<PAGE>
DELAWARE(SM)
INVESTMENTS
---------------------
Philadelphia o London
Delaware Tax-Free
Pennsylvania Fund
Delaware Tax-Free
New Jersey Fund
Class A o Class B o Class C
Prospectus April 29, 2000
Tax-Exempt Current Income Funds
[Tax-Exempt Current Income Funds Artwork]
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
<PAGE>
Table of contents
.................................................................
Fund profiles page 2
Delaware Tax-Free Pennsylvania Fund 2
Delaware Tax-Free New Jersey Fund 4
.................................................................
How we manage the Funds page 6
Our investment strategies 6
The securities we typically invest in 8
The risks of investing in the Funds 10
.................................................................
Who manages the Funds page 12
Investment manager 12
Portfolio managers 12
Fund administration (Who's who) 13
.................................................................
About your account page 14
Investing in the Funds 14
Choosing a share class 14
How to reduce your sales charge 16
How to buy shares 17
How to redeem shares 19
Account minimums 20
Special services 21
Dividends, distributions and taxes 22
.................................................................
Financial highlights page 24
1
<PAGE>
Profile: Delaware Tax-Free Pennsylvania Fund
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What is the Fund's goal?
Delaware Tax-Free Pennsylvania Fund seeks a high level of current interest
income exempt from federal income tax and certain Pennsylvania state and local
taxes, consistent with preservation of capital. Although the Fund will strive to
achieve its goal, there is no assurance that it will.
Who should invest in the Fund
o Investors seeking monthly income, free from federal and Pennsylvania state
and local taxes.
o Investors with long-term financial goals.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate
especially over the short term.
o Investors who are concerned about the special risks associated with
concentrating investments in a particular state or region of the country.
What are the Fund's main investment strategies? The Fund will invest primarily
in municipal bonds and notes that are exempt from federal and Pennsylvania state
income taxes. Municipal securities are debt obligations issued by state and
local governments to raise funds for various public purposes such as hospitals,
schools and general capital expenses. The Fund will invest its assets in
securities with maturities of various lengths, depending on market conditions.
We will attempt to adjust the average maturity of the bonds in the portfolio to
provide a high level of tax-exempt income consistent with preservation of
capital. The Fund's income level will vary depending on current interest rates
and the specific securities in the portfolio. The Fund may concentrate its
investments in certain types of bonds or in a certain segment of the municipal
bond market when the supply of bonds in other sectors does not suit our
investment needs.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
adverse changes in interest rates. When interest rates rise, bond prices and the
value of the Fund's investments will generally fall. The Fund may also be
affected by the ability of individual municipalities to pay interest and repay
principal on the bonds they issue. That ability may be impacted by weak economic
conditions in the Commonwealth of Pennsylvania. The Fund is permitted to invest
up to 20% of its net assets in securities subject to the federal alternative
minimum tax. Income from these securities would be taxable for investors subject
to that tax. The Fund is considered "non-diversified" under federal laws and
rules that regulate mutual funds. That means the Fund may allocate more of its
net assets to investments in single securities than a "diversified" fund. Thus,
adverse effects on an investment held by the Fund may affect a larger portion of
overall assets and subject the Fund to greater risks. For a more complete
discussion of risk, please turn to page 10.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has Delaware Tax-Free Pennsylvania Fund performed?
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Year-by-year total return (Class A)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
----- ------ ----- ------ ------ ------ ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.57% 12.85% 9.09% 10.98% -3.92% 14.72% 3.41% 7.59% 5.03% -4.76%
</TABLE>
This bar chart and table can help you evaluate the risks of investing in
Delaware Tax-Free Pennsylvania Fund. We show how returns for the Fund's Class A
shares have varied over the past ten calendar years, as well as the average
annual returns of all share classes for one-, five-, and ten-year or lifetime
periods, if applicable. The Fund's past performance does not necessarily
indicate how it will perform in the future.
The Fund's Class A had a 2.45% calendar year to date return as of March 31,
2000. During the periods illustrated in this bar chart, Class A's highest
quarterly return was 5.35% for the quarter ended March 31, 1995 and its lowest
quarterly return was -3.32% for the quarter ended March 31, 1994.
The maximum Class A sales charge of 3.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns in the previous paragraph
or in the bar chart. If this fee were included, the returns would be less than
those shown. The average annual returns shown in the table on page 3 do include
the sales charge.
2
<PAGE>
How has Delaware Tax-Free Pennsylvania Fund performed? (continued)
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Average annual returns for periods ending 12/31/99
<TABLE>
<CAPTION>
CLASS A B C
Lehman Brothers
(if redeemed)* (if redeemed)* Municipal
(Inception 3/23/77) (Inception 5/2/94) (Inception 11/29/95) Bond Index
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<S> <C> <C> <C> <C>
1 year -8.29% -9.13% -6.42% -2.06%
5 years 4.21% 3.85% N/A 6.91%
10 years or lifetime** 5.37% 3.34% 2.22% 6.89%
</TABLE>
The table above shows the Fund's average annual returns compared to the
performance of the Lehman Brothers Municipal Bond Index. You should remember
that unlike the Fund, the index is unmanaged and doesn't reflect the actual
costs of operating a mutual fund, such as the costs of buying, selling and
holding securities.
* If shares were not redeemed, the returns for Class B would be -5.51%, 4.17%
and 3.47% for the one-year, five-year and lifetime periods, respectively.
Returns for Class C would be -5.51% and 2.22% for the one-year and lifetime
periods, respectively.
** Lifetime returns are shown if the Fund or Class existed for less than 10
years. Lehman Brothers Municipal Bond Index returns are for 10 years. Lehman
Brothers Municipal Bond Index returns for Class B and Class C lifetimes were
5.98% and 4.58%, respectively. Maximum sales charges are included in the Fund
returns above.
<TABLE>
<CAPTION>
What are the Fund's fees and expenses? CLASS A B C
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<S> <C> <C> <C> <C>
Sales charges are fees paid Maximum sales charge (load) imposed on
directly from your investments purchases as a percentage of offering price 3.75% none none
when you buy or sell Maximum contingent deferred sales charge (load)
shares of the Fund. as a percentage of original purchase price or
redemption price, whichever is lower none(1) 4%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
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Annual fund operating expenses Management fees 0.53% 0.53% 0.53%
are deducted from the Fund's assets. Distribution and service (12b-1) fees 0.24%(4) 1.00% 1.00%
Other expenses 0.19% 0.19% 0.19%
Total operating expenses 0.96% 1.72% 1.72%
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</TABLE>
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<TABLE>
<CAPTION>
CLASS(6) A B B C C
(if redeemed) (if redeemed)
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<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you 1 year $469 $175 $575 $175 $275
compare the cost of investing in the 3 years $669 $542 $842 $542 $542
Fund to the cost of investing in other 5 years $886 $933 $1,133 $933 $933
mutual funds with similar investment 10 years $1,509 $1,829 $1,829 $2,030 $2,030
objectives. We show the cumulative
amount of Fund expenses on a
hypothetical investment of $10,000 with
an annual 5% return over the time
shown.(5) This is an example only, and
does not represent future expenses,
which may be greater or less than those
shown here.
</TABLE>
(1) A purchase of Class A shares of $1 million or more may be made at net asset
value. However, if you buy the shares through a financial adviser who is
paid a commission, a contingent deferred sales charge will apply to
redemptions made within two years of purchase. Additional Class A purchase
options that involve a contingent deferred sales charge may be permitted
from time to time and will be disclosed in the Prospectus if they are
available.
(2) If you redeem Class B shares during the first two years after you buy them,
you will pay a contingent deferred sales charge of 4%, which declines to 3%
during the third and fourth years, 2% during the fifth year, 1% during the
sixth year, and 0% thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1%
contingent deferred sales charge.
(4) The Board of Trustees adopted a formula for calculating 12b-1 plan expenses
for Delaware Tax-Free Pennsylvania Fund's Class A shares that went into
effect on June 1, 1992. Under this formula, 12b-1 plan expenses will not be
more than 0.30% or less than 0.10%. See the Statement of Additional
Information for more information.
(5) The Fund's actual rate of return may be greater or less than the
hypothetical 5% return we use here. Also, this example assumes that the
Fund's total operating expenses remain unchanged in each of the periods we
show.
(6) The Class B example reflects the conversion of Class B shares to Class A
shares after approximately eight years. Information for the ninth and tenth
years reflects expenses of the Class A shares.
3
<PAGE>
Profile: Delaware Tax-Free New Jersey Fund
What is the Fund's goal?
Delaware Tax-Free New Jersey Fund seeks a high level of current interest
income exempt from federal income tax and certain New Jersey state and
local taxes, consistent with preservation of capital. Although the Fund
will strive to achieve its goal, there is no assurance that it will.
Who should invest in the Fund
o Investors seeking monthly income, free from federal, New Jersey state and
local taxes.
o Investors with long-term financial goals.
Who should not invest in the Fund
o Investors with very short-term financial goals.
o Investors who are unwilling to accept share prices that may fluctuate
especially over the short term.
o Investors who are concerned about the special risks associated with
concentrating investments in a particular state or region of the country.
What are the Fund's main investment strategies? The Fund will invest primarily
in municipal bonds and notes that are exempt from federal and New Jersey state
income taxes. Municipal securities are debt obligations issued by state and
local governments to raise funds for various public purposes such as hospitals,
schools and general capital expenses. The Fund will invest its assets in
securities with maturities of various lengths, depending on market conditions.
We will attempt to adjust the average maturity of the bonds in the portfolio to
provide a high level of tax-exempt income consistent with preservation of
capital. The Fund's income level will vary depending on current interest rates
and the specific securities in the portfolio. The Fund may concentrate its
investments in certain types of bonds or in a certain segment of the municipal
bond market when the supply of bonds in other sectors does not suit our
investment needs.
What are the main risks of investing in the Fund? Investing in any mutual fund
involves risk, including the risk that you may lose part or all of the money you
invest. The price of Fund shares will increase and decrease according to changes
in the value of the Fund's investments. This Fund will be affected primarily by
adverse changes in interest rates. When interest rates rise, bond prices and the
value of the Fund's investments will generally fall. The Fund may also be
affected by the ability of individual municipalities to pay interest and repay
principal on the bonds they issue. That ability may be impacted by weak economic
conditions in the state of New Jersey. The Fund is permitted to invest up to 20%
of its net assets in securities subject to the federal alternative minimum tax.
Income from these securities would be taxable for investors subject to that tax.
The Fund is considered "non-diversified" under federal laws and rules that
regulate mutual funds. That means the Fund may allocate more of its net assets
to investments in single securities than a "diversified" fund. Thus, adverse
effects on an investment held by the Fund may affect a larger portion of overall
assets and subject the Fund to greater risks. For a more complete discussion of
risk, please turn to page 10.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other
government agency.
You should keep in mind that an investment in the Fund is not a complete
investment program; it should be considered just one part of your total
financial plan. Be sure to discuss this Fund with your financial adviser to
determine whether it is an appropriate choice for you.
<PAGE>
How has Delaware Tax-Free New Jersey Fund performed?
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This bar chart and table can help you evaluate the risks of investing in the
Fund. We show how returns for the Fund's Class A shares have varied over the
past two calendar years, as well as the average annual returns of all shares for
one-year and lifetime periods. The Fund's past performance does not necessarily
indicate how it will perform in the future. The returns reflect voluntary
expense caps. The returns would be lower without the caps.
The Fund's Class A had a 4.67% calendar year to date return as of
March 31, 2000. During the periods illustrated in this bar chart, Class A's
highest quarterly return was 3.35% for the quarter ended September 30, 1998 and
its lowest quarterly return was -3.10% for the quarter ended June 30, 1999.
The maximum Class A sales charge of 3.75%, which is normally deducted when you
purchase shares, is not reflected in the total returns in the previous paragraph
or in the bar chart. If this fee were included, the returns would be less than
those shown. The average annual returns shown in the table on page 5 do include
the sales charge.
Year-by-year total return (Class A)
1998 1999
6.50% -8.29%
4
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<PAGE>
How has Delaware Tax-Free New Jersey Fund performed? (continued)
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<TABLE>
<CAPTION>
Average annual returns for periods ending 12/31/99
CLASS A B C Lehman Brothers
Municipal
(if redeemed)* (if redeemed)* Bond Index
(Inception 9/2/97) (Inception 9/2/97) (Inception 9/2/97)
<S> <C> <C> <C> <C>
1 year -11.80% -12.49% -9.85% -2.06%
Lifetime -0.52% -1.06% -0.06% 3.51%
</TABLE>
The table above shows the Fund's average annual returns compared to the
performance of the Lehman Brothers Municipal Bond Index. You should remember
that unlike the Fund, the index is unmanaged and doesn't reflect the actual
costs of operating a mutual fund, such as the costs of buying, selling and
holding securities.
*If shares were not redeemed, the returns for Class B would be -8.99% and 0.13%
for the one-year and lifetime periods, respectively. Returns for Class C would
be -8.98% and -0.06% for the one-year and lifetime periods, respectively.
<TABLE>
<CAPTION>
What are the Fund's fees and expenses? CLASS A B C
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<S> <C> <C> <C> <C>
Sales charges are fees paid directly from Maximum sales charge (load) imposed on
your investments when you buy or sell shares purchases as a percentage of offering price 3.75% none none
of the Fund. Maximum contingent deferred sales charge (load)
as a percentage of original purchase price or
redemption price, whichever is lower none(1) 4%(2) 1%(3)
Maximum sales charge (load) imposed on
reinvested dividends none none none
Redemption fees none none none
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Annual fund operating expenses Management fees 0.55% 0.55% 0.55%
are deducted from the Fund's assets. Distribution and service (12b-1) fees 0.25%(4) 1.00% 1.00%
Other expenses 0.65% 0.65% 0.65%
Total operating expenses(5) 1.45% 2.20% 2.20%
</TABLE>
<TABLE>
<CAPTION>
CLASS(7) A B B C C
(if redeemed) (if redeemed)
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<S> <C> <C> <C> <C> <C> <C>
This example is intended to help you compare 1 year $517 $223 $623 $223 $323
the cost of investing in the Fund to the cost 3 years $816 $688 $988 $688 $688
of investing in other mutual funds with 5 years $1,137 $1,180 $1,380 $1,180 $1,180
similar investment objectives. We show the 10 years $2,045 $2,344 $2,344 $2,534 $2,534
cumulative amount of Fund expenses on a
hypothetical investment of $10,000 with an
annual 5% return over the time shown.(6) This
is an example only, and does not represent
future expenses, which may be greater or
less than those shown here.
(1) A purchase of Class A shares of $1 million or more may be made at net asset value. However, if you buy the shares through a
financial adviser who is paid a commission, a contingent deferred sales charge will apply to redemptions made within two years
of purchase. Additional Class A purchase options that involve a contingent deferred sales charge may be permitted from time to
time and will be disclosed in the Prospectus if they are available.
(2) If you redeem Class B shares during the first two years after you buy them, you will pay a contingent deferred sales charge of
4%, which declines to 3% during the third and fourth years, 2% during the fifth year, 1% during the sixth year, and 0%
thereafter.
(3) Class C shares redeemed within one year of purchase are subject to a 1% contingent deferred sales charge.
(4) The Board of Trustees has set the 12b-1 Plan payments at 0.25%. Payments under the Plan may not exceed 0.30%.
(5) The investment manager has agreed to waive fees and pay
expenses from January 22, 1998 through October 31, 2000, Actual Fund operating expenses including voluntary expense caps in
in order to prevent total operating expenses (excluding effect through October 31, 2000
any taxes, interest, brokerage fees, extraordinary CLASS A B C
expenses and 12b-1 fees) from exceeding 0.25% of average Management fees 0.00% 0.00% 0.00%
daily net assets. The fees and expenses shown in the Distribution and service (12b-1) fees 0.25% 1.00% 1.00%
table above do not reflect this voluntary expense cap. Other expenses 0.25% 0.25% 0.25%
The table to the right shows actual operating expenses Total operating expenses 0.50% 1.25% 1.25%
which are based on the most recently completed fiscal
year and reflect the manager's current fee waivers and
payments.
(6) The Fund's actual rate of return may be greater or less than the hypothetical 5% return we use here. Also, this example assumes
that the Fund's total operating expenses remain unchanged in each of the periods we show. This example does not reflect the
voluntary expense cap described in footnote 5.
(7) The Class B example reflects the conversion of Class B shares to Class A shares after approximately eight years. Information for
the ninth and tenth years reflects expenses of the Class A shares.
</TABLE>
5
<PAGE>
How we manage the Funds
Our investment strategies
We analyze economic and market conditions, seeking to identify the securities or
market sectors that we believe are the best investments for a fund. Following
are descriptions of how the portfolio managers pursue the Funds' investment
goals.
We take a disciplined approach to investing, combining investment strategies and
risk management techniques that can help shareholders meet their goals.
Each Fund will invest at least 80% of its net assets in tax-exempt securities
that are described below. We will generally invest in securities for income
rather than seeking capital appreciation through active trading. However, we may
sell securities; for a variety of reasons such as: to reinvest the proceeds in
higher yielding securities; to eliminate investments not consistent with the
preservation of capital; or to honor redemption requests. As a result, we may
realize losses or capital gains which could be taxable to shareholders.
Each Fund intends to invest at least 80% of its net assets in debt obligations
that are rated in the top four quality grades, that is BBB or better, by a
nationally recognized statistical ratings organization (NRSRO) at the time of
purchase. Each Fund may buy securities that have not been rated if we believe
they are comparable in quality to the top four rating categories. The fourth
grade is considered medium grade and may have speculative characteristics. Each
Fund may invest up to 20% of its net assets in securities with ratings lower
than the top four grades and in comparable unrated securities. These securities
(commonly known as "junk bonds") are speculative and may involve greater risks
and have higher yields.
Each Fund may invest up to 20% of its net assets in bonds whose income is
subject to the federal alternative minimum tax.
Each Fund may invest more than 25% of its assets in municipal obligations
relating to similar types of projects or with other similar economic, business
or political characteristics (such as bonds of housing finance agencies or
health care facilities). In addition, Delaware Tax-Free New Jersey Fund may
invest more than 25% of its assets in industrial development bonds or pollution
control bonds, which may be backed only by the assets and revenues of a
nongovernmental issuer. The Fund will not, however, invest more than 25% of its
total assets in bonds issued for companies in the same industry. Percentage
limitations outlined above are determined at the time an investment is made.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
How to use
this glossary
This glossary includes
definitions of investment
terms used throughout the
Prospectus. If you would like Glossary A-C Amortized cost Average maturity
to know the meaning of an --------------------------------------------------------------------------------
investment term that is not Amortized cost is a method used to value An average of when the
explained in the text please a fixed-income security that starts individual bonds and other
check the glossary. with the face value of the security and debt securities held in a
then adds or subtracts from that value portfolio will mature.
depending on whether the purchase price
was greater or less than the value of
the security at maturity. The amount
greater or less than the par value is
divided equally over the time remaining
until maturity.
</TABLE>
6
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Delaware Tax-Free Pennsylvania Fund
We invest primarily in municipal securities paying interest income that is
exempt from federal and Pennsylvania income taxes. Determination of whether a
bond's income qualifies for tax-exemption is based on the opinion of the bond
issuer's legal counsel. The securities we invest in include debt obligations of
the Commonwealth of Pennsylvania and its political subdivisions, agencies,
authorities and instrumentalities and also other issuers such as Puerto Rico and
the Virgin Islands whose bonds are also free of federal and Pennsylvania income
taxes.
Delaware Tax-Free New Jersey Fund
We invest primarily in municipal securities paying interest income that is
exempt from federal and New Jersey gross income taxes. Determination of whether
a bond's income qualifies for tax-exemption is based on the opinion of the bond
issuer's legal counsel. The securities we invest in include debt obligations of
the State of New Jersey and its political subdivisions, agencies, authorities
and instrumentalities and also other issuers such as Puerto Rico and the Virgin
Islands whose bonds are also free of federal and New Jersey income taxes.
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Each Fund's investment objective is non-fundamental. This means that the Board
of Trustees may change an objective without obtaining shareholder approval. If
an objective were changed, we would notify shareholders before the change in the
objective became effective.
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<TABLE>
<CAPTION>
Capital
Bond Bond ratings Capital appreciation
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<S> <C> <C> <C>
A debt security, like an IOU, issued by a Independent evaluations of The amount of An increase in the
company, municipality or government agency. creditworthiness, ranging from money you invest. value of an
In return for lending money to the issuer, Aaa/AAA (highest quality) to D investment.
a bond buyer generally receives fixed (lowest quality). Bonds rated
periodic interest payments and repayment Baa/BBB or better are considered
of the loan amount on a specified maturity investment grade. Bonds rated
date. A bond's price changes prior to Ba/BB or lower are commonly known
maturity and is inversely related to current as junk bonds. See also Nationally
interest rates. When interest rates rise, bond recognized statistical rating
prices fall, and when interest rates fall, organization.
bond prices rise.
</TABLE>
7
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<PAGE>
How we manage the Funds (continued)
The securities we Fixed-income securities offer the potential for greater
typically invest in income payments than stocks, and may also provide capital
appreciation. Municipal bond securities typically pay
income free of federal income taxes and may also be free of
state income taxes in the state where they are issued.
<TABLE>
<CAPTION>
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Securities How we use them
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<S> <C>
General obligation bonds: municipal bonds on which the Each Fund may invest without limit in general obligation
payment of principal and interest is secured by the issuer's bonds with an emphasis on bonds rated in the top four
pledge of its full faith, credit and taxing power. quality grades.
Revenue bonds: municipal bonds on which principal and Each Fund may invest without limit in revenue bonds with an
interest payments are made from revenues derived from a emphasis on bonds rated in the top four quality grades.
particular facility, from the proceeds of a special excise
tax or from revenue generated by the operating project.
Principal and interest are not secured by the general taxing
power. Tax-exempt industrial development bonds, in most
cases, are a type of revenue bond that is not backed by the
credit of the issuing municipality and may therefore involve
more risk.
Insured municipal bonds: Various municipal issuers may Each Fund may invest without limit in insured bonds. We do
obtain insurance for their obligations. In the event of a not evaluate the creditworthiness of the private insurer.
default, the insurer is required to make payments of Instead, we focus first on the creditworthiness of the
interest and principal when due to the bondholders. However, actual bond issuer and its ability to pay interest and
there is no assurance that the insurance company will meet principal.
its obligations. Insured obligations are typically rated in
the top quality grades by an NRSRO. It is possible that a substantial portion of a Fund's
portfolio may consist of municipal bonds that are insured by
a single insurance company.
Insurance is available on uninsured bonds and each Fund may
purchase such insurance directly. We will generally do so
only if we believe that purchasing and insuring a bond
provides an investment opportunity at least comparable to
owning other available insured securities.
The purpose of insurance is to protect against credit risk.
It does not insure against market risk or guarantee the
value of the securities in the portfolio or the value of
shares of any of the Funds.
Private activity or private placement bonds: municipal bond Each Fund may invest up to 20% of its assets in bonds whose
issues whose proceeds are used to finance certain income is subject to the federal alternative minimum tax.
non-government activities, including some types of This means that a portion of a Fund's distributions could be
industrial revenue bonds such as privately-owned sports and subject to the federal alternative minimum tax that applies
convention facilities. The Tax Reform Act of 1986 subjects to certain taxpayers.
interest income from these bonds to the federal alternative
minimum tax and makes the tax-exempt status of certain bonds
dependent on the issuer's compliance with specific
requirements after the bonds are issued.
Advanced refunded bonds: In an advance refunding, the issuer We may invest without limit in refunded bonds. These bonds
will use the proceeds of a new bond issue to purchase high are generally considered to be of very high quality because
grade interest bearing debt securities that are deposited of the escrow account which typically holds U.S. Treasuries.
into an irrevocable escrow account held by a trustee bank to
secure all future payments of principal and interest on
pre-existing bonds which are then considered to be "advance
refunded bonds." Escrow secured bonds often receive the
highest rating from S&P and Moody's.
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</TABLE>
<TABLE>
<CAPTION>
C-D Capital gains distributions Commission Compounding Consumer Price Index (CPI)
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<S> <C> <C> <C> <C>
Payments to mutual fund The fee an investor pays Earnings on an Measurement of U.S.
shareholders of profits to a financial adviser for investment's inflation; represents the price
(realized gains) from the sale investment advice and previous earnings. of a basket of commonly
of a fund's portfolio securities. help in buying or selling purchased goods.
Usually paid once a year; may mutual funds, stocks,
be either short-term gains or bonds or other securities.
long-term gains.
</TABLE>
8
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<PAGE>
<TABLE>
<CAPTION>
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Securities How we use them
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<S> <C>
Municipal leases and certificates of participation (COPs): Each Fund may invest in municipal lease obligations
COPs are widely used by state and local governments to primarily through certificates of participation.
finance the purchase of property and facilities. COPs are
like installment purchase agreements. A governmental As with its other investments, each Fund expects its
corporation may create a COP when it issues long-term bonds investments in municipal lease obligations to be exempt from
to pay for the acquisition of property or facilities. The regular federal income taxes.
property or facilities are then leased to a municipality,
which makes lease payments to repay interest and principal We invest only in certificates of participation that are
to the holders of the bonds. Once the lease payments are rated within the four highest rating categories of a
completed, the municipality gains ownership of the property nationally recognized statistical ratings organization
for a nominal sum. (NRSRO). We may also invest in unrated COPs that we believe
to be of comparable quality. We believe this quality
strategy mitigates the risk of non-appropriation which is
described below.
A feature that distinguishes COPs from municipal debt is
that leases typically contain a "nonappropriation" or
"abatement" clause. This means the municipality leasing the
property or facility must use its best efforts to make lease
payments, but may terminate the lease without penalty if its
legislature or other appropriating body does not allocate
the necessary money. In such a case, the creator of the COP,
or its agent, is typically entitled to repossess the
property. In most cases, however, the market value of the
property will be less than the amount the municipality was
paying.
COPs will be considered illiquid and subject to each Fund's
limitation on illiquid securities unless we determine they
are liquid according to the guidelines set by the board of
trustees.
Inverse floaters: Inverse floaters are a type of derivative Delaware Tax-Free Pennsylvania Fund may invest in inverse
tax-exempt obligation with floating or variable interest floaters to the extent that investments in these securities,
rates that move in the opposite direction of short-term when combined with futures contracts, options on futures
interest rates, usually at an accelerated speed. contracts and securities that are rated below investment
Consequently, the market values of inverse floaters will grade, do not exceed 20% of the Fund's total assets.
generally be more volatile than other tax-exempt
investments. Delaware Tax-Free New Jersey Fund may invest up to 10% of
its assets in inverse floaters.
Investment in inverse floaters could increase the volatility
of a Fund's share price.
Variable rate and floating rate obligations: These Each Fund may purchase "floating-rate" and "variable-rate"
obligations pay interest at rates that are not fixed, but obligations. We generally do not intend to invest more than
instead vary with changes in specified market rates or 5% of a Fund's net assets in these instruments.
indexes on pre-designated dates.
High-yield, higher risk municipal bonds: Municipal debt Each Fund may invest up to 20% of its net assets in
obligations rated lower than investment grade by an NRSRO high-yield, high risk fixed-income securities. We will not
or, if unrated, of comparable quality. These securities are invest in securities that are rated lower than B by S&P or
often referred to as "junk bonds" and are considered to be similarly by another rating agency. We will not invest in
of poor standing and predominately speculative. unrated bonds that we consider to be of a quality lower than
B.
Restricted securities: Privately placed securities whose We may invest in privately placed securities. These include
resale is restricted under securities law. securities that are eligible for resale only among certain
institutional buyers without registration, which are
commonly known as "Rule 144A Securities."
Illiquid securities: Securities that do not have a ready Delaware Tax-Free Pennsylvania Fund may invest up to 10% of
market, and cannot be easily sold within seven days at net assets in illiquid securities.
approximately the price that a fund has valued them.
Delaware Tax-Free New Jersey Fund may invest up to 15% of
its net assets in illiquid securities.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Contingent deferred sales charge (CDSC) Corporate bond Depreciation Diversification Dividend distribution
- ----------------------------------------------------------------------------------------------------------------------------------->
<S> <C> <C> <C> <C>
Fee charged by some mutual funds when A debt security A decline in an The process of Payments to mutual
shares are redeemed (sold back to the issued by a investment's value. spreading investments fund shareholders of
fund) within a set number of years; corporation. among a number of dividends passed along
an alternative method for investors to See Bond. different securities, asset from the fund's
compensate a financial adviser for classes or investment portfolio of securities.
advice and service, rather than an styles to reduce the risks
up-front commission. of investing.
</TABLE>
9
-----
<PAGE>
How we manage the Funds (continued)
The Funds may also invest in other securities including repurchase agreements
and enter into futures and options on futures contracts. Delaware Tax-Free New
Jersey Fund may invest in zero coupon bonds, derivative tax-exempt obligations
and enter into options. Please see the Statement of Additional Information for
more information on these securities as well as those listed in the table above.
Borrowing money Each Fund is permitted to borrow money but normally does not do
so. As a temporary measure for extraordinary purposes or to meet redemption
requests, Delaware Tax-Free New Jersey Fund may borrow up to 10% of the value of
its assets.
Purchasing securities on a when-issued basis Each Fund may buy securities on a
when-issued basis; that is, make a commitment to buy a security with settlement
up to 45 days later. A Fund will designate enough cash or securities to cover
its obligations, and will value the designated assets daily.
Temporary defensive positions Each Fund may invest in taxable instruments for
temporary defensive purposes. These would include instruments of the U.S.
government, its agencies and instrumentalities.
Portfolio turnover We anticipate that each Fund's annual portfolio turnover will
be less than 100%. A turnover rate of 100% would occur if a Fund sold and
replaced securities valued at 100% of its net assets within one year.
The risks of Investing in any mutual fund involves risk, including the
investing in risk that you may receive little or no return on your
the Funds investment, and the risk that you may lose part or all of
the money you invest. Before you invest in a Fund you should
carefully evaluate the risks. An investment in a Fund
typically provides the best results when held for a number
of years. The following are the chief risks you assume when
investing in these Funds. Please see the Statement of
Additional Information for further discussion of these risks
and other risks not discussed here.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest rate risk is the risk that securities, particularly Because interest rate movements can be unpredictable, we do
bonds with longer maturities, will decrease in value if not try to increase return by aggressively capitalizing on
interest rates rise. interest rate moves. We do attempt to manage the duration of
a Fund in order to take advantage of our market outlook,
especially on a longer term basis.
Market risk is the risk that all or a majority of the We maintain a long-term investment approach and focus on
securities in a certain market--like the stock or bond bonds we believe will provide a steady income stream
market--will decline in value because of factors such as regardless of interim market fluctuations. We do not try to
economic conditions, future expectations or investor predict overall market movements and generally do not trade
confidence. for short-term purposes.
Industry and security risk is the risk that the value of We generally spread each Fund's assets across different
securities in a particular industry or the value of an types of municipal bonds and among bonds representing
individual security will decline because of changing different industries and regions within a state. We also
expectations for the performance of that industry or for the follow a rigorous selection process before choosing
individual issuer of the security. securities for the portfolio.
Credit risk is the possibility that a bond's issuer (or an We conduct careful credit analysis of individual bonds. We
entity that insures the bond) will be unable to make timely focus on high quality bonds and limit our holdings of bonds
payments of interest and principal. rated below investment grade. We also hold a number of
different bonds in the portfolio. All of this is designed to
help reduce credit risk.
In the case of municipal bonds, issuers may be affected by
poor economic conditions in their state.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
D-L Duration Expense ratio Financial adviser
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A measurement of a fixed- A mutual fund's total operating expenses, expressed Financial professional (e.g.,
income investment's price as a percentage of its total net assets. Operating broker, banker, accountant,
volatility. The larger the expenses are the costs of running a mutual fund, planner or insurance agent)
number, the greater the likely including management fees, offices, staff, equipment who analyzes clients'
price change for a given and expenses related to maintaining the fund's finances and prepares
change in interest rates. portfolio of securities and distributing its shares. personalized programs to
They are paid from the fund's assets before any meet objectives.
earnings are distributed to shareholders.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Risks How we strive to manage them
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
High-yield, high-risk municipal bonds risk: investing in We limit the amount of each portfolio which may be invested
so-called "junk" bonds entails the risk of principal loss, in lower quality higher yielding bonds.
which may be greater than the risk involved in investment
grade bonds. High-yield bonds are sometimes issued by
municipalities with lesser financial strength and therefore
less ability to make projected debt payments on the bonds.
Although experts disagree on the impact recessionary periods
have had and will have on high-yield municipal bonds, some
analysts believe a protracted economic downturn would
adversely affect the value of outstanding bonds and the
ability of high-yield issuers to repay principal and
interest. In particular, for a high-yield revenue bond,
adverse economic conditions to the particular project or
industry which backs the bond would pose a significant risk.
Call risk is the risk that a bond issuer will prepay the We take into consideration the likelihood of prepayment when
bond during periods of low interest rates, forcing an we select bonds and in certain environments may look for
investor to reinvest their money at interest rates that bonds that have protection against early prepayment.
might be lower than rates on the called bond.
Liquidity risk is the possibility that securities cannot be We limit exposure to illiquid securities.
readily sold within seven days at approximately the price
that a fund has valued them.
Non-diversified funds: Non-diversified funds have the Each Fund is a non-diversified investment company and is
flexibility to invest as much as 50% of their assets in as subject to this risk. Nevertheless, we typically hold
few as two issuers provided no single issuer accounts for securities from a variety of different issuers representing
more than 25% of the portfolio. The remaining 50% of the different sectors and different types of municipal projects.
portfolio must be diversified so that no more than 5% of the We also perform extensive credit analysis on all securities.
fund's assets is invested in the securities of a single We are particularly diligent in reviewing the credit status
issuer. When a fund invests its assets in fewer issuers, the of bonds that represent a larger percentage of portfolio
value of fund shares may increase or decrease more rapidly assets.
than if the fund were fully diversified. If a fund were to
invest a large portion of its assets in a single issuer, the
fund could be significantly affected if that issuer was
unable to satisfy its financial obligations.
Geographic concentration risk is the risk that a fund which Each Fund invests primarily in a specific state and may be
concentrates on investments from a particular state or subject to geographic concentration risk. However, we
region could be adversely affected by political and economic believe that the economies and municipal bond markets in
conditions in that state or region. There is also a risk if Pennsylvania and New Jersey are broad enough to satisfy our
that there could be an inadequate supply of municipal bonds investment needs. In addition, we have the flexibility to
in a particular state. invest in issuers in Puerto Rico and the Virgin Islands
whose bonds are also free of Pennsylvania and New Jersey
state income taxes.
Alternative minimum tax risk: If a fund invests in bonds Each Fund may invest up to 20% of its assets in bonds whose
whose income is subject to an alternative minimum tax, that income is subject to the federal alternative minimum tax.
portion of the fund's distributions would be taxable for
shareholders who are subject to this tax.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fixed-income securities Inflation Investment goal Lehman Brothers Municipal Bond Index
- ----------------------------------------------------------------------------------------------------------------------------------->
<S> <C> <C> <C>
With fixed-income securities, the money The increase in the cost The objective, The Lehman Brothers Municipal Bond
you originally invest is paid back at a of goods and services such as long-term Index is an index that includes
pre-specified maturity date. These over time. U.S. capital growth or approximately 15,000 bonds. To be
securities, which include government, inflation is frequently high current included in the index, a municipal
corporate or municipal bonds, as well measured by changes income, that a bond must meet the following
as money market securities, typically in the Consumer Price mutual fund criteria: a minimum credit rating
pay a fixed rate of return (often referred Index (CPI). pursues. of at least Baa; has been part of
to as interest). See Bond. a deal of at least $50 million;
been issued within the last five
years, and has a maturity of at
least two years. Bonds subject
to the alternative minimum tax
are excluded. Bonds with
floating or zero coupons are
also excluded.
</TABLE>
11
<PAGE>
Who manages the Funds
- --------------------------------------------------------------------------------
Investment The Funds are managed by Delaware Management Company, a series
manager of Delaware Management Business Trust which is an indirect,
wholly owned subsidiary of Delaware Management Holdings, Inc.
Delaware Management Company makes investment decisions for the
Funds, manages the Funds' business affairs and provides daily
administrative services. For these services, the manager was
paid a fee by each Fund for the last fiscal year as follows:
Investment management fees
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania Fund New Jersey Fund
- --------------------------------------------------------------------------------
As a percentage of average daily net assets 0.53% none*
* Reflects a reduction in fees due to an expense cap.
Portfolio Patrick P. Coyne and Mitchell L. Conery have primary
managers responsibility for making day-to-day investment decisions for
each Fund. Mr. Coyne and Mr. Conery have managed Delaware
Tax-Free New Jersey Fund since its inception. Mr. Coyne
assumed primary responsibility for managing Delaware Tax-Free
Pennsylvania Fund in November 1996. Mr. Conery became
co-manager of Delaware Tax-Free Pennsylvania Fund in January
1997.
Patrick P. Coyne, Vice President/Senior Portfolio Manager, is
a graduate of Harvard University with an MBA from the
University of Pennsylvania's Wharton School. Mr. Coyne joined
Delaware Investments' fixed-income department in 1990. Prior
to joining Delaware Investments, he was a manager of Kidder,
Peabody & Co. Inc.'s trading desk, and specialized in trading
high grade municipal bonds and municipal futures contracts.
Mr. Coyne is a member of the Municipal Bond Club of
Philadelphia.
Mitchell L. Conery, Vice President/Senior Portfolio Manager,
joined Delaware Investments in January 1997. Mr. Conery holds
a bachelor's degree from Boston University and an MBA in
Finance from the State University of New York at Albany. He
has served as an investment officer with Travelers Insurance
and as a research analyst with CS First Boston and MBIA
Corporation.
<TABLE>
<CAPTION>
M-P Management fee Market capitalization Maturity
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The amount paid by a mutual The value of a corporation determined by The length of time until a bond
fund to the investment adviser multiplying the current market price of issuer must repay the underlying
for management services, a share of common stock by the number of loan principal to bondholders.
expressed as an annual shares held by shareholders. A
percentage of the fund's corporation with one million shares
average daily net assets. outstanding and the market price per
share of $10 has a market capitalization
of $10 million.
</TABLE>
12
- -----
<PAGE>
Who's who? This diagram shows the various organizations involved with
managing, administering, and servicing the Delaware Investments
funds.
<TABLE>
<CAPTION>
Board of trustees
<S> <C> <C>
Investment manager Custodian
Delaware Management Company The Funds The Chase Manhattan Bank
One Commerce Square 4 Chase Metrotech Center
Philadelphia, PA 19103 Brooklyn, NY 11245
Distributor Service agent
Portfolio managers Delaware Distributors, L.P. Delaware Service Company, Inc.
(see page 12 for details) 1818 Market Street 1818 Market Street
Philadelphia, PA 19103 Philadelphia, PA 19103
Financial advisers
Shareholders
</TABLE>
Board of trustees A mutual fund is governed by a board of trustees which has
oversight responsibility for the management of the fund's business affairs.
Trustees establish procedures and oversee and review the performance of the
investment manager, the distributor and others that perform services for the
fund. At least 40% of the board of trustees must be independent of the fund's
investment manager and distributor. These independent fund trustees, in
particular, are advocates for shareholder interests.
Investment manager An investment manager is a company responsible for selecting
portfolio investments consistent with the objective and policies stated in the
mutual fund's prospectus. The investment manager places portfolio orders with
broker/dealers and is responsible for obtaining the best overall execution of
those orders. A written contract between a mutual fund and its investment
manager specifies the services the manager performs. Most management contracts
provide for the manager to receive an annual fee based on a percentage of the
fund's average daily net assets. The manager is subject to numerous legal
restrictions, especially regarding transactions between itself and the funds it
advises.
Portfolio managers Portfolio managers are employed by the investment manager to
make investment decisions for individual portfolios on a day-to-day basis.
Custodian Mutual funds are legally required to protect their portfolio
securities and most funds place them with a qualified bank custodian who
segregates fund securities from other bank assets.
<PAGE>
Distributor Most mutual funds continuously offer new shares to the public
through distributors who are regulated as broker-dealers and are subject to NASD
Regulation, Inc. (NASD) rules governing mutual fund sales practices.
Service agent Mutual fund companies employ service agents (sometimes called
transfer agents) to maintain records of shareholder accounts, calculate and
disburse dividends and capital gains and prepare and mail shareholder statements
and tax information, among other functions. Many service agents also provide
customer service to shareholders.
Financial advisers Financial advisers provide advice to
their clients--analyzing their financial objectives and recommending appropriate
funds or other investments. Financial advisers are compensated for their
services, generally through sales commissions, and through 12b-1 and/or service
fees deducted from the fund's assets.
Shareholders Like shareholders of other companies, mutual fund shareholders have
specific voting rights, including the right to elect trustees. Material changes
in the terms of a fund's management contract must be approved by a shareholder
vote, and funds seeking to change fundamental investment objectives or policies
must also seek shareholder approval.
<TABLE>
<CAPTION>
Nationally recognized statistical rating Net asset value
NASD Regulation, Inc. (NASD) organization (NRSRO) (NAV) Preferred stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A self-regulating A company that assesses the credit quality of The daily dollar value Preferred stock has
organization, consisting of bonds, commercial paper, preferred and common of one mutual fund preference over common
brokerage firms (including stocks and municipal short-term issues, rating share. Equal to a stock in the payment
distributors of mutual funds), the probability that the issuer of the debt fund's net assets of dividends and
that is responsible for will meet the scheduled interest payments and divided by the number liquidation of assets.
overseeing the actions of its repay the principal. Ratings are published by of shares outstanding. Preferred stocks also
members. such companies as Moody's Investors Service, often pay dividends at
Inc. (Moody's), Standard & Poor's (S&P), Duff & a fixed rate and are
Phelps, Inc. (Duff), and Fitch IBCA, Inc. sometimes convertible
(Fitch). into common stock.
</TABLE>
13
-----
<PAGE>
About your account
- --------------------------------------------------------------------------------
Investing in You can choose from a number of share classes for each Fund.
the Funds Because each share class has a different combination of sales
charges, fees, and other features, you should consult your
financial adviser to determine which class best suits your
investment goals and time frame.
Choosing a share class
CLASS o Class A shares have an front-end sales charge of up to 3.75%
A that you pay when you buy the shares. The offering price for
Class A shares includes the front-end sales charge.
o If you invest $100,000 or more, your front-end sales charge
will be reduced.
o You may qualify for other reduced sales charges, as
described in "How to reduce your sales charge," and under
certain circumstances the sales charge may be waived; please
see the Statement of Additional Information for details.
o Class A shares are also subject to an annual 12b-1 fee no
greater than 0.30% of average daily net assets, which is
lower than the 12b-1 fee for Class B and Class C shares.
o Class A shares generally are not subject to a contingent
deferred sales charge.
<TABLE>
<CAPTION>
Class A -------------------------------------------------------------------------------------------------
sales charges Sales charge as % Sales charge as % of Dealer's commission as
Amount of purchase of offering price amount invested % of offering price
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $100,000 3.75% 3.90% 3.25%
$100,000 but 3.00% 3.09% 2.50%
under $250,000
$250,000 but 2.50% 2.56% 2.00%
under $500,000
$500,000 but 2.00% 2.04% 1.75%
under $1 million
-------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
As shown below, there is no front-end sales charge when you purchase $1 million
or more of Class A shares. However, if your financial adviser is paid a
commission on your purchase, you will have to pay a limited contingent deferred
sales charge of 1% if you redeem these shares within the first year, and 0.50%
if you redeem them within the second year, unless a specific waiver of the
charge applies.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Sales charge as % Sales charge as % of Dealer's commission as
Amount of purchase of offering price amount invested % of offering price
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1 million up to none none 1.00%
$5 million
Next $20 million none none 0.50%
up to $25 million
Amount over none none 0.25%
$25 million
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
P-S Price/earnings ratio Principal Prospectus Redeem
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A measure of a stock's value Amount of money you The official offering To cash in your shares
calculated by dividing the current invest (also called document that describes a by selling them back
market price of a share of stock capital). Also refers mutual fund, containing to the mutual fund.
by its annual earnings per share. to a bond's original information required by
A stock selling for $100 per share face value, due to be the SEC, such as
with annual earnings per share of repaid at maturity. investment objectives,
$5 has a P/E of 20. policies, services and
fees.
</TABLE>
14
- -----
<PAGE>
CLASS o Class B shares have no up-front sales charge, so the full
B amount of your purchase is invested in a Fund. However, you
will pay a contingent deferred sales charge if you redeem
your shares within six years after you buy them.
o If you redeem Class B shares during the first two years
after you buy them, the shares will be subject to a
contingent deferred sales charge of 4%. The contingent
deferred sales charge is 3% during the third and fourth
years, 2% during the fifth year, 1% during the sixth year,
and 0% thereafter.
o Under certain circumstances the contingent deferred sales
charge may be waived; please see the Statement of Additional
Information for details.
o For approximately eight years after you buy your Class B
shares, they are subject to annual 12b-1 fees no greater
than 1% of average daily net assets, of which 0.25% are
service fees paid to the distributor, dealers or others for
providing services and maintaining accounts.
o Because of the higher 12b-1 fees, Class B shares have higher
expenses and any dividends paid on these shares are lower
than dividends on Class A shares.
o Approximately eight years after you buy them, Class B shares
automatically convert into Class A shares with a 12b-1 fee
of no more than 0.30%. Conversion may occur as late as three
months after the eighth anniversary of purchase, during
which time Class B's higher 12b-1 fees apply.
o You may purchase up to $250,000 of Class B shares at any one
time. The limitation on maximum purchases varies for
retirement plans.
CLASS o Class C shares have no up-front sales charge, so the full
C amount of your purchase is invested in a Fund. However, you
will pay a contingent deferred sales charge of 1% if you
redeem your shares within 12 months after you buy them.
o Under certain circumstances the contingent deferred sales
charge may be waived; please see the Statement of Additional
Information for details.
o Class C shares are subject to an annual 12b-1 fee which may
not be greater than 1% of average daily net assets, of which
0.25% are service fees paid to the distributor, dealers or
others for providing services and maintaining shareholder
accounts.
o Because of the higher 12b-1 fees, Class C shares have higher
expenses and pay lower dividends than Class A shares.
o Unlike Class B shares, Class C shares do not automatically
convert into another class.
o You may purchase any amount less than $1,000,000 of Class C
shares at any one time. The limitation on maximum purchases
varies for retirement plans.
<TABLE>
<CAPTION>
SEC (Securities and
Risk Sales charge Exchange Commission) Share classes Signature guarantee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Generally defined as Charge on the purchase Federal agency Different Certification by a bank,
variability of value; or redemption of fund established by classifications of brokerage firm or other
also credit risk, shares sold through Congress to shares; mutual fund financial institution that a
inflation risk, financial advisers. administer the laws share classes offer a customer's signature is valid;
currency and interest May vary with the governing the variety of sales signature guarantees can be
rate risk. Different amount invested. securities industry, charge choices. provided by members of the STAMP
investments involve Typically used to including mutual fund program.
different types and compensate advisers companies.
degrees of risk. for advice and service
provided.
</TABLE>
15
-----
<PAGE>
About your account (continued)
Each share class of the Funds has adopted a separate 12b-1
plan that allows it to pay distribution fees for the sales and
distribution of its shares. Because these fees are paid out of
a Fund's assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more
than paying other types of sales charges.
How to We offer a number of ways to reduce or eliminate the sales
reduce charge on shares. Please refer to the Statement of Additional
your sales Information for detailed information and eligibility
charge requirements. You can also get additional information from
your financial adviser. You or your financial adviser must
notify us at the time you purchase shares if you are eligible
for any of these programs.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Share class
Program How it works A B C
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Letter of Intent Through a Letter of Intent you agree to invest a certain X Although the Letter of Intent
amount in Delaware Investments Funds (except money and Rights of Accumulation do
market funds with no sales charge) over a 13-month not apply to the purchase of
period to qualify for reduced front-end sales charges. Class B and C shares, you can
combine your purchase of Class
Rights of You can combine your holdings or purchases of all funds X A shares with your purchase of
Accumulation in the Delaware Investments family (except money market Class B and C shares to
funds with no sales charge) as well as the holdings and fulfill your Letter of Intent
purchases of your spouse and children under 21 to or qualify for Rights of
qualify for reduced front-end sales charges. Accumulation.
Reinvestment of Up to 12 months after you redeem shares, you can For Class A, you For Class B, Not available.
redeemed shares reinvest the proceeds with no additional charge. will not have to pay your account
an additional will be
front-end sales credited with
charge. the contingent
deferred sales
charge you
previously
paid on the
amount you are
reinvesting.
Your schedule
for contingent
deferred sales
charges and
conversion to
Class A will
not start over
again; it will
pick up from
the point at
which you
redeemed your
shares.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Statement of Additional
S-V Standard deviation Information (SAI) Stock Total return
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
A measure of an investment's The document serving An investment that An investment performance
volatility; for mutual funds, as "Part B" of a represents a share measurement, expressed as a
measures how much a fund's fund's prospectus that of ownership percentage, based on the
total return has typically provides more detailed (equity) in a combined earnings from
varied from its historical information about the corporation. Stocks dividends, capital gains and
average. fund's organization, are often referred change in price over a given
investments, policies to as "equities." period.
and risks.
</TABLE>
16
- -----
<PAGE>
How to buy shares
Through your financial adviser
[Graphic Omitted]
Your financial adviser can handle all the details of purchasing shares,
including opening an account. Your adviser may charge a separate fee for this
service.
By mail
[Graphic Omitted]
Complete an investment slip and mail it with your check, made payable to the
fund and class of shares you wish to purchase, to Delaware Investments, 1818
Market Street, Philadelphia, PA 19103-3682. If you are making an initial
purchase by mail, you must include a completed investment application with your
check.
By wire
[Graphic Omitted]
Ask your bank to wire the amount you want to invest to First Union Bank, ABA
#031201467, Bank Account number 2014 12893 4013. Include your account number and
the name of the fund in which you want to invest. If you are making an initial
purchase by wire, you must call us so we can assign you an account number.
By exchange
[Graphic Omitted]
You can exchange all or part of your investment in one or more funds in the
Delaware Investments family for shares of other funds in the family. Please keep
in mind, however, that under most circumstances you are allowed to exchange only
between like classes of shares. To open an account by exchange, call the
Shareholder Service Center at 800.523.1918.
Through automated shareholder services
[Graphic Omitted]
You can purchase or exchange shares through Delaphone, our automated telephone
service or through our web site, www.delawareinvestments.com. For more
information about how to sign up for these services, call our Shareholder
Service Center at 800.523.1918.
Uniform Gift to Minors Act and
Uniform Transfers to Minors Act Volatility
- -------------------------------------------------------------------------------
Federal and state laws that The tendency of an investment to go up or
provide a simple way to transfer down in value by different magnitudes.
property to a minor with special Investments that generally go up or down in
tax advantages. value in relatively small amounts are
considered "low volatility" investments,
whereas those investments that generally go
up or down in value in relatively large
amounts are considered "high volatility"
investments.
17
----
<PAGE>
About your account (continued)
How to buy shares (continued)
Once you have completed an application, you can generally open an account with
an initial investment of $1,000 and make additional investments at any time for
as little as $100. If you are buying shares under the Uniform Gifts to Minors
Act or the Uniform Transfers to Minors Act, or through an Automatic Investing
Plan, the minimum purchase is $250, and you can make additional investments of
$25 or more.
The price you pay for shares will depend on when we receive your purchase order.
If we or an authorized agent receive your order before the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on a
business day, you will pay that day's closing share price which is based on the
Fund's net asset value. If we receive your order after the close of regular
trading, you will pay the next business day's price. A business day is any day
that the New York Stock Exchange is open for business. We reserve the right to
reject any purchase order.
We determine a Fund's net asset value (NAV) per share at the close of regular
trading of the New York Stock Exchange each business day that the Exchange is
open. We calculate this value by adding the market value of all the securities
and assets in a Fund's portfolio, deducting all liabilities, and dividing the
resulting number by the number of shares outstanding. The result is the net
asset value per share. We price securities and other assets for which market
quotations are available at their market value. We price fixed-income securities
on the basis of valuations provided to us by an independent pricing service that
uses methods approved by the board of trustees. Any fixed-income securities that
have a maturity of less than 60 days we price at amortized cost. For all other
securities, we use methods approved by the board of trustees that are designed
to price securities at their fair market value.
18
- ----
<PAGE>
How to redeem shares
[Graphic Omitted]
Through your financial adviser
Your financial adviser can handle all the details of redeeming your shares. Your
adviser may charge a separate fee for this service.
By mail
[Graphic Omitted]
You can redeem your shares (sell them back to the fund) by mail by writing to:
Delaware Investments, 1818 Market Street, Philadelphia, PA 19103-3682. All
owners of the account must sign the request, and for redemptions of more than
$50,000, you must include a signature guarantee for each owner. Signature
guarantees are also required when you request redemption proceeds to be sent to
an address other than the address of record on an account.
By telephone
[Graphic Omitted]
You can redeem up to $50,000 of your shares by telephone. You may have the
proceeds sent to you by check, or, if you redeem at least $1,000 of shares, you
may have the proceeds sent directly to your bank by wire. Bank information must
be on file before you request a wire redemption.
By wire
[Graphic Omitted]
You can redeem $1,000 or more of your shares and have the proceeds deposited
directly to your bank account the next business day after we receive your
request. If you request a wire deposit, a bank wire fee may be deducted from
your proceeds. Bank information must be on file before you request a wire
redemption.
Through automated shareholder services
[Graphic Omitted]
You can redeem shares through Delaphone, our automated telephone service or
through our web site, www.delawareinvestments.com. For more information about
how to sign up for these services, call our Shareholder Service Center at
800.523.1918.
19
----
<PAGE>
About your account (continued)
How to redeem shares (continued)
If you hold your shares in certificates, you must submit the certificates with
your request to sell the shares. We recommend that you send your certificates by
certified mail.
When you send us a properly completed request to redeem or exchange shares
before the close of regular trading on the New York Stock Exchange (normally
4:00 p.m. Eastern Time) you will receive the net asset value as determined on
the business day we receive your request. We will deduct any applicable
contingent deferred sales charges. You may also have to pay taxes on the
proceeds from your sale of shares. We will send you a check, normally the next
business day, but no later than seven days after we receive your request to sell
your shares. If you purchased your shares by check, we will wait until your
check has cleared, which can take up to 15 days, before we send your redemption
proceeds.
If you are required to pay a contingent deferred sales charge when you redeem
your shares, the amount subject to the fee will be based on the shares' net
asset value when you purchased them or their net asset value when you redeem
them, whichever is less. This arrangement assures that you will not pay a
contingent deferred sales charge on any increase in the value of your shares.
You also will not pay the charge on any shares acquired by reinvesting dividends
or capital gains. If you exchange shares of one fund for shares of another, you
do not pay a contingent deferred sales charge at the time of the exchange. If
you later redeem those shares, the purchase price for purposes of the contingent
deferred sales charge formula will be the price you paid for the original
shares--not the exchange price. The redemption price for purposes of this
formula will be the NAV of the shares you are actually redeeming.
Account minimums
If you redeem shares and your account balance falls below the required account
minimum of $1,000 ($250 for Uniform Gift to Minors Act accounts or accounts with
automatic investing plans) for three or more consecutive months, you will have
until the end of the current calendar quarter to raise the balance to the
minimum. If your account is not at the minimum by the required time, you will be
charged a $9 fee for that quarter and each quarter after that until your account
reaches the minimum balance. If your account does not reach the minimum balance,
a Fund may redeem your account after 60 days' written notice to you.
20
- ----
<PAGE>
Special services
To help make investing with us as easy as possible, and to help you build your
investments, we offer the following special services.
- --------------------------------------------------------------------------------
Automatic
Investing Plan
The Automatic Investing Plan allows you to make regular monthly or quarterly
investments directly from your checking account.
Direct Deposit
With Direct Deposit you can make additional investments through payroll
deductions, recurring government or private payments such as Social Security or
direct transfers from your bank account.
Wealth Builder Option
With the Wealth Builder Option you can arrange automatic monthly exchanges
between your shares in one or more Delaware Investments funds. Wealth Builder
exchanges are subject to the same rules as regular exchanges (see below) and
require a minimum monthly exchange of $100 per fund.
Dividend
Reinvestment Plan
Through our Dividend Reinvestment Plan, you can have your distributions
reinvested in your account or the same share class in another fund in the
Delaware Investments family. The shares that you purchase through the Dividend
Reinvestment Plan are not subject to a front-end sales charge or to a contingent
deferred sales charge. Under most circumstances, you may reinvest dividends only
into like classes of shares.
Exchanges
You can exchange all or part of your shares for shares of the same class in
another Delaware Investments fund without paying a sales charge and without
paying a contingent deferred sales charge at the time of the exchange. However,
if you exchange shares from a money market fund that does not have a sales
charge you will pay any applicable sales charges on your new shares. When
exchanging Class B and Class C shares of one fund for similar shares in other
funds, your new shares will be subject to the same contingent deferred sales
charge as the shares you originally purchased. The holding period for the
contingent deferred sales charge will also remain the same, with the amount of
time you held your original shares being credited toward the holding period of
your new shares. You don't pay sales charges on shares that you acquired through
the reinvestment of dividends. You may have to pay taxes on your exchange. When
you exchange shares, you are purchasing shares in another fund so you should be
sure to get a copy of the fund's prospectus and read it carefully before buying
shares through an exchange.
MoneyLine(SM)
On Demand Service
Through our MoneyLine(SM) On Demand Service, you or your financial adviser may
transfer money between your Fund account and your predesignated bank account by
telephone request. Delaware Investments does not charge a fee for this service;
however, your bank may assess one. MoneyLine has a minimum transfer of $25 and a
maximum transfer of $50,000.
21
----
<PAGE>
About your account (continued)
Special services (continued)
MoneyLine
Direct Deposit Service
Through our MoneyLine Direct Deposit Service you can have $25 or more in
dividends and distributions deposited directly to your bank account. Delaware
Investments does not charge a fee for this service; however, your bank may
assess one.
Systematic
Withdrawal Plan
Through our Systematic Withdrawal Plan you can arrange a regular monthly or
quarterly payment from your account made to you or someone you designate. If the
value of your account is $5,000 or more, you can make withdrawals of at least
$25 monthly, or $75 quarterly. You may also have your withdrawals deposited
directly to your bank account through our MoneyLine Direct Deposit Service.
Dividends, distributions
and taxes
For each Fund, dividends, if any, are paid monthly, while any capital gains are
distributed annually. We automatically reinvest all dividends and any capital
gains, unless you tell us otherwise.
Tax laws are subject to change, so we urge you to consult your tax adviser about
your particular tax situation and how it might be affected by current tax law.
The tax status of your distributions from these Funds is the same whether you
reinvest your dividends or receive them in cash.
Dividends paid by the Funds are generally expected to be exempt from federal
income tax. However, they must be included in the tax base for determining how
much of a shareholder's Social Security benefits are subject to federal income
tax. Shareholders are required to disclose tax-exempt interest received from a
Fund on their federal income tax returns.
Distributions from a Fund's long-term capital gains are taxable as capital
gains. Short-term capital gains are generally taxable as ordinary income. Any
capital gains may be taxable at different rates depending on the length of time
the Fund held the assets. In addition, you may be subject to state and local
taxes on distributions.
The sale of Fund shares either through redemption or exchange, is a taxable
event and may result in a capital gain or loss to shareholders.
We will send you a statement each year by January 31 detailing the amount and
nature of all dividends and capital gains that you were paid for the prior year
as well as all redemptions and exchanges.
22
- ----
<PAGE>
Delaware Tax-Free Pennsylvania Fund
Distributions paid by the Fund that are attributable to interest on Pennsylvania
state and municipal obligations or qualifying obligations of the United States
and certain of its territories or possessions, the interest on which is exempt
from state taxation under the laws of Pennsylvania or the United States, will be
exempt from Pennsylvania personal income tax. For shareholders who are residents
of Philadelphia, income from these sources, as well as distributions paid by the
Fund designated as capital gain dividends for federal income tax purposes, will
also be exempt from Philadelphia School District income tax.
Shares of the Fund are exempt from Pennsylvania county personal property tax to
the extent the portfolio securities consist of Pennsylvania state and municipal
obligations or qualifying obligations of the United States and its agencies and
instrumentalities on the annual assessment date. It should be noted, however,
that at present, Pennsylvania counties generally have stopped assessing personal
property taxes. This is due, in part, to ongoing litigation challenging the
validity of the tax.
Shareholders of the Fund will receive notification from the Fund annually as to
the taxability of such distributions in Pennsylvania.
Delaware Tax-Free New Jersey Fund
Distributions paid by the Fund that are properly attributable to income or net
capital gains from New Jersey state and municipal obligations or qualifying
obligations of the United States and certain of its territories or possessions,
the interest on which is exempt from state taxation under the laws of the state
of New Jersey or the United States, will be exempt from the New Jersey gross
income tax.
Gains from the redemption or sale of shares of the Fund will generally also be
exempt from New Jersey gross income tax.
Delaware Tax-Free New Jersey Fund has qualified and will continue to qualify as
a "qualified investment fund" under the New Jersey gross income tax law except
when investing for defensive purposes under certain circumstances. This
qualification is described more fully in the Statement of Additional
Information. The exemptions described above are effective as long as the Fund
remains a "qualified investment fund." If the Fund fails to be a qualified
investment fund, none of its distributions for the entire taxable year will
qualify for tax-exempt status under New Jersey law.
23
----
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
A Class
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Year ended
Pennsylvania Fund 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
The Financial Net asset value, beginning of period $8.290 $8.420 $8.240 $8.460 $8.180
highlights table is
intended to help you Income (loss) from investment operations
understand each
Fund's financial Net investment income 0.410 0.415 0.430 0.456 0.476
performance. All "per
share" information Net realized and unrealized gain (loss)
reflects financial results on investments (0.830) (0.034) 0.193 (0.105) 0.330
for a single Fund share. ------ ----- ----- ----- -----
This information has Total from investment operations (0.420) 0.381 0.623 0.351 0.806
been audited by Ernst ------ ----- ----- ----- -----
& Young LLP, whose Less dividends and distributions
report, along with the
Funds' financial Dividends from net investment income (0.410) (0.415) (0.430) (0.456) (0.476)
statements, is included
in the Funds' annual Distributions from net realized gain
report, which is on investments none (0.096) (0.013) (0.115) (0.050)
available upon request ------ ----- ----- ----- -----
by calling Total dividends and distributions (0.410) (0.511) (0.443) (0.571) (0.526)
800.523.1918. ------ ----- ----- ----- -----
Net asset value, end of period $7.460 $8.290 $8.420 $8.240 $8.460
====== ===== ===== ===== =====
Total return(2) (5.18%) 4.64% 7.78% 4.35% 10.08%
Ratios and supplemental data
Net assets, end of period (000 omitted) $716,646 $871,740 $917,364 $954,258 $1,002,888
Ratio of expenses to average net assets 0.92% 0.95% 0.94% 0.91% 0.90%
Ratio of net investment income to
to average net assets 5.21% 4.96% 5.20% 5.52% 5.67%
Portfolio turnover 38% 41% 32% 27% 25%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized but 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.
<TABLE>
<CAPTION>
How to read the Net investment Net realized and unrealized gain (loss)
Financial highlights income on investments Net asset value (NAV)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment A realized gain on investments occurs when we sell an This is the value
income includes investment at a profit, while a realized loss occurs when of a mutual fund
dividend and interest we sell an investment at a loss. When an investment increases share, calculated
income earned from or decreases in value but we do not sell it, we record an by dividing the
a fund's securities; unrealized gain or loss. The amount of realized gain per net assets by the
it is after expenses share that we pay to shareholders, if any, is listed under number of shares
have been deducted. "Less dividends and distributions--Distributions from net outstanding.
realized gain on investments."
</TABLE>
24
- ----
<PAGE>
<TABLE>
<CAPTION>
B Class C Class
- ----------------------------------------------------------------- ------------------------------------------------------------
Period
11/29/95(1)
Year ended Year ended through
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
- ----------------------------------------------------------------- ------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.290 $ 8.420 $ 8.240 $ 8.460 $ 8.180 $8.290 $8.420 $8.240 $8.460 $8.510
0.347 0.348 0.370 0.390 0.408 0.347 0.355 0.364 0.390 0.102
(0.830) (0.034) 0.193 (0.105) 0.330 (0.830) (0.034) 0.193 (0.105) none
----- ------ ------ ------ ------- ------ ------ ----- ------ ------
(0.483) 0.314 0.563 0.285 0.738 (0.483) 0.321 0.557 0.285 0.102
----- ------ ------ ------ ------- ------ ------ ----- ------ ------
(0.347) (0.348) (0.370) (0.390) (0.408) (0.347) (0.355) (0.364) (0.390) (0.102)
none (0.096) (0.013) (0.115) (0.050) none (0.096) (0.013) (0.115) (0.050)
----- ------ ------ ------ ------- ------ ------ ----- ------ ------
(0.347) (0.444) (0.383) (0.505) (0.458) (0.347) (0.451) (0.377) (0.505) (0.152)
----- ------ ------ ------ ------- ------ ------ ----- ------ ------
$7.460 $8.290 $8.420 $8.240 $ 8.460 $7.460 $8.290 $8.420 $8.240 $8.460
===== ====== ====== ====== ======= ====== ====== ====== ====== ======
(5.94%) 3.81% 6.92% 3.52% 9.19% (5.94%) 3.81% 6.92% 3.52% 1.19%
$37,390 $42,994 $37,631 $31,644 $20,861 $3,909 $3,963 $2,569 $1,181 $123
1.72% 1.75% 1.74% 1.71% 1.71% 1.72% 1.75% 1.74% 1.71% 1.71%
4.41% 4.16% 4.40% 4.72% 4.86% 4.41% 4.16% 4.40% 4.72% 4.86%
38% 41% 32% 27% 25% 38% 41% 32% 27% 25%
- ----------------------------------------------------------------- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratio of expenses to Ratio of net investment
Total return Net assets average net assets income to average net assets Portfolio turnover
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
This represents the rate Net assets represent The expense ratio is We determine this ratio This figure tells you the
that an investor would the total value of the percentage of by dividing net amount of trading
have earned or lost on an all the assets in a net assets that a investment income by activity in a fund's
investment in a fund. In fund's portfolio, fund pays annually average net assets. portfolio. For example, a
calculating this figure less any for operating fund with a 50% turnover
for the financial liabilities, that expenses and has bought and sold half
highlights table, we are attributable to management fees. of the value of its total
include applicable fee that class of the These expenses investment portfolio
waivers, exclude fund. include accounting during the stated period.
front-end and contingent and administration
deferred sales charges, expenses, services
and assume the for shareholders,
shareholder has and similar
reinvested all dividends expenses.
and realized gains.
</TABLE>
25
----
<PAGE>
Financial highlights (continued)
<TABLE>
<CAPTION>
A Class B Class
- -------------------------------------------------------------------------------------------- ------------------------------------
Period Period
9/2/97(1) 9/2/97(1)
Delaware Tax-Free Year ended through Year ended through
New Jersey Fund 2/29/00 2/28/99 2/28/98 2/29/00 2/28/99 2/28/98
- -------------------------------------------------------------------------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.750 $5.700 $5.500 $5.750 $5.700 $5.500
Income (loss) from investment operations
Net investment income 0.255 0.256 0.115 0.214 0.213 0.069
Net realized and unrealized gain (loss)
on investments (0 .690) 0.075 0.200 (0.690) 0.075 0.200
------- ------ ------ ------ ------ ------
Total from investment operations (0.435) 0.331 0.315 (0.476) 0.288 0.269
------- ------ ------ ------ ------ ------
Less dividends and distributions
Dividends from net investment income (0.255) (0.256) (0.115) (0.214) (0.213) (0.069)
Distributions from net realized gain
on investments none (0.025) none none (0.025) none
------- ------ ------ ------ ------ ------
Total dividends and distributions (0.255) (0.281) (0.115) (0.214) (0.238) (0.069)
------- ------ ------ ------ ------ ------
Net asset value, end of period $5.060 $5.750 $5.700 $5.060 $5.750 $5.700
======= ====== ====== ====== ====== ======
Total return(2/3) (7.68%) 5.93% 5.77% (8.38%) 5.14% 4.90%
Ratios and supplemental data
Net assets, end of period (000 omitted) $1,750 $2,052 $1,141 $2,032 $1,680 $146
Ratio of expenses to average net assets(5) 0.50% 0.50% 0.88% 0.25% 1.25% 1.56%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 1.45% 1.75% 1.93% 2.20% 2.50% 2.61%
Ratio of net investment income to
average net assets 4.74% 4.42% 4.23% 3.99% 3.67% 3.63%
Ratio of net investment income to
average net assets prior to expense
limitation and expenses paid indirectly 3.79% 3.17% 3.18% 3.04% 2.42% 2.58%
Portfolio turnover 14% 0% 47% 14% 0% 47%
- -------------------------------------------------------------------------------------------- ------------------------------------
</TABLE>
<PAGE>
[RESTUBED FOR ABOVE]
<TABLE>
<CAPTION>
C Class
- -----------------------------------------------------------------------------------
Delaware Tax-Free Year ended
New Jersey Fund 2/29/00 2/28/99(4)
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $5.750 $5.700
Income (loss) from investment operations
Net investment income 0.214 0.213
Net realized and unrealized gain (loss)
on investments (0.690) 0.075
------ ------
Total from investment operations (0.476) 0.288
------ ------
Less dividends and distributions
Dividends from net investment income (0.214) (0.213)
Distributions from net realized gain
on investments none (0.025)
------ ------
Total dividends and distributions (0.214) (0.238)
------ ------
Net asset value, end of period $5.060 $5.750
====== ======
Total return(2/3) (8.37%) 5.14%
Ratios and supplemental data
Net assets, end of period (000 omitted) $160 $171
Ratio of expenses to average net assets(5) 0.25% 1.25%
Ratio of expenses to average net assets
prior to expense limitation and
expenses paid indirectly 2.20% 2.50%
Ratio of net investment income to
average net assets 3.99% 3.67%
Ratio of net investment income to
average net assets prior to expense
limitation and expenses paid indirectly 3.04% 2.42%
Portfolio turnover 14% 0%
- -----------------------------------------------------------------------------------
</TABLE>
(1) Date of initial public offering; ratios have been annualized but 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.
(3) Total investment return reflects a voluntary waiver and payment of fees by
the manager.
(4) Shares of the Tax-Free New Jersey Fund C Class were initially offered on
September 2, 1997. On October 20, 1997 the C Class sold shares which were
subsequently repurchased, leaving a balance of 1 share, which is the initial
seed purchase, as of February 28, 1998. Financial highlights for the period
ended February 28, 1998 are not presented because the data is not believed
to be meaningful.
(5) Ratios for the year ended February 29, 2000 including fees paid indirectly
in accordance with Securities and Exchange Commission rules were 0.64%,
1.39% and 1.39% for A Class, B Class and C Class, respectively.
26
- -----
<PAGE>
DELAWARE(SM)
INVESTMENTS
---------------------
Philadelphia o London
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<PAGE>
DELAWARE(SM)
INVESTMENTS
---------------------
Philadelphia o London
This page intentionally left blank
<PAGE>
Delaware Tax-Free
Pennsylvania Fund
Delaware Tax-Free
New Jersey Fund
Additional information about the Funds' investments is available in the Funds'
annual and semi-annual reports to shareholders. In the Funds' shareholder
reports, you will find a discussion of the market conditions and investment
strategies that significantly affected the Funds' performance during the report
period. You can find more detailed information about the Funds in the current
Statement of Additional Information, which we have filed electronically with the
Securities and Exchange Commission (SEC) and which is legally a part of this
prospectus. If you want a free copy of the Statement of Additional Information,
the annual or semi-annual report, or if you have any questions about investing
in these Funds, you can write to us at 1818 Market Street, Philadelphia, PA
19103-3682, or call toll-free 800.523.1918. You may also obtain additional
information about the Funds from your financial adviser.
You can find reports and other information about the Funds on the EDGAR Database
on the SEC web site (http://www.sec.gov). You can also get copies of this
information, after payment of a duplicating fee, by e-mailing the SEC at
[email protected] or by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-0102. Information about the Funds, including their
Statement of Additional Information, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get information on the public reference room by calling the SEC at
202.942.8090.
Web site
www.delawareinvestments.com
E-mail
[email protected]
Shareholder Service Center
800.523.1918
Call the Shareholder Service Center
Monday to Friday, 8 a.m. to 8 p.m. Eastern time:
o For fund information; literature; price, yield and performance figures.
o For information on existing regular investment accounts and retirement plan
accounts including wire investments; wire redemptions; telephone redemptions
and telephone exchanges.
Delaphone Service
800.362.FUND (800.362.3863)
o For convenient access to account information or current performance
information on all Delaware Investments Funds seven days a week, 24 hours a
day, use this Touch-Tone(R) service.
Investment Company Act file number: 811-2715
Delaware Tax-Free Pennsylvania Fund CUSIP NASDAQ
- ----------------------------------- ----- ------
Class A 233216100 DELIX
Class B 233216209 DPTBX
Class C 233216308 DPTCX
Delaware Tax-Free New Jersey Fund
- ---------------------------------
Class A 24609H107 DPJAX
Class B 24609H206 DPJBX
Class C 24069H305 DPJCX
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
P-007 [--] PP 4/00
