................... 138,648 143,161
Institutional Class ............................ 649,255 1,424,128
------------ ------------
101,386,128 200,963,503
------------ ------------
Cost of shares repurchased:
A Class ........................................ (106,368,602) (224,067,177)
B Class ........................................ (3,677,958) (4,880,946)
C Class ........................................ (4,655,175) (3,536,067)
Institutional Class ............................ (20,715,266) (17,913,940)
------------ ------------
(135,417,001) (250,398,130)
------------ ------------
Decrease in net assets derived from
capital share transactions...................... (34,030,873) (49,434,627)
------------ ------------
NET DECREASE IN NET ASSETS ....................... (44,623,840) (46,318,000)
NET ASSETS:
Beginning of period .............................. 357,361,998 403,679,998
------------ ------------
End of period .................................... $312,738,158 $357,361,998
============ ============
See accompanying notes
<PAGE>
10 for current income
Delaware Group Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
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
------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
6/30/99(1) 1998 1997 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $8.700 $8.620 $8.770 $9.050 $8.990 $9.840
Income (loss) from investment operations:
Net investment income ........................ 0.258 0.540 0.601 0.600 0.699 0.667
Net realized and unrealized gain (loss)
from investments, futures contracts
and written options ......................... (0.270) 0.079 (0.150) (0.280) 0.060 (0.850)
------ ------ ------ ------ ------ ------
Total from investment operations ............. (0.012) 0.619 0.451 0.320 0.759 (0.183)
------ ------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income .......... (0.258) (0.539) (0.601) (0.600) (0.699) (0.667)
------ ------ ------ ------ ------ ------
Total dividends ............................... (0.258) (0.539) (0.601) (0.600) (0.699) (0.667)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................... $8.430 $8.700 $8.620 $8.770 $9.050 $8.990
====== ====== ====== ====== ====== ======
Total return(2) .................................. (0.15%) 7.46% 5.23% 3.69% 8.71% (1.88%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)........ $286,990 $317,329 $355,079 $464,649 $653,451 $789,525
Ratio of expenses to average net assets ....... 1.00% 1.01% 0.98% 0.93% 0.96% 0.91%
Ratio of net investment income
to average net assets........................ 6.05% 6.32% 6.85% 6.80% 7.71% 7.10%
Portfolio turnover ............................ 216% 69% 79% 83% 73% 148%
</TABLE>
- ---------------
(1) 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 distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
for current income 11
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Limited-Term Government Fund B Class
-------------------------------------------------------------------------
Period
Six Months Ended Year Ended December 31, 5/2/94(2) to
6/30/99(1) 1998 1997 1996 1995 12/31/94
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $8.700 $8.620 $8.770 $9.050 $8.990 $9.430
Income (loss) from investment operations:
Net investment income ........................ 0.222 0.467 0.522 0.524 0.622 0.399
Net realized and unrealized gain (loss)
from investments, futures contracts
and written options ........................ (0.270) 0.079 (0.150) (0.280) 0.060 (0.440)
------ ------ ------ ------ ------ ------
Total from investment operations ............. (0.048) 0.546 0.372 0.244 0.682 (0.041)
------ ------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income ......... (0.222) (0.466) (0.522) (0.524) (0.622) (0.399)
------ ------ ------ ------ ------ ------
Total dividends .............................. (0.222) (0.466) (0.522) (0.524) (0.622) (0.399)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................. $8.430 $8.700 $8.620 $8.770 $9.050 $8.990
====== ====== ====== ====== ====== ======
Total return(3) ................................. (0.57%) 6.55% 4.35% 2.81% 7.80% (0.44%)
Ratios and supplemental data:
Net assets, end of period (000 omitted)....... $14,249 $13,900 $12,119 $12,959 $12,313 $6,282
Ratio of expenses to average net assets ...... 1.85% 1.86% 1.83% 1.78% 1.81% 1.76%
Ratio of net investment income
to average net assets ...................... 5.20% 5.47% 5.98% 5.91% 6.86% 6.25%
Portfolio turnover ........................... 216% 69% 79% 83% 73% 148%
</TABLE>
- ------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Date of initial public offering; ratios have been annualized but total
return has not been annualized.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
12 for current income
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Limited-Term Government Fund C Class
---------------------------------------------------------------
Period
Six Months Ended Year Ended December 31, 11/28/95(2) to
6/30/99(1) 1998 1997 1996 12/31/95
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................. $8.700 $8.620 $8.770 $9.050 $9.010
Income (loss) from investment operations:
Net investment income .............................. 0.220 0.467 0.524 0.524 0.051
Net realized and unrealized gain (loss)
from investments, futures contracts
and written options .............................. (0.269) 0.079 (0.152) (0.280) 0.040
------ ------ ------ ------ ------
Total from investment operations .................. (0.049) 0.546 0.372 0.244 0.091
------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income ............... (0.221) (0.466) (0.522) (0.524) (0.051)
------ ------ ------ ------ ------
Total dividends .................................... (0.221) (0.466) (0.522) (0.524) (0.051)
------ ------ ------ ------ ------
Net asset value, end of period ....................... $8.430 $8.700 $8.620 $8.770 $9.050
====== ====== ====== ====== ======
Total return(3) ....................................... (0.58%) 6.56% 4.34% 2.81% (2)
Ratios and supplemental data:
Net assets, end of period (000 omitted)............. $6,831 $4,932 $3,580 $3,090 $33
Ratio of expenses to average net assets ............ 1.85% 1.86% 1.83% 1.78% (2)
Ratio of net investment income
to average net assets ............................ 5.20% 5.47% 5.98% 5.78% (2)
Portfolio turnover ................................. 216% 69% 79% 83% (2)
</TABLE>
- --------------
(1) Ratios have been annualized and total return has not been annualized.
(2) 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.
(3) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
for current income 13
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
Limited-Term Government Fund Institutional Class
---------------------------------------------------------------------------
Six Months Ended Year Ended December 31,
6/30/99(1) 1998 1997 1996 1995 1994
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........... $8.700 $8.620 $8.770 $9.050 $8.990 $9.840
Income (loss) from investment operations:
Net investment income ....................... 0.269 0.553 0.605 0.613 0.712 0.681
Net realized and unrealized gain (loss)
from investments, futures contracts
and written options ....................... (0.274) 0.079 (0.150) (0.280) 0.060 (0.850)
------ ------- ------- ------- ------- -------
Total from investment operations ............ (0.005) 0.632 0.455 0.333 0.772 (0.169)
------ ------- ------- ------- ------- -------
Less dividends:
Dividends from net investment income ....... (0.265) (0.552) (0.605) (0.613) (0.712) (0.681)
------ ------- ------- ------- ------- -------
Total dividends ............................. (0.265) (0.552) (0.605) (0.613) (0.712) (0.681)
------ ------- ------- ------- ------- -------
Net asset value, end of period ................. $8.430 $8.700 $8.620 $8.770 $9.050 $8.990
====== ======= ======= ======= ======= =======
Total return ................................... (0.07%) 7.62% 5.39% 3.84% 8.87% (1.74%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ..... $4,669 $21,201 $32,902 $30,349 $37,460 $37,328
Ratio of expenses to average net assets ..... 0.85% 0.86% 0.83% 0.78% 0.81% 0.76%
Ratio of net investment income
to average net assets ..................... 6.20% 6.47% 6.98% 6.92% 7.86% 7.25%
Portfolio turnover .......................... 216% 69% 79% 83% 73% 148%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
See accompanying notes
<PAGE>
14 for current income
Delaware Group Limited-Term Government Funds, Inc. -
Limited-Term Government Fund
Notes to Financial Statements
June 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Delaware Group Limited-Term Government Funds, Inc. - Limited-Term Government
Fund (the "Fund"), is registered as a diversified open-end investment company
under the Investment Company Act of 1940, as amended. The Fund is organized as a
Maryland corporation. The Fund offers four classes of shares. The Limited-Term
Government Fund A Class carries a front-end sales charge of 2.75%. The
Limited-Term Government Fund B Class carries a back-end deferred sales charge,
Limited-Term Government Fund C Class carries a level load deferred sales charge
and Limited-Term Government Fund Institutional Class has no sales charge. The
investment objective of the Fund is to seek a high, stable level of current
income while attempting to minimize fluctuations in principal and provide
maximum liquidity.
1. Significant Accounting Policies
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Fund.
Security Valuation - Securities listed on an exchange are valued at the last
quoted sales price as of the close of the NYSE on the valuation date. Securities
not traded or securities 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 such prices 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, which approximates market value. Other
securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
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 has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
the Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Repurchase Agreements - The Fund may invest in a pooled cash account along with
other members of the Delaware Investments Family of Funds. The aggregate daily
balance of the pooled cash account is invested in repurchase agreements secured
by obligations of the U.S. government. The respective collateral is held by the
custodian bank until the maturity of the respective 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.
Use of Estimates - The preparation of financial statements in conformity with
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.
<PAGE>
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts are
accredited to interest income over the lives of the respective securities. The
Fund declares dividends daily from net investment income and pays such dividends
monthly. Capital gain dividends, if any, are declared and paid annually.
Certain expenses of the Fund are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. The
amount of these expenses was approximately $7,967 for the period ended June 30,
1999. In addition, the Fund receives earnings credits from its custodian when
positive cash balances are maintained, which are used to offset custody fees.
For the period ended June 30, 1999, there were no earnings credits. The expenses
paid under the above arrangements are included in their respective expense
captions on the statement of operations with the corresponding expense offset
shown as "Expenses paid indirectly".
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Fund
pays Delaware Management Company, ("DMC"), the Investment Manager of the Fund,
an annual fee based on its net assets. The management fees rates changed
effective April 1, 1999. The new management fee rate for Limited-Term Government
Fund is 0.50% on the first $500 million of net assets, 0.475% on the next $500
million, 0.45% on the next $1,500 million and 0.425% in excess of $1,500
million. The old management fee rate for Limited-Term Government was 0.50% of
the net assets of the Fund less the fees paid to the unaffiliated directors. At
June 30, 1999, the Fund had a liability for investment management fees and other
expenses payable to DMC of $128,160.
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services. At
June 30, 1999, the Fund had a liability for such fees and other expenses payable
to DSC of $7,647.
Pursuant to the Distribution Agreement, the Fund pays Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.15% of the average daily net assets of A Class and 1.00% of the average
daily net assets of the B and C Classes. No distribution expenses are paid by
the Institutional Class.
For the six months ended June 30, 1999, DDLP earned $9,527 for commissions on
sales of the Fund's A Class shares.
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Fund. These officers, directors and employees are paid no compensation by
the Fund.
3. Investments
During the six months ended June 30, 1999, the Fund made purchases of
$213,579,630 and sales of $284,775,694 of investment securities other than U.S.
government securities and temporary cash investments. During the six months
ended June 30, 1999, the Fund made purchases of $152,447,143 and sales
$122,721,213 of long term U.S. government securities.
At June 30, 1999, the aggregate cost of securities for federal income tax
purposes was $359,420,636.
At June 30, 1999, unrealized depreciation for federal income tax purposes
aggregate $3,751,545 of which $1,457,880 related to unrealized appreciation of
securities and written options and $5,209,425 related to unrealized depreciation
of securities.
<PAGE>
for current income 15
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
For federal income tax purposes, the Fund had accumulated capital losses of
$140,470,509 at December 31, 1998, which may be carried forward and applied
against future capital gains. The capital loss carry forward expire as follows:
2002 - $85,612,370, 2003 - $29,779,768, 2004 - $16,636,244 and 2005 -
$9,442,127.
During the six months ended June 30, 1999, the Fund entered into futures and
options contracts in accordance with its investment objectives. 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. Subsequent payments are received
from or paid to the broker 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 may arise upon entering into futures contracts from potential imperfect
correlation between the futures contracts and the underlying securities and from
the possibility of an illiquid secondary market for these instruments.
When the Fund writes an option, the premium received is recorded as a liability
and is subsequently adjusted to the current market value of the option written.
Premiums received from writing options that expire unexercised are treated by
the Fund on the expiration date as realized gains from investments. The
difference between the premium and the amount paid on effecting a closing
purchase transaction, including brokerage commissions, is also treated as a
realized gain, or if the premium is less than the amount paid for the closing
purchase transaction, as a realized loss. If a call option is exercised, the
premium is added to the proceeds from the sale of the underlying security in
determining whether the Fund has realized a gain or loss. If a put option is
exercised, the premium reduces the cost basis of the securities purchased by the
Fund. The Fund as writer of an option bears the market risk of an unfavorable
change in the price of the security underlying the written option.
Transactions in options written during the six months ended June 30, 1999, were
as follows:
Number of Premiums
Contracts Ended
---------- --------
Options outstanding at December 31, 1998 ............. 1,350 464,569
Options written ...................................... 0 0
Options terminated in closing purchase transaction ... (1,350) (464,569)
Options expired ...................................... 0 0
Options exercised .................................... 0 0
------ --------
Options written outstanding at June 30, 1999 ......... 0 0
------ --------
<PAGE>
4. Capital Stock
Transactions in capital stock shares were as follows:
Six Months Year
Ended Ended
6/30/99 12/31/98
(Unaudited)
----------- ----------
Shares sold:
A Class ........................................... 9,220,870 19,823,010
B Class ........................................... 491,054 707,452
C Class ........................................... 770,293 547,427
Institutional Class ............................... 490,810 537,313
Shares issued upon reinvestment of dividends from
net investment income:
A Class ........................................... 735,936 1,626,617
B Class ........................................... 29,696 54,062
C Class ........................................... 16,167 16,695
Institutional Class ............................... 75,631 166,140
----------- -----------
11,830,457 23,478,716
----------- -----------
Shares repurchased:
A Class ...........................................(12,408,294) (26,163,018)
B Class ........................................... (429,171) (569,491)
C Class ........................................... (543,499) (412,395)
Institutional Class ............................... (2,450,392) (2,083,368)
----------- -----------
(15,831,356) (29,228,272)
----------- -----------
Net decrease ......................................... (4,000,899) (5,749,556)
=========== ===========
5. Market and Credit Risk
The Fund invests in securities whose value is derived from an underlying pool of
mortgages or consumer loans. Some of these securities are collateralized
mortgage obligations (CMOs). CMOs are debt securities issued by U.S. government
agencies or by financial institutions and other mortgage lenders which are
collateralized by a pool of mortgages held under an indenture. The Fund invests
in private-backed CMOs only if they are 100% collateralized at the time of
issuance by securities or certificates issued or guaranteed by the U.S.
government, its agencies or instrumentalities. Prepayment of mortgages may
shorten the stated maturity of the 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 and 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 will, from time to time, invest
in higher risk interest only CMOs. At June 30, 1999, the Fund had no holdings in
interest-only CMOs.
<PAGE>
16 for current income
Proxy Results
(Unaudited)
- --------------------------------------------------------------------------------
For the six months ended June 30, 1999, The Delaware Group Limited-Term
Government Funds, Inc. shareholders voted on the following proposals at the
annual meeting of shareholders on March 17, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:
1. To elect the Delaware Group Limited-Term Government Funds, Inc. Board
of Directors.
Shares Shares Voted
Voted Withheld
For Authority
---------- ------------
Jeffrey J. Nick ................................ 25,975,400 2,829,583
Walter P. Babich ............................... 25,995,932 2,809,051
John H. Durham ................................ 26,018,208 2,786,775
Anthony D. Knerr ............................... 26,023,483 2,781,500
Ann R. Leven .................................. 26,017,383 2,787,600
Thomas F. Madison .............................. 26,032,585 2,772,398
Charles E. Peck ................................ 26,027,639 2,777,344
Wayne A. Stork ................................. 26,010,513 2,794,470
Jan L. Yeomans ................................. 26,019,065 2,785,918
2. To approve the redesignation of the Fund's Investment objective from
fundamental to non-fundamental.
For Against Abstain
---------- --------- ---------
21,831,146 1,170,153 2,084,944
3. To approve standardized fundamental investment restrictions for the Delaware
Group Limited-Term Government Fund (proposal involves separate votes on
seven sub-proposals 3A-3G).
3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.
For Against Abstain
---------- --------- ---------
22,321,795 772,922 1,991,526
3B. To adopt a new fundamental investment restriction concerning borrowing money
and issuing senior securities.
For Against Abstain
---------- --------- ---------
21,749,973 1,347,550 1,988,719
3C. To adopt a new fundamental investment restriction concerning underwriting.
For Against Abstain
---------- --------- ---------
22,225,245 867,454 1,996,544
<PAGE>
3D. To adopt a new fundamental investment restriction concerning investments in
real estate.
For Against Abstain
---------- --------- ---------
22,168,831 936,590 1,980,822
3E. To adopt a new fundamental investment restriction concerning investments in
commodities.
For Against Abstain
---------- --------- ---------
22,172,705 940,494 1,973,044
3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.
For Against Abstain
---------- --------- ---------
22,161,162 902,898 2,022,183
3G. To reclassify all current fundamental investment restrictions as
non-fundamental.
For Against Abstain
---------- --------- ---------
21,843,675 1,142,747 2,099,820
4. To approve a new investment management agreement with Delaware Management
Company for the Delaware Group Limited-Term Government Fund, Inc.
For Against Abstain
---------- --------- ---------
22,135,987 940,731 2,009,525
5. To ratify the selection of Ernst & Young LLP, as the independent auditors
for Delaware Group Limited-Term Government Funds, Inc.
For Against Abstain
---------- --------- ---------
24,594,833 734,006 3,476,143
6. To approve the restructuring of the Delaware Group Limited-Term Government
Funds, Inc. from a Maryland Corporation into a Delaware Business Trust.
For Against Abstain
---------- --------- ---------
22,450,692 738,039 1,897,512
Year 2000 (Unaudited)
Like other investment companies, financial and business organizations and
individuals around the world, the Fund could be adversely affected if computer
systems used by the Investment Manager and other service providers do not
properly process and calculate date-related information and data on and after
January 1, 2000. The Fund is taking steps to obtain satisfactory assurances that
the Investment Manager and other major service providers are taking steps
reasonably designed to address the Year 2000 issue with respect to the computer
systems that such service providers use. At this time, however, there can be no
assurance that these steps will be sufficient to avoid any adverse impact to the
Fund.
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
FOR GROWTH OF CAPITAL
Aggressive Growth Fund
Trend Fund
DelCap Fund
Small Cap Value Fund
U.S. Growth Fund
Growth Stock Fund
Tax-Efficient Equity Fund
Social Awareness Fund
FOR TOTAL RETURN
Blue Chip Fund
Devon Fund
Decatur Equity Incom Fund
Growth and Income Fund
REIT Fund
Delaware Balanced Fund
FOR INTERNATIONAL DIVERSIFICATION
Emerging Markets Fund
New Pacific Fund
Overseas Equity Fund
International Equity Fund
Global Equity Fund
Global Bond Fund
FOR CURRENT INCOME
Delchester Fund
High-Yield Opportunities Fund
Extended Duration Bond Fund
Strategic Income Fund
Corporate Bond Fund
American Government Bond Fund
U.S. Government Securities Fund
Limited-Term Government Fund
FOR TAX-EXEMPT INCOME
National High Yield Municipal Bond Fund
Tax-Free USA Fund
Tax-Free Insured Fund
Tax-Free USA Intermediate Fund
State Tax-Free Funds*
MONEY MARKET FUNDS
Delaware Cash Reserve
Tax-Free Money Fund
ASSET ALLOCATION FUNDS
Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, North Dakota, New Jersey, New
Mexico, New York, Ohio, Oregon, Pennsylvania, Utah, Washington, Wisconsin.
Insured and intermediate bond funds are available in selected states.
funds
(PHOTO OF COMPUTER KEYBOARD)
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
<PAGE>
THIS SEMI-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 and the
Delaware Investments Performance Update for the most recently completed calendar
quarter. The prospectus sets forth details about charges, expenses, investment
objectives and operating policies of the Fund. You should read the prospectus
carefully before you invest. The figures in this report represent past results
which are not a guarantee of future results. The return and principal value of
an investment in the Fund will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost.
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INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
(PHOTO OF GLOBES)
For Shareholders
1.800.523.1918
For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
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,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Fund are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
Printed in the USA
on recycled paper
SA-022 [6/99] PP8/99
(2018)
