<PAGE>
DELAWARE(SM)
INVESTMENTS
------------
Delaware Tax-Free Pennsylvania Fund
Delaware Tax-Free New Jersey Fund
Tax-Exempt Income
(Tax-Exempt Income Artwork)
2000 Semi-annual report
<PAGE>
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary
Delaware Tax-Free
Pennsylvania Fund 6
Delaware Tax-Free
New Jersey Fund 7
Financial Statements
Statements of Net Assets 8
Statements of Operations 15
Statements of Changes in
Net Assets 16
Financial Highlights 17
Notes to Financial
Statements 22
A Commitment To Our Investors
Experienced
[] Our seasoned investment professionals average more than 15 years' experience.
[] We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
[] We follow strict investment policies and clear buy/sell guidelines.
[] We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
[] We clearly articulate our investment policies and follow them consistently.
[] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage more than $44
billion in assets as of September 30, 2000.
Comprehensive
[] We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
[] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
"WE BELIEVE THAT
RISING TREASURY PRICES
LEFT MUNICIPAL BONDS
IN A POSITION OF
RELATIVE VALUE."
October 9, 2000
Recap of Events - Throughout much of the six-month period ended August 31, 2000,
the Federal Reserve Board focused on tightening the U.S. money supply,
continuing a prolonged series of interest rate hikes. A strong U.S. economy and
threatening inflation prompted the Fed to bump up short-term interest rates
twice during the period, with the last increase coming on May 16, 2000.
At the start of the period, municipal bond markets were beginning to rebound
from a difficult period that in many cases had produced negative returns. An
interest rate hike in March, coupled with the U.S. Treasury buyback and April
turmoil in the U.S. stock market, led to a marked increase in demand for the
safety of bonds - particularly U.S. Treasury bonds. We believe that rising
Treasury prices left municipal bonds in a position of relative value. Retail
investors began to recognize this value when Treasury yields dropped and
municipal bond yields exceeded 6% in March (Source: Bloomberg). The resulting
municipal bond rally generally coincided with the start of your Fund's reporting
period and lasted throughout the entire six months.
Increased tax revenue resulting from the strong economy and higher borrowing
costs resulting from rising interest rates caused many state and local
governments to reduce the number of municipal bonds they issued during the
period. This caused demand to exceed supply (Source: Moody's Investors Service,
Inc.). As of August 31, 2000, demand for municipals remained high and yet
municipal bond issuance year-to-date for 2000 was off by approximately 19% from
the same period one year prior, or about $33 billion. (Source: Thomson
Financial).
Long-term interest rates began to decline during the summer months, with the
30-year mortgage rate at 7.64% on August 31, 2000, about three quarters of a
percentage point off its spring 2000 high for the year. The average yield on
30-year AAA-rated municipal bonds, which rarely is more than the yield for the
30-year Treasury bond, stood at 5.68% on August 31, 2000. By comparison, the
30-year Treasury bond was yielding 5.66% and two-year Treasury notes were
yielding 6.16% on August 31, 2000 (Source: Bloomberg).
Total Returns
For the Period Ended August 31, 2000 Six Months
--------------------------------------------------------------------------------
Delaware Tax-Free Pennsylvania Fund Class A +6.42%
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Lipper Pennsylvania Municipal Debt Fund Average (63 Funds) +6.56%
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Delaware Tax-Free New Jersey Fund Class A +9.97%
--------------------------------------------------------------------------------
Lipper New Jersey Municipal Debt Fund Average (60 Funds) +6.52%
Lehman Brothers Municipal Bond Index +6.77%
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All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of distributions. Performance information for
all Fund classes can be found on pages 6 and 7. The Lipper categories represent
the average returns of state-specific municipal bond funds tracked by Lipper
(Source: Lipper Inc.). The Lehman Brothers Municipal Bond Index is an unmanaged
index that generally tracks the performance of municipal bonds. You cannot
invest directly in an index. Past performance does not guarantee future results.
1
<PAGE>
(Tax-Exempt Income Artwork)
Delaware Tax-Free Pennsylvania Fund returned +6.42% (Class A shares at net asset
value with distributions reinvested) for the six months ended August 31, 2000,
slightly less than the Lehman Brothers Municipal Bond Index and the average fund
in the Lipper Pennsylvania Municipal Debt Funds class. Delaware Tax-Free New
Jersey Fund returned +9.97% (Class A shares at net asset value with
distributions reinvested) for the six months ended August 31, 2000,
outperforming the Lehman Brothers Municipal Bond Index and the average fund in
the Lipper New Jersey Municipal Debt Funds class. In both cases, the difference
between the Fund's return and that of the respective benchmark can be attributed
to management's approach to interest rate sensitivity in the portfolio.
Market Outlook - We are encouraged by the current environment. As of this
writing, the predominant opinion on Wall Street is that the Fed is firmly in a
holding pattern with regard to its actions on interest rates. Evident slowing in
the U.S. economy, which has prompted the Fed to leave rates untouched at its
last three meetings, could eventually lead to lesser revenues for states and
municipalities. In our opinion, this would likely lead to a general increase in
the issuance of municipal bonds.
We believe that municipal bonds will continue to play a role in well-diversified
portfolios. In addition, we believe that in an environment where interest rates
trend downward, investing in municipal bond funds may be more attractive to
investors than buying individual bonds. In such an environment, municipal bond
funds like Delaware's are holding slightly older bonds - often issued at more
attractive rates than most new issues coming to market. On the pages that
follow, your Funds' portfolio managers explain the Funds' positioning during the
period and provide a view of issues affecting the Pennsylvania and New Jersey
municipal markets.
Thank you for your continued confidence and your commitment to Delaware
Investments.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
2
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
---------------------------
Mitchell L. Conery
Senior Portfolio Manager
Patrick P. Coyne
Senior Portfolio Manager
October 9, 2000
The Funds' Results
The six-month period ended August 31, 2000 was generally a strong period in
municipal markets despite changing interest rates. While municipal bond fund
cash flows are negative year-to-date, July 2000 brought positive numbers, with
investors pouring a net $850 million dollars into municipal bond funds - a trend
that we hope to see continue (Source: Investment Company Institute).
The period was characterized by a continued diminishing of municipal bond
supply, as states, counties, and municipalities simply issued fewer bonds.
This is likely due to strong local economies and tax bases, as well as the
dramatic decline in bond refunding. Bond issues for public projects such as
water and sewer, transportation, and higher education often exhibited strength,
while credit upgrades given to municipal issuers were substantial - especially
among bonds whose principal and interest payments are backed by taxes (Source:
Moody's Investors Service).
We continued to limit our investments in the healthcare sector. The cloudy
outlook for the future of Medicaid/Medicare may have been among the reasons that
municipal bonds in this sector often faced pressures. Of the 37 credit
downgrades that Moody's has made to revenue bonds year-to-date in 2000, 28 have
been to healthcare bonds (Source: Moody's Investors Service). When investing in
healthcare issues, we use careful research and always keep an eye out for
undervalued bond issues.
The uncertainty surrounding interest rates, meanwhile, dictated the need
throughout the period for managing portfolio duration, a common measure of a
bond or bond fund's sensitivity to interest rates. The shorter a bond fund's
duration, the less sensitive the fund is to changes in interest rates.
Delaware Tax-Free Pennsylvania Fund
After a difficult period in fiscal 1999, the past six months have been a breath
of fresh air in the Pennsylvania municipal bond market. Municipal markets
rallied through much of 2000, and the Fund posted a positive return of +6.42%
for the six-month period ended August 31, 2000 (Class A shares at net asset
value with distributions reinvested).
The slight underperformance compared to the benchmark can be attributed in part
to the length of the portfolio's duration. We concentrated our efforts during
the period on shortening the portfolio's duration, and brought it down from 8.75
years on February 29, 2000 to a more modest 7.94 years as of August 31, 2000.
3
<PAGE>
Delaware Tax-Free
Pennsylvania Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------
Current 30-Day SEC Yield* 4.68%
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Average Rating A
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Average Effective Duration** 7.94 years
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Average Effective Maturity*** 12.48 years
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*For Class A shares measured according to Securities and Exchange
Commission (SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for
both Class B and C shares was 4.07%.
**Average effective duration is a common measure of a bond or bond
fund's sensitivity to interest rate changes.
***Average effective maturity is the average time remaining until
scheduled principal repayment by issuers of portfolio securities.
(Tax-Exempt Income Artwork)
Delaware Tax-Free Pennsylvania Fund (continued)
In Pennsylvania, the economic picture is largely unchanged from six months ago.
Credit ratings are generally strong, with the possible exception of healthcare.
This sector is still feeling the last effects of the credit crunch initiated by
Allegheny Health Systems' failure in 1998. As a result, we have been more
selective with regard to our investments in this sector.
We continue to believe that the healthcare and hospital sectors hold value in
places, however, and continue to search for undervalued bonds. For example, July
2000 brought the refunding of a key hospital bond we had purchased in the wake
of the Allegheny crisis. The refunding of this western Pennsylvania hospital
bond issue, on which we were the lead investors, was a positive for the Fund
during the period.
Delaware Tax-Free Pennsylvania Fund
Top Five Sectors
As of August 31, 2000
Sector Percentage of Net Assets
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Pre-Refunded/Escrowed to Maturity 20.24%
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Hospitals 17.88%
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Higher Education 13.57%
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Pollution Control 12.23%
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Other Revenue 7.43%
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Delaware Tax-Free New Jersey Fund
Since its inception in September 1997, the Fund has frequently been volatile due
to its relatively small asset size. In constructing the portfolio over time, it
has often been necessary to purchase bonds that have longer-term maturities in
order to provide a competitive yield for investors. The result is that the
Fund's sensitivity to interest rates has remained relatively high.
We are happy to report that the last six months have been a strong period for
Delaware Tax-Free New Jersey Fund. The Fund returned +9.97% (Class A shares at
net asset value with distributions reinvested), outperforming its benchmark
index and the relative Lipper class during the period.
While we are still buying longer-term bonds that require us to actively manage
the portfolio, we envision this trend beginning to dissipate as the Fund's total
assets grow.
4
<PAGE>
Delaware Tax-Free
New Jersey Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------
Current 30-Day SEC Yield* 4.90%
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Average Rating AA
---------------------------------------------------------------
Average Effective Duration** 11.31 years
---------------------------------------------------------------
Average Effective Maturity*** 19.57 years
---------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange
Commission (SEC) guidelines. Current 30-day SEC yield as of 8/31/00
for both Class B and C shares was 4.35%.
**Average effective duration is a common measure of a bond or bond fund's
sensitivity to interest rates.
***Average effective maturity is the average time remaining until scheduled
principal repayment by issuers of portfolio securities.
Delaware Tax-Free New Jersey Fund (continued)
Meanwhile, New Jersey remains a hotbed for both high-tech and pharmaceutical
companies within the private sector, and residents continue to witness an
economy that is flourishing. With its progressive outlook, the state also
continues to rank among the top ten issuers of municipal debt nationally
(Source: The Bond Buyer). The state announced legislation during the period
authorizing up to $8.6 billion in bonds from local school districts for
construction needs. A portion of the state's tobacco settlement dollars is among
the variety of funding sources identified to cover part of the increased debt
service (Source: Standard & Poor's).
Delaware Tax-Free New Jersey Fund
Top Five Sectors
As of August 31, 2000
Sector Percentage of Net Assets
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Higher Education 20.56%
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Water & Sewer 18.12%
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School Districts 14.32%
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Territorial 8.57%
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Hospitals 6.82%
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Outlook
In the months ahead, we anticipate a positive environment for municipal bonds.
We think it is possible that the strong performance seen in the first half of
2000 could continue through the fall.
As always with municipal bonds, this depends largely on interest rate trends, as
well as supply and demand in the municipal markets. The Federal Reserve Board
has promised to remain vigilant about keeping inflation under control and could
continue with interest rate increases in the future. As of this writing,
however, many analysts and investors seem to believe that the Fed may be
finished with increases - at least for the rest of this year. Long-term interest
rates, meanwhile, are generally trending downward.
We feel that a non-inflationary U.S. economy that has less-robust growth is
likely to boost the demand for capital funding. This would be a positive for
municipal bonds and for the Funds. In our opinion, municipal bond funds will
continue to be an important investment vehicle, which can provide excellent
diversification to an investor's portfolio, as well as providing individual
investors an opportunity to preserve their own capital and generate non-taxable
income.*
*A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
5
<PAGE>
FUND BASICS
Fund Objectives
The 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.
Total Fund Assets
As of August 31, 2000
$751 million
Number of Holdings
117
Fund Start Date
March 23, 1977
Your Fund Managers
Mitchell L. Conery received a bachelor's degree from Boston University and an
MBA in Finance from the State University of New York at Albany. Prior to joining
Delaware Investments in 1997, he served as a Municipal Bond Investment Officer
with the Travelers Group. Before that, he held positions at CS First Boston
Corporation, MBIA Corporation, Thomson McKinnon Securities, Ovest Financial
Services, and Merrill Lynch.
Patrick P. Coyne received a bachelor's degree from Harvard University and an MBA
in Finance from the University of Pennsylvania's Wharton School. He began his
career with Kidder, Peabody & Co., where he managed the firm's trading desk for
four years. He joined Delaware Investments' fixed-income department in 1990.
Nasdaq Symbols
Class A DELIX
Class B DPTBX
Class C DPTCX
DELAWARE TAX-FREE PENNSYLVANIA FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2000 Lifetime 10 Years Five Years One Year
--------------------------------------------------------------------------------
Class A (Est. 3/23/77)
Excluding Sales Charge +6.21% +6.31% +4.34% +3.90%
Including Sales Charge +6.03% +5.91% +3.54% -0.05%
--------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.03% +3.51% +3.08%
Including Sales Charge +4.03% +3.19% -0.86%
--------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +3.13% +3.08%
Including Sales Charge +3.13% +2.09%
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Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Returns and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Class B and C share
results, excluding sales charge, assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge, and for periods
after June 1, 1992 a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
6
<PAGE>
FUND BASICS
Fund Objectives
The 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.
Total Fund Assets
As of August 31, 2000
$4 million
Number of Holdings
41
Fund Start Date
September 2, 1997
Your Fund Managers
Mitchell L. Conery
Patrick P. Coyne
Nasdaq Symbols
Class A DPJAX
Class B DPJBX
Class C DPJCX
DELAWARE TAX-FREE NEW JERSEY FUND PERFORMANCE
Average Annual Total Returns
Through August 31, 2000 Lifetime One Year
--------------------------------------------------------------------------------
Class A (Est. 9/2/97)
Excluding Sales Charge +4.10% +6.16%
Including Sales Charge +2.80% +2.14%
--------------------------------------------------------------------------------
Class B (Est. 9/2/97)
Excluding Sales Charge +3.16% +5.37%
Including Sales Charge +2.23% +1.37%
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Class C (Est. 9/2/97)
Excluding Sales Charge +3.01% +5.37%
Including Sales Charge +3.01% +4.37%
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Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Returns and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Class B and C share
results, excluding sales charge, assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes during the period.
Performance would have been lower if the expense limitation was not in effect.
7
<PAGE>
Statements of Net Assets
DELAWARE TAX-FREE PENNSYLVANIA FUND
Principal Market
August 31, 2000 (Unaudited) Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.79%
Continuing Care/Retirement Revenue Bonds - 1.01%
Lancaster Pennsylvania Authority for
Industrial Development Revenue -
Garden Spot Village Project Series A
7.625% 5/1/31 ................................ $1,650,000 $1,669,520
Montgomery County Higher Education and
Health Authority Revenue (Foulkeways
at Gwynedd Project)
6.75% 11/15/30 ................................ 1,000,000 1,006,450
Philadelphia Pennsylvania Authority for
Industrial Development Revenue
(Stapley Germantown Continuing
Care Community) 6.60% 1/1/16 .................. 5,250,000 4,932,060
----------
7,608,030
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Higher Education Revenue Bonds - 13.57%
Dauphin County General Authority
College Revenue (Holy Family College)
7.50% 12/1/19 ................................. 3,025,000 3,141,795
Delaware County Authority
College Revenue
(Eastern College) Series B
5.50% 10/1/19 ................................. 1,500,000 1,348,125
5.50% 10/1/24 ................................. 2,850,000 2,511,563
(Haverford College) 5.75% 11/15/29 ............ 1,875,000 1,897,781
Gettysburg Municipal Authority College
Revenue (Gettysburg College) Series B
4.75% 8/15/23 (AMBAC) ......................... 2,100,000 1,862,532
Indiana County Industrial Development
Authority Revenue (Indiana University
Student Co-op Association Inc.)
Series A 5.875% 11/1/24 (AMBAC) ............... 1,000,000 1,012,510
Series A 5.875% 11/1/29 (AMBAC) ............... 1,000,000 1,009,920
Montgomery County Higher Education and
Health Authority Revenue (Beaver College)
5.85% 4/1/21 (Connie Lee) ..................... 5,465,000 5,575,120
Montgomery County Pennsylvania
Industrial Development Authority
Revenue (Hill School Project)
5.35% 8/15/27 (MBIA) .......................... 5,870,000 5,674,823
Pennsylvania State Higher Education
Assistance Capital Acquisition
5.875% 12/15/30 (MBIA) ....................... 7,385,000 7,558,695
Pennsylvania State Higher Educational
Facilities Authority Revenue
College Revenue
(Allegheny College)
Series B 5.00% 11/1/26 (MBIA) ................. 2,700,000 2,482,218
(Drexel University) 6.00% 5/1/29 ............. 3,400,000 3,450,048
(Elizabethtown College)
6.50% 6/15/15 ................................. 6,700,000 6,891,151
(Lafayette College) 6.00% 5/1/30 ............. 2,500,000 2,588,650
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Higher Education Revenue Bonds (continued)
(Philadelphia University)
6.00% 6/1/29 ................................. $ 1,800,000 $ 1,826,298
(Temple University)
5.75% 4/1/31 (MBIA) ........................... 8,000,000 8,006,240
(University of Pennsylvania)
4.75% 7/15/33 ................................. 14,420,000 12,333,859
5.90% 9/1/15 .................................. 4,205,000 4,338,383
(Ursinus College) 5.90% 1/1/27 ................ 2,000,000 1,955,400
Pennsylvania State Higher Educational
Facilities Authority Revenue State System
Series M 5.75% 6/15/20 (AMBAC) ................ 17,730,000 17,934,427
Philadelphia Pennsylvania Hospitals & Higher
Education Facilities Authority Revenue
(Chestnut Hill College)
6.00% 10/1/29 ................................. 2,860,000 2,564,905
Swarthmore Borough Authority
(Swarthmore College)
6.00% 9/15/12 ................................. 5,730,000 5,970,832
-----------
101,935,275
-----------
Hospital Revenue Bonds - 17.88%
Allegheny County Hospital
Development Authority
8.45% 11/15/03 ............................... 375,000 375,645
8.55% 11/15/04 ............................... 240,000 240,533
9.25% 11/15/30 ............................... 6,650,000 6,265,364
Allegheny County Pennsylvania Hospital
Development Authority Revenue
(Allegheny Valley Hospital)
7.75% 8/1/20 .................................. 2,840,000 2,898,050
7.50% 8/1/13 .................................. 390,000 392,200
Allegheny County Pennsylvania Hospital
Development Authority Revenue Health
Center (UPMC Health)
Series B 6.00% 7/1/23 (MBIA) .................. 5,745,000 6,084,415
Series B 6.00% 7/1/24 (MBIA) .................. 5,000,000 5,294,900
Series B 6.00% 7/1/26 (MBIA) .................. 4,750,000 5,027,495
Series B 6.00% 7/1/27 (MBIA) .................. 9,325,000 9,865,570
Allegheny County Pennsylvania Hospital
Authority Revenue Health System
Revenue (Catholic Health East)
4.875% 11/15/26 (AMBAC) ....................... 8,500,000 7,434,355
Berks County Pennsylvania Municipal
Authority Health Care Reading Hospital
Pooled Financing Project
5.00% 3/1/28 .................................. 20,000,000 17,307,800
8
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free Pennsylvania Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Chester County Pennsylvania Health and
Educational Facilities Authority Health
System Revenue (Jefferson Health
Systems) Series B 5.375% 5/15/27 ............. $10,000,000 $ 9,037,400
Delaware County Authority Revenue
(Main Line & Haverford Nursing and
Rehabilitation Center) 9.00% 8/1/22 .......... 1,925,000 2,066,083
Pennsylvania Economic Development
Financing Authority Revenue
(Dr. Gertrude A Barber Center Inc.)
5.90% 12/1/30 ............................... 2,250,000 2,243,453
Philadelphia Pennsylvania Hospital Higher
Education Facilities Authority
Hospital Revenue
(Children's Hospital of Philadelphia)
Series A 5.50% 2/15/22 ....................... 5,600,000 5,342,344
(Children's Seashore House)
Series A 7.00% 8/15/17 ....................... 3,100,000 3,220,993
(Children's Seashore House)
Series B 7.00% 8/15/22 ....................... 2,100,000 2,178,414
(Jeanes Health System Project)
6.85% 7/1/22 ................................. 18,020,000 17,737,266
(Roxborough Memorial Hospital)
7.25% 3/1/24 ................................. 11,830,000 10,644,279
Sayre Pennsylvania Health Care Facilities
(Gutherie Health Care System)
Series A 6.00% 3/1/21 (AMBAC) ................ 2,250,000 2,255,378
Sayre Pennsylvania Health Care Facilities
(VHA of Pennsylvania, Inc.) (Capital Asset
Financing Program-Guthrie
Medical Center)
Series A 7.625% 12/1/15 (AMBAC) .............. 1,000,000 1,027,440
Series B 7.625% 12/1/15 (AMBAC) .............. 2,490,000 2,635,018
Scranton-Lackawanna Health and Welfare
Authority (Allied Services Rehabilitation
Hospitals) 7.60% 7/15/20 ..................... 5,640,000 5,887,483
Westmorland County Pennsylvania
Industrial Development Authority
Hospital Revenue (Citizen General
Hospital) 5.25% 7/1/15 ....................... 11,000,000 8,874,580
-----------
134,336,458
-----------
Housing Revenue Bonds - 7.13%
Montgomery County Pennsylvania
Redevelopment Authority Multi-Family
Housing (KBF Associates Project)
Series A 6.50% 7/1/25 ........................ 26,560,000 26,578,592
Series B 7.25% 7/1/25 ........................ 14,785,000 14,955,915
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Housing Revenue Bonds (continued)
Pennsylvania Housing Finance Agency
Single Family Mortgage
Series 57A
6.15% 4/1/27 (AMT) (FHA) ..................... $ 5,000,000 $ 5,099,700
Series 66A 5.65% 4/1/29 (AMT) ................ 3,950,000 3,873,015
Series 69A 6.25%
4/1/31 (AMT) (FHA) ........................... 3,000,000 3,078,000
----------
53,585,222
----------
Industrial Development Revenue Bonds - 7.13%
Allegheny County Authority Industrial
Development Environmental
Improvement Revenue
(USX Corp Project)
5.50% 12/1/29 ................................ 19,500,000 17,043,000
5.60% 9/1/30 ................................. 4,575,000 4,058,620
Allegheny County Pennsylvania
Redevelopment Authority Tax Increment
Revenue (Waterfront Project) Series B
6.00% 12/15/10 .............................. 1,000,000 1,030,830
6.40% 12/15/18 .............................. 2,500,000 2,570,375
Carbon County Pennsylvania Industrial
Development Authority (Panther Creek
Partners Project)
6.65% 5/1/10 (AMT) ........................... 6,000,000 6,149,520
Pennsylvania Economic Development
Financing Authority Solid Waste
Disposal Revenue (USG Corp Project)
6.00% 6/1/31 (AMT) ........................... 24,200,000 22,687,500
----------
53,539,845
----------
Pollution Control Revenue Bonds - 12.23%
Beaver County Pennsylvania Industrial
Development Authority Pollution
Control Revenue (Cleveland Electric
Illuminating Project)
7.625% 5/1/25 ................................ 8,500,000 9,035,500
Series A 7.75% 7/15/25 ....................... 10,000,000 10,697,900
(Atlantic Richfield Company Project)
5.95% 7/1/21 ................................. 5,100,000 5,063,433
Bucks County Pennsylvania Industrial
Development Authority Environmental
Improvement Revenue
(USX Corp Project) 5.60% 3/1/33 .............. 1,000,000 883,980
Cambria County Pennsylvania Industrial
Development Authority Pollution
Control Revenue (Pennsylvania Electric
Company Project)
5.80% 11/1/20 (MBIA) ........................ 4,500,000 4,573,260
6.05% 11/1/25 (MBIA) ......................... 9,700,000 9,930,569
9
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free Pennsylvania Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Pollution Control Revenue Bonds (continued)
Delaware County Pennsylvania
Industrial Development Authority
Pollution Control Revenue
(Philadelphia Electric Company) Series A
5.20% 4/1/21 ................................. $15,500,000 $15,415,370
Lehigh County Pennsylvania Industrial
Development Authority Pollution Control
Revenue (Pennsylvania Power and
Light Company Project)
Series A 6.40% 11/1/21 (MBIA) ................ 7,000,000 7,308,350
Series B 6.40% 9/1/29 (MBIA) ................. 15,000,000 15,884,850
Montgomery County Industrial Development
Authority Pollution Control Revenue
(Philadelphia Electric Company)
Series A 5.20% 10/1/30 ....................... 11,500,000 11,482,865
Schuylkill County Pennsylvania Industrial
Development Authority Resource
Recovery Center (Schuylkill Energy
Resource) 6.50% 1/1/10 (AMT) ................. 1,600,000 1,605,504
----------
91,881,581
----------
Port and Harbors Revenue Bonds - 1.35%
Delaware River Port Authority
5.70% 1/1/21 (FSA) ........................... 8,560,000 8,745,410
Erie Western Pennsylvania Port Authority
General Revenue
6.25% 6/15/10 (AMT) .......................... 1,365,000 1,409,171
----------
10,154,581
----------
*Pre-Refunded/Escrowed to
Maturity Bonds - 20.24%
Abington School District
6.00% 5/15/26-06 (FGIC) ...................... 6,000,000 6,437,700
Allegheny County Pennsylvania Hospital
Development Authority Revenue
(Health Facilities)
6.00% 5/1/20-02 (MBIA) ....................... 1,500,000 1,538,715
Allegheny County Pennsylvania Sanitation
Authority Revenue Series 91C
6.50% 12/1/16-01 (FGIC) ...................... 4,500,000 4,617,540
Cambria County Hospital Development
Authority Health Care Revenue
(Allegheny Lutheran Social Ministries
Project) 8.25% 6/15/17-02 .................... 3,250,000 3,454,750
Delaware County Authority
University Revenue
(Haverford College)
7.375% 11/15/20-00 (MBIA) .................... 3,275,000 3,358,709
(Villanova University) 9.625% 8/1/02
(Escrowed to Maturity) ....................... 200,000 210,448
Delaware County Pennsylvania Authority
(Mercy Health Corporation)
6.00% 12/15/26
(Escrowed to Maturity) ....................... 3,500,000 3,650,185
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
*Pre-Refunded/Escrowed to
Maturity Bonds (continued)
Harrisburg Water Authority Revenue
7.00% 7/15/15-01 (FGIC) ...................... $12,000,000 $12,272,400
Pennsylvania Higher Education Facilities
Authority College and University Revenue
(Hahnemann University)
6.90% 7/1/21-01 (MBIA) ....................... 13,000,000 13,522,600
Pennsylvania Intergovernmental Cooperative
Authority Special Tax Revenue (City of
Philadelphia Funding Program)
6.80% 6/15/22-02 ............................. 2,125,000 2,212,444
Pennsylvania State Higher Educational
Facilities Authority Revenue College
Revenue (LaSalle University)
9.50% 5/1/03 (Escrowed to Maturity) .......... 200,000 216,396
Pennsylvania State Turnpike Commission
Turnpike Revenue
Series I 7.20% 12/1/17-01 (FGIC) ............. 8,915,000 9,391,328
Series J 7.20% 12/1/17-01 (FGIC) ............. 8,995,000 9,475,603
Philadelphia Authority for Industrial
Development Revenue (Cathedral Village)
7.25% 4/1/15-03 .............................. 2,000,000 2,168,140
Philadelphia Pennsylvania Authority for
Industrial Development Industrial and
Commercial Revenue (Girard Estates
Facilities Leasing Project) 5.00% 5/15/27
(Escrowed to Maturity) ....................... 7,500,000 6,899,250
Philadelphia Pennsylvania Hospital Higher
Education Facilities Authority Hospital
Revenue (Presbyterian Medical Center)
6.65% 12/1/19 (MBIA)
(Escrowed to Maturity) ....................... 13,000,000 14,776,450
Philadelphia Water & Sewer Revenue
7.00% 8/1/18-01 .............................. 20,650,000 21,142,916
Pittsburgh Water & Sewer Revenue
7.25% 9/1/14 (FGIC)
(Escrowed to Maturity) ....................... 9,000,000 10,671,030
Pottsville Pennsylvania School District
9.375% 5/1/06 (AMBAC)
(Escrowed to Maturity) ....................... 900,000 1,044,144
Puerto Rico (Commonwealth of) General
Obligation 6.00% 7/1/22-02 ................... 3,585,000 3,757,474
Swarthmore Borough Authority
(Swarthmore College)
6.00% 9/15/12-00 ............................. 1,270,000 1,333,208
7.375% 9/15/20-00 ............................ 10,000,000 10,107,100
York County Hospital Revenue Authority
(York Hospital)
7.00% 7/1/21-01 (AMBAC) ...................... 9,500,000 9,767,520
-----------
152,026,050
-----------
10
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free Pennsylvania Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
School District General Obligation Bonds - 0.84%
Gateway Pennsylvania School District
Allegheny 5.25% 7/15/22 (FGIC) ............... $ 1,900,000 $ 1,830,517
McGuffey Pennsylvania School District
Series B 4.75% 8/1/28 (AMBAC) ................ 2,750,000 2,397,203
Norwin Pennsylvania School District
6.00% 4/1/30 (FGIC) .......................... 2,000,000 2,066,020
----------
6,293,740
----------
Transportation Revenue Bonds - 3.19%
Allegheny County Pennsylvania Airport
Revenue (Pittsburgh International
Airport) 5.75% 1/1/14 (AMT) (MBIA) ........... 6,910,000 7,230,762
Lehigh Northhampton Pennsylvania Airport
Series A
6.00% 5/15/25 (AMT) (MBIA) .................. 1,525,000 1,571,147
6.00% 5/15/30 (AMT) (MBIA) .................. 2,700,000 2,767,500
Pennsylvania State Turnpike Commission
Series L 6.25% 6/1/11 (AMBAC) ................ 9,000,000 9,303,570
Series N 6.50% 12/1/13 ....................... 3,000,000 3,116,790
----------
23,989,769
----------
Waste Disposal Revenue Bonds - 2.38%
Borough of New Morgan Pennsylvania
Guaranteed Revenue 8.00% 11/1/05 ............. 6,800,000 7,063,500
Chester (City of) Pennsylvania Guaranteed
Host Community Resource Recovery
7.25% 12/1/05 ................................ 9,305,000 9,619,044
Greater Lebanon Refuse Authority Solid
Waste Revenue Refunding
(Lancaster County) 7.00% 11/15/04 ............ 1,145,000 1,196,216
----------
17,878,760
----------
Water & Sewer Revenue Bonds - 2.50%
Dauphin County Industrial Development
Authority Water Development Revenue
(Dauphin Consolidate Water Supply)
Series B 6.70% 6/1/17 ........................ 1,750,000 1,959,178
Delaware County Industrial Development
Authority Water Revenue
(Philadelphia Suburban Water Project)
6.00% 6/1/29 (AMT) (FGIC) .................... 3,000,000 3,091,080
Philadelphia Pennsylvania Water & Waste
Water Revenue Series A
5.125% 8/1/27 (AMBAC) ........................ 14,700,000 13,734,504
----------
18,784,762
----------
Other General Obligation Bonds - 1.91%
Falls Township Pennsylvania General
Obligation 7.00% 12/15/10 (MBIA) ............. 3,000,000 3,022,050
Puerto Rico (Commonwealth of) General
Obligation 5.75% 7/1/17 ...................... 11,000,000 11,359,810
----------
14,381,860
----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Other Revenue Bonds - 7.43%
Dauphin County Pennsylvania General
Authority Office and Parking Forum
Series A 6.00% 1/15/25 ....................... $ 3,500,000 $ 3,246,915
Dauphin County Pennsylvania General
Authority Office and Parking/Riverfront
Office Center Project Series A
6.00% 1/1/25 ................................. 4,000,000 3,710,880
Delaware Valley Pennsylvania Regional
Finance Authority Local Government
Revenue Series A
5.50% 8/1/28 (AMBAC) ......................... 13,000,000 13,017,680
**First Albany Corporation Municipal Series,
Inverse Floater
5.06% 12/15/14 (AMBAC) ....................... 31,000,000 31,638,910
Harrisburg Pennsylvania Authority Office
and Parking Revenue Series A
6.00% 5/1/19 ................................. 3,000,000 2,811,240
+Philadelphia Gas Works Revenue
5.53% 1/1/12 (AMBAC) ......................... 2,500,000 1,398,225
------------
55,823,850
------------
Total Municipal Bonds
(cost $725,888,538) .......................... 742,219,783
------------
Total Market Value of Securities - 98.79%
(cost $725,888,538) .......................... 742,219,783
Receivables and Other Assets
Net of Liabilities - 1.21% ................... 9,080,762
------------
Net Assets Applicable to 97,258,887
Shares Outstanding - 100.00% ................. $751,300,545
============
Net Asset Value - Delaware Tax-Free
Pennsylvania Fund A Class
($709,814,307 / 91,888,330 Shares) ........... $7.72
-----
Net Asset Value - Delaware Tax-Free
Pennsylvania Fund B Class
($37,179,825 / 4,813,075 Shares) ............. $7.72
-----
Net Asset Value - Delaware Tax-Free
Pennsylvania Fund C Class
($4,306,413 / 557,482 Shares) ................ $7.72
-----
-----------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
**Inverse Floater represents a security that pays interest at a rate that
increases (decreases) with a decrease (increase) in a specific index.
Interest rate disclosed is in effect as of August 31, 2000.
+Zero coupon security - the interest rate shown is the effective yield as of
August 31, 2000.
11
<PAGE>
Statements of Net Assets (continued)
Delaware Tax-Free Pennsylvania Fund
--------------------------------------------------------------------------------
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
Connie Lee - Insured by The College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
FHA - Insured by the Federal Housing Administration
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) .............................. $766,050,293
Distributions in excess of net investment income ........ (171,876)
Accumulated net realized loss on investments ............ (30,909,117)
Net unrealized appreciation of investments .............. 16,331,245
------------
Total net assets ........................................ $751,300,545
============
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Pennsylvania Fund
Net asset value A Class (A) ............................. $7.72
Sales charge (3.75% of offering price or 3.89% of amount
invested per share) (B) .............................. 0.30
-----
Offering price .......................................... $8.02
=====
(A) Net asset value per share, as illustrated, is the estimated amount
which would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
12
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE NEW JERSEY FUND
Principal Market
August 31, 2000 (Unaudited) Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.23%
Airport Revenue Bonds - 6.04%
New Jersey Economic Development Authority
Special Facilities Revenue (Continental
Airlines Project)
5.50% 4/1/28 (AMT) ................................. $ 50,000 $ 40,427
6.625% 9/15/12 (AMT) ............................... 200,000 205,080
-------
245,507
-------
Continuing Care/Retirement Revenue Bonds - 1.05%
New Jersey Economic Development Authority
Revenue Refunding First Mortgage
(The Evergreens) 6.00% 10/1/22 ..................... 50,000 42,680
-------
42,680
-------
Higher Education Revenue Bonds - 20.56%
Higher Education Student Assistance Authority
New Jersey Student Loan Revenue Series A
6.10% 6/1/16 (MBIA) ................................ 100,000 105,174
New Jersey State Educational Facilities
Authority Revenue
(Bloomfield College) Series A
6.85% 7/1/30 ....................................... 300,000 314,943
(Drew University) Series C
5.00% 7/1/17 (MBIA) ................................ 65,000 62,353
(Georgian Court College) Series B
5.20% 7/1/15 ....................................... 200,000 191,224
(Montclair State University) Series F
5.40% 7/1/25 (AMBAC) ............................... 30,000 29,198
(Princeton Theological Seminary) Series A
5.00% 7/1/22 ....................................... 20,000 18,665
(Richard Stockton College) Series C
5.10% 7/1/23 (AMBAC) ............................... 70,000 65,860
(University of Medicine and Dentistry)
5.25% 12/1/21 (AMBAC) .............................. 50,000 47,958
-------
835,375
-------
Hospital Revenue Bonds - 6.82%
New Jersey Health Care Facilities
Financing Authority
(AHS Hospital) Series A
5.00% 7/1/27 (AMBAC) ............................... 150,000 134,889
(Holy Name Hospital)
5.25% 7/1/20 (AMBAC) ............................... 50,000 48,149
(JFK Medical Center/Hartwyck)
5.00% 7/1/18 (MBIA) ................................ 100,000 94,142
-------
277,180
-------
Housing Revenue Bonds - 1.20%
New Jersey State Housing and Mortgage Finance
Agency Series A
5.65% 5/1/40 (AMT) (AMBAC) ......................... 50,000 48,837
-------
48,837
-------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Parking Revenue Bonds - 4.62%
Essex County New Jersey Improvement Authority
Parking Facility
5.00% 10/1/22 (AMBAC) .............................. $ 60,000 $ 55,828
Series B 5.25% 10/1/27 (MBIA) ...................... 40,000 38,327
New Brunswick New Jersey Parking Authority
Revenue 5.00% 1/1/20 (FGIC) ........................ 100,000 93,395
-------
187,550
-------
Ports & Harbors Revenue Bonds - 5.72%
Delaware River and Bay Authority
5.25% 1/1/26 (FGIC) ................................ 50,000 47,838
Port Authority of New York and New Jersey
Consolidated 109th Series
5.375% 7/15/22 (FGIC) .............................. 100,000 98,915
Consolidated 114th Series 4.75% 8/1/33 ............. 100,000 85,707
-------
232,460
-------
School District General Obligation Bonds - 14.32%
Carteret New Jersey Board of Education
4.75% 4/15/19 (MBIA) ............................... 300,000 270,477
Freehold Township New Jersey Board of Education
5.40% 7/15/23 (FSA) ................................ 50,000 49,543
Mount Olive Township New Jersey
Board of Education 5.00% 1/15/19 (FGIC) ............ 25,000 23,843
Newark New Jersey Schools
5.30% 9/1/15 (MBIA) ................................ 50,000 50,377
Sparta Township School District
5.00% 9/1/20 (MBIA) ................................ 200,000 187,952
-------
582,192
-------
Territorial General Obligation Bonds - 1.23%
Puerto Rico Commonwealth
5.375% 7/1/21 (MBIA) ............................... 50,000 50,118
-------
50,118
-------
Territorial Revenue Bonds - 8.57%
Puerto Rico Commonwealth Highway &
Transportation Authority (Highway Improvements)
Series Y 5.50% 7/1/26 .............................. 250,000 249,295
Puerto Rico Electric Power Authority Revenue
Series X 5.50% 7/1/25 .............................. 100,000 98,923
-------
348,218
-------
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free New Jersey Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Water & Sewer Revenue Bonds - 18.12%
Bayonne New Jersey Municipal Utilities Authority
Water Systems 5.00% 1/1/28 (MBIA) ................. $ 50,000 $ 45,889
Essex County New Jersey Improvement Authority
Revenue Utility System (East Orange Franchise)
5.00% 7/1/28 (MBIA) ............................... 100,000 91,714
Jersey City New Jersey Municipal Utilities
Authority Sewer Revenue
5.25% 12/1/13 (FSA) ............................... 100,000 101,327
Mount Holly New Jersey Municipal Utilities
Authority Sewer Revenue
4.75% 12/1/18 (MBIA) .............................. 140,000 127,257
New Jersey Economic Development Authority
Water Facilities Revenue United Water
5.00% 11/1/28 (AMT) (AMBAC) ....................... 300,000 267,342
Stafford New Jersey Municipal Utilities Authority
Water and Sewer Revenue
5.00% 12/1/22 (FGIC) .............................. 60,000 55,809
Wanaque Borough New Jersey Sewer Authority
Sewer Revenue 5.25% 12/1/21 ....................... 50,000 47,069
----------
736,407
----------
Other General Obligation Bonds - 5.86%
Evesham Township New Jersey Series A
5.00% 9/15/17 (FGIC) .............................. 50,000 48,276
Lafayette Yard New Jersey Community Development
Hotel/Conference Center - Trenton
5.625% 4/1/21 (MBIA) .............................. 100,000 101,790
Summit New Jersey 4.50% 11/1/18 ...................... 100,000 88,143
----------
238,209
----------
Other Revenue Bonds - 4.12%
Middlesex County New Jersey Improvement
Authority Revenue 4.70% 9/15/18 ................... 85,000 77,166
Union County New Jersey Utilities Authority
County Deficiency Series A2
5.00% 6/15/28 (AMT) ............................... 100,000 90,417
----------
167,583
----------
Total Municipal Bonds
(cost $4,133,789) ................................. 3,992,316
----------
Total Market Value of Securities - 98.23%
(cost $4,133,789) ................................. 3,992,316
Receivables and Other Assets
Net of Liabilities - 1.77% ........................ 71,889
----------
Net Assets Applicable to 755,488
Shares Outstanding - 100.00% ...................... $4,064,205
==========
<PAGE>
--------------------------------------------------------------------------------
Net Asset Value - Delaware Tax-Free New Jersey
Fund A Class ($1,912,155 / 355,424 Shares) ........ $5.38
-----
Net Asset Value - Delaware Tax-Free New Jersey
Fund B Class ($1,913,263 / 355,677 Shares) ........ $5.38
-----
Net Asset Value - Delaware Tax-Free New Jersey
Fund C Class ($238,787 / 44,387 Shares) ........... $5.38
-----
---------------------------------
Summary of Abbreviations:
AMBAC - Insured by AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ........................... $4,293,342
Accumulated net realized loss on investments ......... (87,664)
Net unrealized depreciation of investments ........... (141,473)
----------
Total net assets ..................................... $4,064,205
==========
Net Asset Value and Offering Price per Share -
Delaware Tax-Free New Jersey Fund
Net asset value A Class (A) .......................... $5.38
Sales charge (3.75% of offering price or 3.90% of
amount invested per share) (B) .................... 0.21
-----
Offering price ....................................... $5.59
=====
-----------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
14
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free
Six Months Ended August 31, 2000 (Unaudited) Pennsylvania Fund New Jersey Fund
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Interest ................................................................................ $23,517,193 $114,716
Expenses:
Management fees ......................................................................... 2,005,849 11,317
Distribution expense .................................................................... 915,632 13,719
Dividend disbursing and transfer agent fees and expenses ................................ 284,500 3,024
Accounting and administration ........................................................... 150,867 862
Reports and statements to shareholders .................................................. 143,771 600
Custodian fees .......................................................................... 49,227 182
Professional fees ....................................................................... 32,250 --
Registration fees ....................................................................... 15,000 600
Trustees' fees .......................................................................... 6,285 1,143
Taxes (other than taxes on income) ...................................................... 206 --
Other ................................................................................... 36,410 1,024
3,639,997 32,471
----------------------------------
Less expenses absorbed or waived ........................................................ -- (13,454)
Less expenses paid indirectly ........................................................... (27,452) (156)
----------------------------------
Total expenses .......................................................................... 3,612,545 18,861
----------------------------------
Net Investment Income ................................................................... 19,904,648 95,855
----------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments ........................................................ (3,223,990) (51,068)
Net change in unrealized appreciation/depreciation of investments ....................... 29,691,965 292,602
----------------------------------
Net Realized and Unrealized Gain on Investments ......................................... 26,467,975 241,534
----------------------------------
Net Increase in Net Assets Resulting from Operations .................................... $46,372,623 $337,389
==================================
</TABLE>
See accompanying notes
15
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free
Pennsylvania Fund New Jersey Fund
------------------------------------------------------------------------------------------------------------------------------------
Period Ended Period Ended
8/31/00 2/29/00 8/31/00 2/29/00
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ...................................... $ 19,904,648 $ 43,727,581 $ 95,855 $ 175,007
Net realized loss on investments ........................... (3,223,990) (20,524,031) (51,068) (36,596)
Net change in unrealized appreciation/depreciation
of investments ........................................... 29,691,965 (69,393,134) 292,602 (481,895)
--------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations .......................................... 46,372,623 (46,189,584) 337,389 (343,484)
--------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
A Class .................................................. (19,140,698) (41,724,653) (46,325) (89,272)
B Class .................................................. (844,310) (1,824,404) (45,100) (79,304)
C Class .................................................. (91,516) (178,524) (4,430) (6,431)
--------------------------------------------------------------------
(20,076,524) (43,727,581) (95,855) (175,007)
--------------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class .................................................. 6,423,074 23,862,911 182,617 335,525
B Class .................................................. 1,387,085 5,605,238 129,860 1,309,229
C Class .................................................. 500,354 1,249,953 75,377 83,583
Net asset value of shares issued upon reinvestment of
distributions from net investment income:
A Class .................................................. 10,786,324 24,002,904 37,813 72,704
B Class .................................................. 467,422 1,052,295 26,904 60,517
C Class .................................................. 68,702 134,166 2,791 3,871
--------------------------------------------------------------------
19,632,961 55,907,467 455,362 1,865,429
--------------------------------------------------------------------
Cost of shares repurchased:
A Class .................................................. (48,897,818) (117,904,345) (164,578) (467,080)
B Class .................................................. (3,363,197) (7,834,490) (397,256) (763,068)
C Class .................................................. (312,787) (1,003,067) (12,713) (77,836)
--------------------------------------------------------------------
(52,573,802) (126,741,902) (574,547) (1,307,984)
--------------------------------------------------------------------
Increase (decrease) in net assets derived from capital
share transactions ....................................... (32,940,841) (70,834,435) (119,185) 557,445
--------------------------------------------------------------------
Net Increase (Decrease) in Net Assets ...................... (6,644,742) (160,751,600) 122,349 38,954
Net Assets:
Beginning of period ........................................ 757,945,287 918,696,887 3,941,856 3,902,902
--------------------------------------------------------------------
End of period .............................................. $751,300,545 $757,945,287 $4,064,205 $3,941,856
====================================================================
</TABLE>
See accompanying notes
16
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Pennsylvania Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Period Ended
8/31/00(1) 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............ $7.460 $8.290 $8.420 $8.240 $8.460 $8.180
Income (loss) from investment operations:
Net investment income ......................... 0.204 0.410 0.415 0.430 0.456 0.476
Net realized and unrealized gain (loss)
on investments .............................. 0.260 (0.830) (0.034) 0.193 (0.105) 0.330
--------------------------------------------------------------------------------
Total from investment operations .............. 0.464 (0.420) 0.381 0.623 0.351 0.806
--------------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .......... (0.204) (0.410) (0.415) (0.430) (0.456) (0.476)
Distributions from net realized gain
on investments .............................. -- -- (0.096) (0.013) (0.115) (0.050)
--------------------------------------------------------------------------------
Total dividends and distributions ............. (0.204) (0.410) (0.511) (0.443) (0.571) (0.526)
--------------------------------------------------------------------------------
Net asset value, end of period .................. $7.720 $7.460 $8.290 $8.420 $8.240 $8.460
================================================================================
Total return(2) ................................. 6.42% (5.18%) 4.64% 7.78% 4.35% 10.08%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ....... $709,814 $716,646 $871,740 $917,364 $954,258 $1,002,888
Ratio of expenses to average net assets ....... 0.92% 0.92% 0.95% 0.94% 0.91% 0.90%
Ratio of net investment income to average
net assets .................................. 5.33% 5.21% 4.96% 5.20% 5.52% 5.67%
Portfolio turnover ............................ 25% 38% 41% 32% 27% 25%
</TABLE>
---------------------------------
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) Ratios have been annualized and total return has not been annualized.
See accompanying notes
17
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Pennsylvania Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Period Ended
8/31/00(1) 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $7.460 $8.290 $8.420 $8.240 $8.460 $8.180
Income (loss) from investment operations:
Net investment income .................................... 0.174 0.347 0.348 0.370 0.390 0.408
Net realized and unrealized gain (loss) on investments.... 0.260 (0.830) (0.034) 0.193 (0.105) 0.330
---------------------------------------------------------------------
Total from investment operations ......................... 0.434 (0.483) 0.314 0.563 0.285 0.738
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.174) (0.347) (0.348) (0.370) (0.390) (0.408)
Distributions from net realized gain on investments ...... -- -- (0.096) (0.013) (0.115) (0.050)
---------------------------------------------------------------------
Total dividends and distributions ........................ (0.174) (0.347) (0.444) (0.383) (0.505) (0.458)
---------------------------------------------------------------------
Net asset value, end of period ............................. $7.720 $7.460 $8.290 $8.420 $8.240 $8.460
=====================================================================
Total return(2) ............................................ 5.86% (5.94%) 3.81% 6.92% 3.52% 9.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $37,180 $37,390 $42,994 $37,631 $31,644 $20,861
Ratio of expenses to average net assets .................. 1.72% 1.72% 1.75% 1.74% 1.71% 1.71%
Ratio of net investment income to average net assets ..... 4.53% 4.41% 4.16% 4.40% 4.72% 4.86%
Portfolio turnover ....................................... 25% 38% 41% 32% 27% 25%
</TABLE>
---------------------------------
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) Ratios have been annualized and total return has not been annualized.
See accompanying notes
18
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Pennsylvania Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Period
11/29/95(1)
Period Ended to
8/31/00 2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $7.460 $8.290 $8.420 $8.240 $8.460 $8.510
Income (loss) from investment operations:
Net investment income .................................... 0.174 0.347 0.355 0.364 0.390 0.102
Net realized and unrealized gain (loss) on investments ... 0.260 (0.830) (0.034) 0.193 (0.105) --
-------------------------------------------------------------------
Total from investment operations ......................... 0.434 (0.483) 0.321 0.557 0.285 0.102
-------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.174) (0.347) (0.355) (0.364) (0.390) (0.102)
Distributions from net realized gain on investments ...... -- -- (0.096) (0.013) (0.115) (0.050)
-------------------------------------------------------------------
Total dividends and distributions ........................ (0.174) (0.347) (0.451) (0.377) (0.505) (0.152)
-------------------------------------------------------------------
Net asset value, end of period ............................. $7.720 $7.460 $8.290 $8.420 $8.240 $8.460
===================================================================
Total return(2) ............................................ 5.85% (5.94%) 3.81% 6.92% 3.52% 1.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $4,306 $3,909 $3,963 $2,569 $1,181 $123
Ratio of expenses to average net assets .................. 1.72% 1.72% 1.75% 1.74% 1.71% 1.71%
Ratio of net investment income to average net assets ..... 4.53% 4.41% 4.16% 4.40% 4.72% 4.86%
Portfolio turnover ....................................... 25% 38% 41% 32% 27% 25%
</TABLE>
---------------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
19
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding Delaware Tax-Free New Jersey Fund
throughout each period were as follows: A Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months Period
Ended 9/2/97(1)
8/31/00 Year Ended to
(Unaudited) 2/29/00 2/28/99 2/28/98
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............................................... $5.060 $5.750 $5.700 $5.500
Income (loss) from investment operations:
Net investment income ............................................................ 0.133 0.255 0.256 0.115
Net realized and unrealized gain (loss)
on investments ................................................................. 0.320 (0.690) 0.075 0.200
-------------------------------------------
Total from investment operations ................................................. 0.453 (0.435) 0.331 0.315
-------------------------------------------
Less dividends and distributions:
Dividends from net investment income ............................................. (0.133) (0.255) (0.256) (0.115)
Distributions from net realized gain
on investments ................................................................. -- -- (0.025) --
-------------------------------------------
Total dividends and distributions ................................................ (0.133) (0.255) (0.281) (0.115)
-------------------------------------------
Net asset value, end of period ..................................................... $5.380 $5.060 $5.750 $5.700
===========================================
Total return(2) .................................................................... 9.97% (7.68%) 5.93% 5.77%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................................... $1,912 $1,750 $2,052 $1,141
Ratio of expenses to average net assets .......................................... 0.50% 0.50% 0.50% 0.88%
Ratio of expenses to average net assets prior
to expense limitation and expenses paid
indirectly ..................................................................... 1.15% 1.45% 1.75% 1.93%
Ratio of net investment income to average
net assets ..................................................................... 5.08% 4.74% 4.42% 4.23%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly ....................................................... 4.43% 3.79% 3.17% 3.18%
Portfolio turnover ............................................................... 20% 14% 0% 47%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding Delaware Tax-Free New Jersey Fund
throughout each period were as follows: B Class
------------------------------------------------------------------------------------------------------------------------------------
Six Months Period
Ended 9/2/97(1)
8/31/00 Year Ended to
(Unaudited) 2/29/00 2/28/99 2/28/98
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............................................... $5.060 $5.750 $5.700 $5.500
Income (loss) from investment operations:
Net investment income ............................................................ 0.113 0.214 0.213 0.069
Net realized and unrealized gain (loss)
on investments ................................................................. 0.320 (0.690) 0.075 0.200
-------------------------------------------
Total from investment operations ................................................. 0.433 (0.476) 0.288 0.269
-------------------------------------------
Less dividends and distributions:
Dividends from net investment income ............................................. (0.113) (0.214) (0.213) (0.069)
Distributions from net realized gain
on investments ................................................................. -- -- (0.025) --
-------------------------------------------
Total dividends and distributions ................................................ (0.113) (0.214) (0.238) (0.069)
-------------------------------------------
Net asset value, end of period ..................................................... $5.380 $5.060 $5.750 $5.700
===========================================
Total return(2) .................................................................... 9.43% (8.38%) 5.14% 4.90%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................................... $1,913 $2,032 $1,680 $146
Ratio of expenses to average net assets .......................................... 1.25% 1.25% 1.25% 1.56%
Ratio of expenses to average net assets prior
to expense limitation and expenses paid
indirectly ..................................................................... 1.90% 2.20% 2.50% 2.61%
Ratio of net investment income to average
net assets ..................................................................... 4.33% 3.99% 3.67% 3.63%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly ....................................................... 3.68% 3.04% 2.42% 2.58%
Portfolio turnover ............................................................... 20% 14% 0% 47%
</TABLE>
---------------------------------
(1) Date of initial public offering; ratios have been annualized and total
return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
20
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding Delaware Tax-Free New Jersey Fund
throughout each period were as follows: C Class(2)
------------------------------------------------------------------------------------------------------------------------------------
Six Months
Ended
8/31/00 Year Ended
(Unaudited) 2/29/00 2/28/99
<S> <C> <C> <C>
Net asset value, beginning of period .......................................................... $5.060 $5.750 $5.700
Income (loss) from investment operations:
Net investment income ....................................................................... 0.113 0.214 0.213
Net realized and unrealized gain (loss)
on investments ............................................................................ 0.320 (0.690) 0.075
--------------------------------
Total from investment operations ............................................................ 0.433 (0.476) 0.288
--------------------------------
Less dividends and distributions:
Dividends from net investment income ........................................................ (0.113) (0.214) (0.213)
Distributions from net realized gain on investments ......................................... -- -- (0.025)
--------------------------------
Total dividends and distributions ........................................................... (0.113) (0.214) (0.238)
--------------------------------
Net asset value, end of period ................................................................ $5.380 $5.060 $5.750
================================
Total return(1) ............................................................................... 9.43% (8.37%) 5.14%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ..................................................... $239 $160 $171
Ratio of expenses to average net assets ..................................................... 1.25% 1.25% 1.25%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........................................... 1.90% 2.20% 2.50%
Ratio of net investment income to average
net assets ................................................................................ 4.33% 3.99% 3.67%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly .................................................................. 3.68% 3.04% 2.42%
Portfolio turnover .......................................................................... 20% 14% 0%
</TABLE>
---------------------------------
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) Shares of the 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, representing 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.
See accompanying notes
21
<PAGE>
Notes to Financial Statements
August 31, 2000 (Unaudited)
--------------------------------------------------------------------------------
Delaware Group State Tax-Free Income Trust (the "Company") is organized as a
Pennsylvania trust and offers two series: Delaware Tax-Free Pennsylvania Fund
and Delaware Tax-Free New Jersey Fund (each referred to as a "Fund" or
collectively as the "Funds"). The Funds are non-diversified open-end investment
companies under the Investment Company Act of 1940, as amended. The Funds offer
three classes of shares. The A Class carries a front-end sales charge of 3.75%.
The B Class carries a back-end deferred sales charge and the C Class carries a
level load deferred sales charge.
The Delaware Tax-Free Pennsylvania Fund seeks as high a level of current
interest income exempt from federal income tax and Pennsylvania state income tax
as is consistent with preservation of principal. The Delaware Tax-Free New
Jersey Fund seeks as high a level of current interest income exempt from federal
income tax and New Jersey state income tax as is consistent with preservation of
principal.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds:
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Funds' Board
of Trustees.
Federal Income Taxes - Each Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States.
<PAGE>
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
each Fund on the basis of daily net assets of each class. Distribution expenses
relating to a specific class are charged directly to that class.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts and
market premiums are amortized to interest income over the lives of the
respective securities. Each Fund declares dividends from net investment income
daily and pays such dividends monthly. Capital gains, if any, are distributed
annually.
Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. Each Fund may
receive earnings credits from its custodian when positive cash balances are
maintained, which are used to offset custody fees. The expenses paid under the
above arrangements are included in their respective expense captions on the
Statement of Operations with the corresponding expense offset shown as "expenses
paid indirectly". The amount of these expenses and credits for the period ended
August 31, 2000 are as follows:
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania New Jersey
Fund Fund
------------ ----------
Commission Reimbursement ........................... $ 8,649 $ 47
Earnings Credits ................................... 18,803 109
22
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, each Fund
pays Delaware Management Company (DMC), the Investment Manager, an annual fee,
based on the net assets of each Fund.
The following are the management fees as a percentage of average daily net
assets for each respective Fund:
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania New Jersey
Fund Fund
------------ ----------
On the first $500 million ..................... 0.55% 0.55%
On the next $500 million ...................... 0.50% 0.50%
On the next $1.5 billion ...................... 0.45% 0.45%
In excess of $2.5 billion ..................... 0.425% 0.425%
DMC has elected to waive its fee and reimburse the Delaware Tax-Free New Jersey
Fund to the extent that annual operating expenses exclusive of taxes, interest,
brokerage commissions, extraordinary expenses and distribution expenses exceed
0.25% of average daily net assets through October 31, 2001.
The Company has engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administrative services. Each Fund pays DSC a monthly fee based on the number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums.
On August 31, 2000, the Funds had liabilities payable to affiliates as follows:
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania New Jersey
Fund Fund
------------ ----------
Investment management fee
payable to DMC .............................. $338,579 $--
Dividend disbursing, transfer
agent and accounting
services and other
expenses payable to DSC ..................... 45,969 1,153
Other expenses payable
to DMC and affiliates ....................... 17,254 657
Pursuant to the Distribution Agreement, each Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class for the Delaware
Tax-Free Pennsylvania Fund and 0.25% of the average daily net assets of the
Delaware Tax-Free New Jersey Fund A Class and 1.00% of the average daily net
assets of the B and C Classes of each Fund.
<PAGE>
For the period ended August 31, 2000, DDLP earned commissions on sales of the A
Class shares for each Fund as follows:
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania New Jersey
Fund Fund
------------ ----------
$21,782 $361
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Funds. These officers, trustees and employees are paid no compensation by
the Funds.
3. Investments
During the period ended August 31, 2000, the Funds made purchases and sales of
investment securities other than temporary cash investments as follows:
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania New Jersey
Fund Fund
------------ ----------
Purchases .................................... $ 93,199,710 $390,475
Sales. ....................................... 119,859,216 436,719
The cost of investments for federal income tax purposes approximates cost for
book purposes. As of August 31, 2000, the aggregate cost of securities and
unrealized appreciation (depreciation) for each Fund were as follows:
Delaware Delaware
Tax-Free Tax-Free
Pennsylvania New Jersey
Fund Fund
------------ ----------
Cost of investments ........................... $725,888,538 $4,133,789
============ ==========
Aggregate unrealized
appreciation ................................ $ 26,559,783 $ 31,842
Aggregate unrealized
depreciation ................................ 10,288,152 173,316
------------ ----------
Net unrealized appreciation
(depreciation) .............................. $ 16,331,245 $ (141,474)
============ ==========
For federal income tax purposes, the Funds had the following capital loss
carryforwards as of August 31, 2000, which may be carried forward and applied
against future capital gains. The capital loss carryforwards expire in 2008.
Delaware Tax-Free Pennsylvania Fund .......................... $15,601,441
Delaware Tax-Free New Jersey Fund ............................ $30,262
23
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
4. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free
Pennsylvania Fund
-----------------
Six Months Year
Ended Ended
8/31/00 2/29/00
Shares sold:
A Class .......................................... 849,500 3,061,342
B Class .......................................... 183,056 707,397
C Class .......................................... 65,659 156,389
Shares issued upon reinvestment of
distributions from net investment income:
A Class .......................................... 1,426,024 3,059,519
B Class .......................................... 61,798 134,274
C Class .......................................... 9,083 17,135
--------- -----------
2,595,120 7,136,056
--------- -----------
Shares repurchased:
A Class .......................................... 6,475,201 (15,128,940)
B Class .......................................... 445,056 (1,011,697)
C Class .......................................... 41,444 (127,172)
--------- -----------
6,961,700 (16,267,809)
--------- -----------
Net increase/(decrease) ............................ 9,556,821 (9,131,753)
========= ===========
Transactions in capital shares were as follows:
Delaware Tax-Free
New Jersey Fund
----------------
Six Months Year
Ended Ended
8/31/00 2/29/00
Shares sold:
A Class .......................................... 34,702 63,332
B Class .......................................... 24,940 243,724
C Class .......................................... 14,613 15,199
Shares issued upon reinvestment of
distributions from net investment income:
A Class .......................................... 7,251 13,639
B Class .......................................... 5,165 11,394
C Class .......................................... 533 731
--------- -----------
87,204 348,019
--------- -----------
Shares repurchased:
A Class .......................................... (32,150) (87,904)
B Class .......................................... (75,784) (145,718)
C Class .......................................... (2,400) (14,021)
--------- -----------
(110,334) (247,643)
--------- -----------
Net increase/(decrease) ............................ (23,130) 100,376
========= ===========
5. Lines of Credit
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $375,400,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each Fund's allocation of the entire facility. The Participants may
borrow up to a maximum of one third of their net assets under the agreement. The
Funds had no amounts outstanding at August 31, 2000 or at any time during the
period.
6. Market and Credit Risk
The Funds concentrate their investments in securities issued by each specific
state's municipalities. The value of these investments may be adversely affected
by new legislation within the state, regional or local economic conditions, and
differing levels of supply and demand for municipal bonds. Many municipalities
insure repayment for their obligations. Although bond insurance reduces the risk
of loss due to default by an issuer, such bonds remain subject to the risk that
the market may fluctuate for other reasons and there is no assurance that the
insurance company will meet its obligations. These securities have been
identified in the Statement of Net Assets.
24
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
<TABLE>
<CAPTION>
<S> <C> <C>
Growth of Capital International and Global Tax-Exempt Income
o Technology and Innovation o Emerging Markets Fund o National High-Yield
Fund o New Pacific Fund Municipal Bond Fund
o Select Growth Fund o Overseas Equity Fund o Tax-Free USA Fund
o Trend Fund o International Equity Fund o Tax-Free Insured Fund
o Growth Opportunities Fund* o Global Equity Fund o Tax-Free USA
o Small Cap Value Fund o Global Bond Fund Intermediate Fund
o U.S. Growth Fund o State Tax-Free Funds**
o Tax-Efficient Equity Fund Current Income
o Social Awareness Fund o Delchester Fund Stability of Principal
o High-Yield o Cash Reserve
Total Return Opportunities Fund o Tax-Free Money Fund
o Blue Chip Fund o Strategic Income Fund
o Devon Fund o Corporate Bond Fund Asset Allocation
o Growth and Income Fund o Extended Duration o Foundation Funds
o Decatur Equity Bond Fund Growth Portfolio
Income Fund o American Government Balanced Portfolio
o REIT Fund Bond Fund Income Portfolio
o Balanced Fund o U.S. Government
Securities Fund
o Limited-Term
Government Fund
</TABLE>
*Formerly known as DelCap Fund.
**Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
C Delaware Distributors, L.P.
<PAGE>
DELAWARE(SM) For Shareholders
INVESTMENTS 1.800.523.1918
---------------------
Philadelphia o London For Securities Dealers
1.800.362.7500
For Financial Institutions
Representatives Only
1.800.659.2265
www.delawareinvestments.com
This semi-annual report is for the information of Delaware Tax-Free Pennsylvania
Fund and Delaware Tax-Free New Jersey Fund shareholders, but it may be used with
prospective investors when preceded or accompanied by a current Prospectus for
Delaware Tax-Free Pennsylvania Fund and Delaware Tax-Free New Jersey Fund and
the Delaware Investments Performance Update for the most recently completed
calendar quarter. The prospectus sets forth details about charges, expenses,
investment objectives and operating policies of the Funds. You should read the
prospectus carefully before you invest. The figures in this report represent
past results which are not a guarantee of future results. The return and
principal value of an investment in each Fund will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
St. Paul, MN
Walter P. Babich National Distributor
Board Chairman Delaware Distributors, L.P.
Citadel Constructors, Inc. AFFILIATED OFFICERS Philadelphia, PA
King of Prussia, PA
Charles E. Haldeman, Jr. Shareholder Servicing, Dividend
David K. Downes President and Chief Executive Officer Disbursing and Transfer Agent
President and Chief Executive Officer Delaware Management Holdings, Inc. Delaware Service Company, Inc.
Delaware Investments Family of Funds Philadelphia, PA Philadelphia, PA
Philadelphia, PA
Richard J. Flannery 1818 Market Street
John H. Durham Executive Vice President Philadelphia, PA 19103-3682
Private Investor and General Counsel
Horsham, PA Delaware Investments Family of Funds
Philadelphia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates Bruce D. Barton
New York, NY President and Chief Executive Officer
Delaware Distributors, L.P.
Ann R. Leven Philadelphia, PA
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(3878) Printed in the USA
SA-007 [8/00] PPL 10/00 (J6380)
