<PAGE>
DELAWARE(SM)
INVESTMENTS
- ------------
Delaware Limited-Term Government Fund
Current Income
[Current Income Artwork]
1999 annual report
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
Table of Contents
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary 5
Financial Statements
Statement of Net Assets 6
Statement of Operations 8
Statements of Changes in
Net Assets 9
Financial Highlights 10
Notes to Financial Statements 14
Report of Independent
Auditors 18
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 15 years'
experience.
[ ] For over 70 years, we have managed money in a variety of investment styles
that have weathered a full range of economic and market environments. We
opened our first mutual fund in 1938.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide relatively
conservative investment alternatives within any given asset class.
Consistent
[ ] We believe consistent processes are the best way to seek consistent
investment performance.
[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage
approximately $47 billion in assets as of December 31, 1999.
Comprehensive
[ ] We offer more than 60 mutual funds in these asset classes.
o Large-cap equity
o High-yield bonds
o Mid-cap equity
o Investment grade bonds
o Small-cap equity
o Municipal bonds (24 single-state funds)
o International equity
o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested. (C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
FOR INVESTORS WHO SEEK BOTH CURRENT INCOME AND PRESERVATION OF PRINCIPAL,
DELAWARE LIMITED-TERM GOVERNMENT FUND SEEKS TO OFFER AN ATTRACTIVE BALANCE
BETWEEN THE TWO.
[Current Income Artwork]
January 7, 2000
Recap of Events - Economic activity in the United States continues to move along
ahead of expectations. An improving global economic outlook reduced demand for
U.S. government debt over fiscal 1999, pushing U.S. bond prices lower and yields
significantly higher. Long-term U.S. Treasury yields increased from 5.09% on
January 1, 1999 to 6.48% on December 31, 1999. Short-term yields on the generic
two-year U.S. Treasury bond also rose from 4.53% to 6.24% for the same time
period (Source: Bloomberg). This presented a significant challenge to many
investors seeking to strike a balance between income and capital appreciation.
Strong economic activity and a booming stock market eventually heightened
inflationary concerns. The Federal Reserve responded by raising interest rates
on June 30th, August 24th and November 16th, effectively taking back all three
rate reductions of the previous year. As of this writing, the Federal funds
target rate on overnight loans between banks, stands at 5.50%. The Dow Jones
Industrial Average and Nasdaq Composite both hit new records at the end of your
Fund's fiscal year even after the Fed had raised interest rates three times in
1999.
Delaware Limited-Term Government Fund provided a total return of +1.07%
(Class A shares at net asset value with distributions reinvested) for the one
year ended December 31, 1999. Although this was only a slightly positive return,
your Fund faired better than its peer group, the Lipper Short-Intermediate
Government Funds Average, in a difficult environment for fixed income investors.
As of December 31, 1999, your Fund's 30-day current yield was 5.76% (for Class A
shares at net asset value).
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended December 31, 1999 One Year Lifetime*
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<S> <C> <C>
Delaware Limited-Term Government Fund Class A +1.07% +6.17%
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Merrill Lynch U.S. Treasury Three Year Index +1.43% Not Available
Merrill Lynch One-to-Three Year Government Bond Index +3.07% +7.12%
Lipper Short-Intermediate Government Funds Average +0.65% (91 funds) +7.07% (6 funds)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Performance is calculated at net asset value without the effect of sales charges
and assumes reinvestment of distributions. For U.S. Treasury securities,
interest and principal repayment at maturity 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 securities with three year maturities. The Merrill Lynch One-to-Three
Year Government Bond Index is an index of government securities with
one-to-three year maturities. The Lipper Short-Intermediate Government Fund
Average is an index of mutual funds tracked by Lipper Analytical. Complete Fund
performance can be found on page 5. Past performance does not guarantee future
results. You cannot invest directly in an index.
*Established November 24, 1985.
1
<PAGE>
Market Outlook - Though bonds may remain in the shadow of stocks as long as
economic growth continues in 2000, we still believe they have a role in
well-balanced portfolios. We believe that for investors who seek both current
income and preservation of principal, Delaware Limited-Term Government Fund
seeks to offer an attractive balance between the two.
On the pages that follow, Paul C. Grillo Jr. and Stephen R. Cianci, your Fund's
portfolio managers, explain Delaware Limited-term Government Fund's positioning
during the last six months and provide an outlook for the first half of fiscal
2000. We'd like to thank Delaware Limited-Term Government Fund's 14,281 retail
and institutional shareholders for their continued confidence and commitment to
Delaware Investments.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
- -------------------------- --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Delaware Investments
2
<PAGE>
[Current Income Artwork]
Paul C. Grillo Jr.
Vice President
Portfolio Manager
Delaware Management Company
Stephen R. Cianci
Vice President
Portfolio Manager
Delaware Management Company
January 7, 2000
Delaware Limited-Term
Government Fund Asset Allocation
As of December 31, 1999
Agency Mortgage-Backed Securities 44.1%
U.S. Treasuries 15.2%
Collateralized Mortgage Obligations 15.8%
Asset-Backed Securities 14.7%
Corporate Bonds 5.1%
U. S. Government Agencies 3.7%
Cash and Other Assets 1.4%
PORTFOLIO MANAGEMENT REVIEW
As it has traditionally done in the past, a booming U.S. stock market spelled
difficult times for fixed income investors this past year. Delaware Limited-Term
Government Fund delivered a +1.07% return for the one-year period ended December
31, 1999 (Class A shares at net asset value with distributions reinvested).
Although this return was not consistent with your Fund's lifetime average of
6.17% (Class A shares at net asset value with distributions reinvested), it did
significantly outpace the return of its peers, represented by the Lipper
Short-Intermediate Government Funds Average, which returned 0.15% for the same
time period.
Highlights
In order to maximize your Fund's income stream in a low interest rate
environment, we invested nearly 59.9% of your Fund's total assets in
mortgage-backed securities, 44.1% in traditional mortgage-backed securities and
15.8% in collateralized mortgage obligations (CMOs). These securities delivered
better income than Treasury securities over the course of fiscal 1999.
Within our overall mortgage-backed holdings, we decreased your Fund's investment
in traditional mortgage-backed securities over the last fiscal year. Instead, we
found greater value and income potential in CMOs, a more complex type of
mortgage-based security. CMOs are mortgage-backed bonds that separate mortgage
pools into different maturity classes, called tranches. CMOs - like traditional
mortgage-backed securities - are derived from government-guaranteed mortgages or
other top grade mortgages. As of December 31, 1999, CMOs represented 15.8% of
your Fund's total assets.
Improved global economic conditions throughout fiscal 1999 eventually decreased
demand for U.S. government securities and their inherent high credit quality. We
took note of this decline and began steadily reducing our position in U.S.
Treasuries early in 1999. We decreased your Fund's allocation to U.S. Treasuries
from 24.8% as of December 31, 1998 to 18.9% as of December 31, 1999.
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. We consider 2.5 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.
3
<PAGE>
IN ORDER TO MAXIMIZE YOUR FUND'S INCOME STREAM IN A LOW INTEREST RATE
ENVIRONMENT, WE INVESTED NEARLY 59.9% OF YOUR FUND'S TOTAL ASSETS IN
MORTGAGE-BACKED SECURITIES.
For the 12 months ending December 31, 1999, your Fund's duration stood at 2.3
years. This positioning, which is slightly shorter than our mid-point, reflects
our conservative outlook for the year. In the future, we believe 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.
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 and asset-backed
securities, among others. Over the last twelve months, our most significant
weighting in non-government securities was asset-backed securities, which
represented nearly 14.7% of total Fund assets. 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 of high credit quality will
continue to perform well.
Outlook
For the U.S., continued strong forward momentum is likely to result in solid
growth again 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. That means we have little expectation that increased
demand will push bond prices higher.
We plan to continue to focus on mortgage-backed securities, including
collateralized mortgage obligations. We think bonds with this combination of
characteristics will be effective investments for the portfolio, offering both
income and relative safety. 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
In the months ahead, we will also be looking for opportunities to raise your
Fund's exposure to U.S. Treasury securities. We believe these securities are
currently undervalued and have the chance to recover in the next six months.
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 first half of fiscal 2000.
Delaware Limited-Term
Government Fund
Portfolio Characteristics
12/31/99 12/31/98
Average Effective
Duration 2.3 years 2.4 years
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Average Quality AAA AAA
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Thirty-Day Current
SEC Yield* 5.76% 5.00%
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* For Class A shares measured according to Securities and Exchange Commission
guidelines. Class B and Class C thirty-day current SEC yields were both
5.06% as of December 31, 1999. Institutional Class yield was 6.07%.
4
<PAGE>
Delaware Limited-Term Government Fund
FUND BASICS
Fund Objectives
Seeks to provide a high, stable level of income while attempting to minimize
fluctuations in principal and to provide maximum liquidity.
Assets Under Management
$286.3 million
Number of Holdings
448
Fund Start Date
November 24, 1985
Your Fund Managers
Paul C. Grillo, Jr. joined Delaware Investments in 1993, after serving as a
Mortgage Strategist and Trader at Dreyfus Corporation. He holds a bachelor's
degree from North Carolina State University and an M.B.A. from Pace University.
Mr. Grillo is also a CFA charterholder.
Stephen R. Cianci joined Delaware Investments in 1992. He holds both a B.S. and
an M.B.A. from Widener University and became co-manager of the Fund in January
1999. Mr. Cianci is an Adjunct Professor of Finance at Widener University and
also a CFA charterholder.
NASDAQ Symbols
Class A DTRIX
Class B DTIBX
Class C DTICX
[Current Income Artwork]
FUND PERFORMANCE
Growth of a $10,000 Investment
January 1, 1990 through December 31, 1999
<TABLE>
<CAPTION>
Dec-89 Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95
<S> <C> <C> <C> <C> <C> <C> <C>
Merrill Lynch
One-to-Three Year Government Bond Index $10,000 $10,972 $12,253 $13,026 $13,730 $13,808 $15,327
Lipper Short-Intermediate Government
Funds Average (18 funds) $10,000 $10,799 $12,211 $12,943 $13,859 $13,621 $15,368
Delaware Limited-Term Government Fund $ 9,725 $10,637 $12,025 $12,701 $13,375 $13,124 $14,268
</TABLE>
<TABLE>
<CAPTION>
Dec-96 Dec-97 Dec-98 Dec-99
<S> <C> <C> <C> <C>
Merrill Lynch
One-to-Three Year Government Bond Index $16,090 $17,161 $18,362 $18,924
Lipper Short-Intermediate Government
Funds Average (18 funds) $15,999 $17,113 $18,282 $18,466
Delaware Limited-Term Government Fund $14,794 $15,543 $16,705 $16,882
</TABLE>
<PAGE>
Chart assumes $10,000 invested on January 1, 1990 and includes the effect of a
2.75% front-end sales charge and reinvestment of distributions. Past performance
does not guarantee future results. For U.S. Treasury securities, interest and
principal repayment at maturity are guaranteed by the U.S. government, unlike
mutual fund dividends and share values which are not guaranteed. The Merrill
Lynch One-to-Three Year Government Bond Index is an index of government
securities with one-to-three year maturities. The Lipper Short-Intermediate
Government Funds Average is an index of 18 limited-term government mutual funds.
You cannot invest directly in an index.
Average Annual Returns
Through December 31, 1999 Lifetime 10 Years Five Years One Year
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Class A (Est. 11/24/85)
Excluding Sales Charge +6.17% +5.68% +5.20% +1.07%
Including Sales Charge +5.96% +5.39% +4.62% -1.75%
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Class B (Est. 5/2/94)
Excluding Sales Charge +3.71% +4.31% +0.22%
Including Sales Charge +3.71% +4.31% -1.68%
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Class C (Est. 11/28/95)
Excluding Sales Charge +3.63% +0.20%
Including Sales Charge +3.63% -0.75%
All performance includes reinvestment of distributions and applicable sales
charges as described below. Return and share value will fluctuate so that shares
when redeemed may be worth more or less than the original cost. Performance for
Class B and C results excluding sales charges assumes either the investment was
not redeemed or contingent sales charges did not apply. Past performance is not
a guarantee of future results.
Class A shares have a 2.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a contingent deferred
sales charge of up to 2% if redeemed before the end of the third year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
The Institutional Class, initially offered June 1, 1992, is available
without a sales or asset-based distribution charge only to certain eligible
institutional accounts. Performance prior to the class inception date is based
on Class A performance, adjusted to eliminate the effect of the sales charge,
but not Class A's asset-based distribution charge.
<TABLE>
<CAPTION>
Average Annual Returns
Through December 31, 1999 Lifetime 10 Years Five Years One Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Institutional Class (Est. 11/24/85) +6.30% +5.84% +5.35% +1.22%
- -----------------------------------------------------------------------------------------------------
NASDAQ Symbol Institutional Class: DTINX
</TABLE>
5
<PAGE>
Statement of Net Assets
Delaware Group Limited-Term Government Funds --
DELAWARE LIMITED-TERM GOVERNMENT FUND
Principal Market
December 31, 1999 Amount Value
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Agency Mortgage-Backed Securities - 31.55%
Federal Home Loan Mortgage Corporation
6.00% 5/1/06 $ 9,453,563 $ 9,125,643
7.00% 4/1/29 2,411,953 2,332,811
8.00% 5/1/05 to 8/1/29 8,643,660 8,758,597
8.50% 12/1/08 to 11/1/10 1,563,514 1,598,425
8.75% 5/1/10 569,505 599,226
9.00% 6/1/09 to 1/1/24 3,237,536 3,365,190
9.25% 3/1/20 170,548 179,022
9.50% 11/1/05 to 2/15/20 3,529,086 3,696,403
11.00% 9/1/10 to 6/1/20 830,043 918,928
11.50% 3/1/01 to 3/1/16 3,074,395 3,464,785
Federal National Mortgage Association
7.00% 3/1/28 to 5/1/29 9,973,682 9,633,952
7.50% 12/1/27 to 10/1/29 19,027,886 18,831,070
8.00% 7/1/02 to 10/1/29 4,309,093 4,349,104
8.50% 8/1/07 to 2/1/29 12,668,715 13,068,082
9.00% 8/1/04 to 4/1/16 1,639,994 1,714,979
9.25% 7/1/08 to 8/1/16 1,188,982 1,256,876
10.00% 1/1/19 352,050 379,004
11.00% 12/25/03 to 8/1/20 6,191,383 6,773,582
12.50% 2/1/11 96,871 110,736
13.00% 7/1/15 159,778 185,992
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Total Agency Mortgage-Backed Securities
(cost $91,501,124) 90,342,407
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Asset-Backed Securities - 14.69%
Advanta Home Equity Loan Trust 92-4 A1
7.20% 11/25/08 332,362 329,869
AFC Home Equity Loan Trust Series 1992-5 A
7.20% 2/15/08 1,225,729 1,226,386
EQCC Home Equity Loan Trust
Series 98-2 Class A3F 6.229% 3/15/13 50,000 49,375
Series 99-3 Class A3F 7.067% 1/25/25 3,565,000 3,523,780
First USA Credit Card Master Trust 1997-5 A
6.60% 4/17/07 4,000,000 3,995,200
Honda Auto Lease Trust Series 99-A A4
6.45% 9/16/02 5,625,000 5,599,687
MBNA Master Credit Card Trust
1995-A 5.65% 1/16/07 6,000,000 6,030,000
1999-L A 5.66% 3/16/09 1,770,000 1,776,018
MetLife Capital Equipment Loan Trust
6.85% 5/20/08 4,088,000 4,071,239
Peco
1999-A-A4 5.80% 3/1/07 5,015,000 4,749,205
Sears Credit Account Master Trust 1999-3
6.45% 11/17/09 5,000,000 4,855,469
Standard Credit Card Trust
8.25% 1/7/07 5,622,000 5,862,760
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Total Asset-Backed Securities
(cost $42,870,292) 42,068,988
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<PAGE>
Principal Market
December 31, 1999 Amount Value
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Collateralized Mortgage Obligations - 15.81%
Federal Home Loan Mortgage Corporation
Series 69 Class F 9.00% 12/15/05 $ 696,498 $ 740,423
Series 1608 Class GA 9.00% 6/15/21 7,822,727 8,113,949
Series 2113 Class QD 6.00% 2/15/23 8,467,000 8,108,857
Federal National Mortgage Association
Series 1993-12 Class ED 7.50% 2/25/06 8,375,000 8,443,461
Series 1993-89 Class A 5.90% 4/25/19 1,731,042 1,724,565
Series 1998-W3 Class A3 6.50% 7/25/28 3,487,000 3,397,237
Government National Mortgage Association
Series 1998-9 Class B 6.85% 12/20/25 5,356,721 5,089,322
Series 1999-23 Class VB 6.50% 3/20/10 10,000,000 9,566,837
Investor GNMA Mortgage-Backed Securities
Trust Series 1984-4 Class F
10.875% 10/25/13 73,240 79,744
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Total Collateralized Mortgage Obligations
(cost $46,865,727) 45,264,395
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Corporate Bonds - 5.09%
Bear Stearns 6.15% 3/2/04 3,400,000 3,239,336
Daimler-Benz North 7.375% 9/15/06 4,700,000 4,698,028
General Electric Capital 8.85% 3/1/07 3,000,000 3,246,462
Northwest Natural Gas 9.75% 7/1/15 3,200,000 3,386,504
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Total Corporate Bonds
(cost $15,414,925) 14,570,330
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Government National Mortgage Association
Obligations - 12.55%
GNMA
7.625% 2/15/22 1,779,785 1,777,004
8.00% 1/15/17 to 11/15/29 14,858,320 15,030,470
9.00% 4/15/16 to 8/15/17 8,093,908 8,556,987
9.50% 6/15/16 to 11/15/17 789,323 849,560
11.00% 10/15/00 to 5/15/20 2,019,025 2,258,427
11.50% 7/15/15 to 2/15/19 38,158 43,012
12.00% 10/15/10 53,508 61,200
12.25% 9/15/13 to 5/15/14 191,751 219,675
12.50% 12/15/10 45,345 52,430
13.75% 9/15/14 48,771 56,331
GNMA GPM
11.50% 4/15/10 to 4/15/13 115,338 130,151
GNMA II
9.50% 11/20/20 to 12/20/17 1,939,496 2,062,966
9.75% 11/20/16 244,493 262,676
10.00% 1/20/20 to 11/20/20 1,041,165 1,145,281
10.50% 11/15/15 to 6/20/20 265,020 287,341
11.00% 09/20/15 to 10/20/15 710,551 793,819
11.50% 12/20/17 to 10/20/18 172,060 189,966
12.00% 03/20/14 to 5/20/16 1,416,479 1,617,007
12.50% 10/20/13 to 1/20/14 471,631 541,306
------------
Total Government National Mortgage
Association Obligations (cost $35,963,964) 35,935,609
------------
6
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Limited-Term Government Fund Amount Value
- --------------------------------------------------------------------------------
U.S. Government Agency Obligations - 3.72%
Federal National Mortgage Association
6.50% 8/15/04 $10,800,000 $ 10,668,202
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Total U.S. Government Agency Obligations
(cost $10,817,780) 10,668,202
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U.S. Treasury Obligations - 15.20%
* U.S. Treasury Bonds
10.75% 8/15/05 10,605,000 12,657,722
U.S. Treasury Inflation Index Notes
3.625% 7/15/02 7,915,118 7,838,579
U.S. Treasury Notes
6.375% 9/30/01 8,660,000 8,679,354
7.50% 11/15/01 10,070,000 10,290,841
7.875% 8/15/04 3,830,000 4,051,104
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Total U.S. Treasury Obligations
(cost $45,048,445) 43,517,600
------------
Repurchase Agreements - 0.29%
With Chase Manhattan 2.50% 1/3/00
(dated 12/31/99, collateralized by $236,000
U.S. Treasury Notes 4.75% due 2/15/04,
market value $226,656) 222,000 222,000
With J.P. Morgan Securities 3.00% 1/3/00
(dated 12/31/99, collateralized by $90,000
U.S. Treasury Notes 6.375% due 9/30/01,
market value $91,779 and $88,000 U.S.
Treasury Notes 6.625% due 4/30/02,
market value $89,452 and $88,000
U.S. Treasury Notes 6.25% due 06/30/02,
market value $87,490) 263,000 263,000
With PaineWebber 3.00% 1/3/00 (dated
12/31/99, collateralized by $90,000 U.S.
Treasury Notes 5.625% due 11/30/00,
market value $90,292 and $88,000 U.S.
Treasury Notes 5.375% due 2/15/01,
market value $88,847) 175,500 175,500
With Prudential Securities 2.75% 1/3/00
(dated 12/31/99, collateralized by $183,000
U.S. Treasury Bills due 5/18/00,
market value $179,172) 175,500 175,500
------------
Total Repurchase Agreements
(cost $836,000) 836,000
------------
<PAGE>
Total Market Value of Securities - 98.90%
(cost $289,318,257) $283,203,531
Receivables and Other Assets
Net of Liabilities - 1.10% 3,140,933
------------
Net Assets Applicable to 34,639,029 Shares
Outstanding - 100.00% $286,344,464
------------
- ----------------------
GNMA - Government National Mortgage Association
GPM - Graduate Payment Mortgage
* Principal amount of $5,000,000 pledged as collateral for futures.
Net Asset Value - Delaware Limited-Term
Government Fund A Class
($262,775,726 / 31,787,920 Shares) $8.27
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Net Asset Value - Delaware Limited-Term
Government Fund B Class
($12,482,638 / 1,510,023 Shares) $8.27
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Net Asset Value - Delaware Limited-Term
Government Fund C Class
($6,638,164 / 803,019 Shares) $8.27
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Net Asset Value - Delaware Limited-Term
Government Fund Institutional Class
($4,447,936 / 538,067 Shares) $8.27
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Components of Net Assets at December 31, 1999:
Shares of beneficial interest (unlimited
authorization - no par) $438,733,211
Undistributed net investment income 17,112
Accumulated net realized loss on investments (146,569,544)
Net unrealized depreciation of investments
and futures contracts (5,836,315)
------------
Total net assets $286,344,464
------------
Net Asset Value and Offering Price Per Share -
Delaware Limited-Term Government Fund
Net asset value A Class (A) $8.27
Sales charge (2.75% of offering price or 2.78%
of amount invested per share) (B) 0.23
-------
Offering price $8.50
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- ----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
7
<PAGE>
Statement of Operations
Delaware Group Limited-Term Government Funds
Year Ended December 31, 1999 Delaware Limited-Term Government Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest .............................................. $ 23,173,271
Expenses:
Management fees ....................................... $ 1,625,199
Dividend disbursing and transfer agent
fees and expenses ................................... 778,515
Distribution expense .................................. 640,846
Accounting and administration ......................... 128,912
Reports and statements to shareholders ................ 95,668
Registration fees ..................................... 42,852
Professional fees ..................................... 36,418
Taxes (other than taxes on income) .................... 16,989
Trustees' fees ........................................ 8,807
Custodian fees ........................................ 2,250
Other ................................................. 48,674 3,425,130
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Less expenses paid indirectly ......................... (7,485)
------------
Total expenses ........................................ 3,417,645
------------
Net Investment Income ................................. 19,755,626
------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on:
Investments ........................................ (6,158,600)
Futures contracts .................................. (57,854)
Written options .................................... 126,287
------------
Net realized loss on investments ...................... (6,090,167)
Net change in unrealized appreciation / depreciation of
investments and futures contracts ................... (10,466,154)
------------
Net Realized and Unrealized Loss on Investments ....... (16,556,321)
------------
Net Increase in Net Assets Resulting from Operations .. $ 3,199,305
------------
</TABLE>
See accompanying notes
8
<PAGE>
Statements of Changes in Net Assets
Delaware Group Limited-Term Government Funds
<TABLE>
<CAPTION>
Delaware Limited-Term Government Fund
- ---------------------------------------------------------------------------------------
Year Ended
12/31/99 12/31/98
Increase (Decrease) in Net Assets from Operations:
<S> <C> <C>
Net investment income ................................. $ 19,755,626 $ 22,987,243
Net realized gain (loss) on investments ............... (6,090,167) 3,061,740
Net change in unrealized appreciation / depreciation of
investments and futures contracts ................... (10,466,154) 16,068
------------------------------
Net increase in net assets resulting from operations .. 3,199,305 26,065,051
------------------------------
Distributions To Shareholders from:
Net investment income:
A Class ............................................ (17,911,570) (20,661,739)
B Class ............................................ (743,784) (679,520)
C Class ............................................ (340,211) (163,243)
Institutional Class ................................ (791,764) (1,443,922)
------------------------------
(19,787,329) (22,948,424)
------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ............................................ 122,671,414 169,666,637
B Class ............................................ 7,484,917 6,046,049
C Class ............................................ 12,877,720 4,674,211
Institutional Class ................................ 5,331,913 4,602,819
Net asset value of shares issued upon reinvestment of
dividends from net investment income
A Class ............................................ 12,310,557 13,943,162
B Class ............................................ 500,770 463,336
C Class ............................................ 299,210 143,161
Institutional Class ................................ 792,517 1,424,128
------------------------------
162,269,018 200,963,503
------------------------------
Cost of shares repurchased:
A Class ............................................ (174,726,114) (224,067,177)
B Class ............................................ (8,694,266) (4,880,946)
C Class ............................................ (11,144,509) (3,536,067)
Institutional Class ................................ (22,133,639) (17,913,940)
------------------------------
(216,698,528) (250,398,130)
------------------------------
Decrease in net assets derived from capital
share transactions ................................... (54,429,510) (49,434,627)
------------------------------
Net decrease in net assets ............................ (71,017,534) (46,318,000)
Net Assets:
Beginning of year ..................................... 357,361,998 403,679,998
------------------------------
End of year ........................................... $ 286,344,464 $ 357,361,998
==============================
</TABLE>
See accompanying notes
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Limited-Term Government Fund A Class
- --------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $8.700 $8.620 $8.770 $9.050 $8.990
Income (loss) from investment operations:
Net investment income ................................... 0.519 0.540 0.601 0.600 0.699
Net realized and unrealized gain (loss) on investments .. (0.429) 0.079 (0.150) (0.280) 0.060
-------------------------------------------------------------
Total from investment operations ........................ 0.090 0.619 0.451 0.320 0.759
-------------------------------------------------------------
Less dividends:
Dividends from net investment income .................... (0.520) (0.539) (0.601) (0.600) (0.699)
-------------------------------------------------------------
Total dividends ......................................... (0.520) (0.539) (0.601) (0.600) (0.699)
-------------------------------------------------------------
Net asset value, end of year .............................. $8.270 $8.700 $8.620 $8.770 $9.050
-------------------------------------------------------------
Total return(1) ............................................. 1.07% 7.46% 5.23% 3.69% 8.71%
Ratios and supplemental data:
Net assets, end of year (000 omitted) ................... $262,776 $317,329 $355,079 $464,649 $653,451
Ratio of expenses to average net assets ................. 1.00% 1.01% 0.98% 0.93% 0.96%
Ratio of net investment income to average net assets .... 6.12% 6.32% 6.85% 6.80% 7.71%
Portfolio turnover ...................................... 175% 69% 79% 83% 73%
</TABLE>
- ----------------------
(1) 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
10
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Limited-Term Government Fund B Class
- --------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $8.700 $8.620 $8.770 $9.050 $8.990
Income (loss) from investment operations:
Net investment income ................................... 0.447 0.467 0.522 0.524 0.622
Net realized and unrealized gain (loss) on investments .. (0.429) 0.079 (0.150) (0.280) 0.060
-----------------------------------------------------------
Total from investment operations ........................ 0.018 0.546 0.372 0.244 0.682
-----------------------------------------------------------
Less dividends:
Dividends from net investment income .................... (0.448) (0.466) (0.522) (0.524) (0.622)
-----------------------------------------------------------
Total dividends ......................................... (0.448) (0.466) (0.522) (0.524) (0.622)
-----------------------------------------------------------
Net asset value, end of year .............................. $8.270 $8.700 $8.620 $8.770 $9.050
-----------------------------------------------------------
Total return(1) ........................................... 0.22% 6.55% 4.35% 2.81% 7.80%
Ratios and supplemental data:
Net assets, end of year (000 omitted) ................... $12,483 $13,900 $12,119 $12,959 $12,313
Ratio of expenses to average net assets ................. 1.85% 1.86% 1.83% 1.78% 1.81%
Ratio of net investment income to average net assets .... 5.27% 5.47% 5.98% 5.91% 6.86%
Portfolio turnover ...................................... 175% 69% 79% 83% 73%
</TABLE>
- ----------------------
(1) 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
11
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Limited-Term Government Fund C Class
- --------------------------------------------------------------------------------------------------------------------------
Period
Year Ended 11/28/95(1) to
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $8.700 $8.620 $8.770 $9.050 $9.010
Income (loss) from investment operations:
Net investment income ................................... 0.447 0.467 0.524 0.524 0.051
Net realized and unrealized gain (loss) on investments .. (0.431) 0.079 (0.152) (0.280) 0.040
-----------------------------------------------------------------
Total from investment operations ........................ 0.016 0.546 0.372 0.244 0.091
-----------------------------------------------------------------
Less dividends:
Dividends from net investment income .................... (0.446) (0.466) (0.522) (0.524) (0.051)
-----------------------------------------------------------------
Total dividends ......................................... (0.446) (0.466) (0.522) (0.524) (0.051)
-----------------------------------------------------------------
Net asset value, end of year .............................. $8.270 $8.700 $8.620 $8.770 $9.050
-----------------------------------------------------------------
Total return(2)............................................ 0.20% 6.56% 4.34% 2.81% (1)
Ratios and supplemental data:
Net assets, end of year (000 omitted) ................... 6,638 $4,932 $3,580 $3,090 $33
Ratio of expenses to average net assets ................. 1.85% 1.86% 1.83% 1.78% (1)
Ratio of net investment income to average net assets .... 5.27% 5.47% 5.98% 5.78% (1)
Portfolio turnover ...................................... 175% 69% 79% 83% (1)
</TABLE>
- ----------------------
(1) 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.
(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
12
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Limited-Term Government Fund Institutional Class
- --------------------------------------------------------------------------------------------------------------------------
Year Ended
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........................ $8.700 $8.620 $8.770 $9.050 $8.990
Income (loss) from investment operations:
Net investment income ................................... 0.531 0.553 0.605 0.613 0.712
Net realized and unrealized gain (loss) on investments .. (0.428) 0.079 (0.150) (0.280) 0.060
-----------------------------------------------------------
Total from investment operations ........................ 0.103 0.632 0.455 0.333 0.772
-----------------------------------------------------------
Less dividends:
Dividends from net investment income .................... (0.533) (0.552) (0.605) (0.613) (0.712)
-----------------------------------------------------------
Total dividends ......................................... (0.533) (0.552) (0.605) (0.613) (0.712)
-----------------------------------------------------------
Net asset value, end of year .............................. $8.270 $8.700 $8.620 $8.770 $9.050
-----------------------------------------------------------
Total return(1) ........................................... 1.22% 7.62% 5.39% 3.84% 8.87%
Ratios and supplemental data:
Net assets, end of year (000 omitted) ................... $4,448 $21,201 $32,902 $30,349 $37,460
Ratio of expenses to average net assets ................. 0.85% 0.86% 0.83% 0.78% 0.81%
Ratio of net investment income to average net assets .... 6.27% 6.47% 6.98% 6.92% 7.86%
Portfolio turnover ...................................... 175% 69% 79% 83% 73%
</TABLE>
- ----------------------
(1) 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.
See accompanying notes
13
<PAGE>
Notes to Financial Statements
December 31, 1999
- --------------------------------------------------------------------------------
Delaware Group Limited-Term Government Funds - Delaware 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
Delaware Business Trust. The Fund offers four classes of shares. The Delaware
Limited-Term Government Fund A Class carries a front-end sales charge of 2.75%.
The Delaware Limited-Term Government Fund B Class carries a back-end deferred
sales charge, Delaware Limited-Term Government Fund C Class carries a level load
deferred sales charge and Delaware 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 - 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 Trustees.
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 102% collateralized. However, in the event of default or
bankruptcy by the counterparty to the agreement, realization of the collateral
may be subject to legal proceedings.
<PAGE>
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.
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 $7,485 for the year ended December
31, 1999. In addition, the Fund receives earnings credits from its custodian
when positive cash balances are maintained, which are used to offset custody
fees. There were no earnings credits for the year ended December 31, 1999. 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
Effective April 1, 1999 and 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 which is calculated daily at a
rate of 0.50% on 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 $2,500
million. Prior to April 1, 1999 the management fee was calculated at the rate of
0.50% of the average daily net assets of the Fund less the fees paid to the
unaffiliated directors. At December 31, 1999, the Fund had a liability for
investment management fees and other expenses payable to DMC of $41,358.
The Fund has engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administrative services. The Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions, and average net assets, subject
to certain minimums. At December 31, 1999, the Fund had a liability for such
fees and other expenses payable to DSC of $15,573.
14
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates (continued)
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. At December 31, 1999 the Fund had a
payable to DDLP of $9,130.
For the year ended December 31, 1999, DDLP earned $27,070 for commissions on
sales of the Fund's A Class shares.
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Fund. These officers, trustees and employees are paid no compensation by the
Fund.
3. Investments
During the year ended December 31, 1999, the Fund made purchases of $369,785,977
and sales of $410,435,308 of investment securities other than U.S. government
securities and temporary cash investments.
At December 31, 1999, the aggregate cost of securities for federal income tax
purposes was $289,392,058.
At December 31, 1999, net unrealized appreciation for federal income tax
purposes aggregated $6,188,527 of which $6,796,437 related to unrealized
appreciation of securities and $607,910 related to unrealized depreciation of
securities.
For federal income tax purposes, the Fund had accumulated capital losses of
$145,976,013 at December 31, 1999, which may be carried forward and applied
against future capital gains. The capital loss carry forward expire as follows:
2002 - $84,612,370, 2003 - $29,779,768 - 2004 - $16,636,244, 2005 - $9,442,127
and 2006 - $5,505,504.
4. Capital Shares
Transactions in capital shares were as follows:
Year Ended
12/31/99 12/31/98
Shares sold:
A Class ....................................... 14,431,512 19,823,010
B Class ....................................... 883,214 707,452
C Class ....................................... 1,521,301 547,427
Institutional Class ........................... 627,622 537,313
Shares issued upon reinvestment of dividends
from net investment income:
A Class ....................................... 1,453,542 1,626,617
B Class ....................................... 59,133 54,062
C Class ....................................... 35,400 16,695
Institutional Class ........................... 92,791 166,140
----------- -----------
19,104,515 23,478,716
----------- -----------
Shares repurchased:
A Class ....................................... (20,583,300) (26,163,018)
B Class ....................................... (1,030,538) (569,491)
C Class ....................................... (1,320,789) (412,395)
Institutional Class ........................... (2,619,975) (2,083,368)
----------- -----------
(25,554,602) (29,228,272)
----------- -----------
Net decrease .................................... (6,450,087) (5,749,556)
----------- -----------
15
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
5. Futures Contracts
The Fund invests in financial futures contracts for the purpose of hedging their
existing portfolio securities against fluctuations in fair value caused by
changes in prevailing market rates. Upon entering into a futures contract, the
Fund deposits cash or pledges U.S. government securities to a broker, equal to
the minimum "initial margin" requirements of the exchange on which the contract
is traded. 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 Funds as unrealized gains or losses until the contracts are closed. When the
contracts are closed, the Funds record a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Risk 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.
Financial futures contracts open at December 31, 1999 were as follows:
Contracts Notional Unrealized
to Sell Cost Amount Expiration Date Gain
------- ----------- --------------- ----
36 U.S. 10-Year
Treasury note
contracts $(3,518,748) March 2000 $ 69,313
175 U.S. 5-Year
Treasury note
contracts (17,357,344) March 2000 209,098
6. Options Written
During the year ended December 31, 1999, the Fund entered into options contracts
in accordance with its investment objectives. When the Fund writes an option,
the premium is received and a liability is recorded and adjusted on a daily
basis to reflect the current market value of the option written. Premiums
received from writing options that expire unexercised are treated by the Fund on
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 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 a writer of an option bears the
market risk of an unfavorable change in the price of the security underlying the
written option.
Transactions in options written during the year ended December 31,1999, were as
follows:
Number of Premiums
Contracts Received
--------- ---------
Options outstanding at
December 31, 1998 1,350 $ 464,569
Options written 370,000 168,887
Options terminated in closing
purchase transaction (371,350) (633,456)
Options expired -- --
Options exercised -- --
-------- ---------
Options outstanding at
December 31, 1999 -- --
-------- ---------
16
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
7. 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 December 31, 1999 the Fund had no holdings
in interest-only CMOs.
8. Lines of Credit
The Fund has a committed line of credit for $10.8 million. No amount was
outstanding at December 31, 1999, or at any time during the fiscal year.
9. Tax Information (Unaudited)
The information set forth below is for the Fund's fiscal year as required by
federal laws. Shareholder's, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2000. Please
consult your tax advisor for proper treatment of this information.
For the fiscal year ended December 31, 1999, the Fund designates as long term
capital gains, ordinary income, and tax-exempt income distributions paid during
the year as follows:
Long-Term Ordinary
Capital Gains Income Total
Distributions Distributions Distributions Qualifying
(Tax Basis) (Tax Basis) (Tax Basis) Dividends1
------------- ------------- ------------- ----------
-- 100% 100% --
17
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group Limited-Term Government Funds -
Delaware Limited-Term Government Fund
We have audited the accompanying statement of net assets of Delaware
Limited-Term Government Fund (the "Fund") as of December 31, 1999, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 1999, 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 Limited-Term Government Fund at December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the periods indicated therein, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
February 4, 2000
18
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
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.
[GRAPHIC OMITTED: BUILDING BLOCKS OF A DIVERSIFIED PORTFOLIO "HOUSE"]
GROWTH OF CAPITAL
Aggressive Growth Equity Funds
Growth Equity Funds
o Select Growth Fund
o Trend Fund
o DelCap Fund
o Small Cap Value Fund
o U.S. Growth Fund
o Growth Stock Fund
o Tax-Efficient Equity Fund
o Social Awareness Fund
TOTAL RETURN
Moderate Growth Equity Funds
o Blue Chip Fund
o Devon Fund
o Decatur Equity Income Fund
o Growth and Income Fund
o REIT Fund
o Balanced Fund
INTERNATIONAL AND GLOBAL
International and Global Funds
o Emerging Markets Fund
o New Pacific Fund
o Overseas Equity Fund
o International Equity Fund
o Global Equity Fund
o Global Bond Fund
CURRENT INCOME
Taxable Bond Funds
o Delchester Fund
o High-Yield Opportunities Fund
o Extended Duration Bond Fund
o Strategic Income Fund
o Corporate Bond Fund
o American Government Bond Fund
o U.S. Government Securities Fund
o Limited-Term Government Fund
TAX-EXEMPT INCOME
Tax-Exempt Bond Funds
o National High Yield Municipal Bond Fund
o Tax-Free USA Fund
o Tax-Free Insured Fund
o Tax-Free USA Intermediate Fund
o State Tax-Free Funds*
STABILITY OF PRINCIPAL
Stability of Principal
o Cash Reserve
o Tax-Free Money Fund Asset Allocation
o Foundation Funds
Growth Portfolio
Balanced Portfolio
Income Portfolio
* Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey, New
Mexico, New York, Ohio, Oregon, Pennsylvania, and Wisconsin. Insured and
intermediate bond funds are available in selected states.
<PAGE>
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
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
This annual report is for the information of Delaware Limited-Term Government
Fund shareholders, but it may be used with prospective investors when preceded
or accompanied by a current Prospectus for Delaware Limited-Term Government Fund
and the Delaware Investments Performance Update for the most recently completed
calendar quarter. The prospectus sets forth details about charges, expenses,
investment objectives and operating policies of the Fund. You should read the
prospectus carefully before you invest. The figures in this report represent
past results which are not a guarantee of future results. The return and
principal value of an investment in the Fund will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
BOARD OF TRUSTEES
Wayne A. Stork
Chairman
Delaware Investments
Philadelphia, PA
Walter P. Babich
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA
David K. Downes
President and Chief Executive Officer
Delaware Investments
Philadelphia, PA
John H. Durham
Private Investor
Horsham, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates
New York, NY
Ann R. Leven
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
Charles E. Peck
Retired
Fredericksburg, VA
Janet L. Yeomans
Vice President and Treasurer
3M Corporation
St. Paul, Minnesota
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AFFILIATED OFFICERS
Charles E. Haldeman, Jr.
President and Chief Executive Officer
Delaware Management Holdings, Inc.
Richard J. Flannery
Executive Vice President
and General Counsel
Delaware Investments
Philadelphia, PA
Bruce D. Barton
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA
Investment Manager
Delaware Management Company
Philadelphia, PA
International Affiliate
Delaware International Advisers Ltd.
London, England
National Distributor
Delaware Distributors, L.P.
Philadelphia, PA
Shareholder Servicing, Dividend Disbursing and Transfer Agent
Delaware Service Company, Inc.
Philadelphia, PA
1818 Market Street
Philadelphia, PA 19103-3682
(2722) Printed in the USA
AR-022 [12/99] PP 2/00 J5499
