<PAGE>
DELAWARE(SM) Delaware Tax-Free Pennsylvania Fund
INVESTMENTS Delaware Tax-Free New Jersey Fund
- ------------ Delaware Tax-Free Ohio Fund
Tax-Exempt Income
[GRAPHIC OMITTED]
2000 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 7
Delaware Tax-Free
New Jersey Fund 8
Delaware Tax-Free
Ohio Fund 9
Financial Statements
Statements of Net Assets 10
Statements of Assets and
Liabilities 18
Statements of Operations 19
Statements of Changes in
Net Assets 20
Financial Highlights 21
Notes to Financial
Statements 25
Report of Independent
Auditors 28
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 15 years'
experience.
[ ] For over 70 years, we have managed money in a variety of investment styles
that have weathered a full range of economic and market environments. We
opened our first mutual fund in 1938.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide relatively
conservative investment alternatives within any given asset class.
Consistent
[ ] We believe consistent processes are the best way to seek consistent
investment performance.
[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage
approximately $47 billion in assets as of December 31, 1999.
Comprehensive
[ ] We offer more than 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 (24 single-state funds)
o International equity o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C) Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
March 22, 2000
Recap of Events - Economic activity in the United States continues to surpass
expectations. An improving global economic outlook continued to reduce demand
for U.S. government debt over the last six months, pushing U.S. bond prices
lower and yields significantly higher.
The booming stock market, however, did heighten inflationary concerns during our
fiscal period. The Federal Reserve responded by raising interest rates five
times between June 30, 1999 and March 21, 2000. As of this writing the federal
funds target rate on overnight loans between banks stands at 6.00%, its highest
level in more than four years. The Federal Reserve's actions have been directed
at slowing the economy and pre-empting inflation before it takes root.
Municipal bonds weathered the turbulent fixed-income arena somewhat better than
U.S Treasuries during the past municipal year. Municipal bond yields steadily
increased throughout this period, but municipal bond prices fluctuated less than
Treasuries (Source: Bloomberg). When bond yields rise, their prices generally
fall.
As of February 29, 2000 the 30-year U.S. Treasury bond yield stood at 6.16%,
while 30-year U.S. AAA-rated general obligation municipal bonds closed at 5.90%
(Source: Bloomberg). For investors in the 28% tax bracket, a 5.90% tax-free
yield would be equivalent to an 8.19% yield on a taxable investment, surpassing
that of the 30-year Treasury.
Delaware Tax-Free Pennsylvania, New Jersey and Ohio Funds - As yields rose,
municipal bonds generally lost value for the twelve months ending February 29,
2000. Our tax-free municipal bond funds in Pennsylvania, New Jersey and Ohio
were no exception - all three Funds finished the year lower than where they
started.
A longer-than-average duration was the primary reason Delaware's Tax-Free New
Jersey and Ohio Funds had such a difficult time preserving capital. In
Pennsylvania, credit concerns in the health care industry reduced the value of
some Delaware Tax-Free Pennsylvania Fund holdings in that sector. Please see the
Portfolio Management Review for a detailed discussion of each Fund's
performance.
"MUNICIPAL BONDS
WEATHERED THE
TURBULENT FIXED-INCOME
ARENA SOMEWHAT BETTER
THAN U.S TREASURIES
DURING THE PAST YEAR."
1
<PAGE>
"ALTHOUGH STOCKS HAVE
RECENTLY CAPTURED
MORE INVESTOR
ATTENTION AND
A LARGER SHARE OF
THEIR ASSETS,
WE BELIEVE FIXED-INCOME
INVESTMENTS PLAY
AN IMPORTANT ROLE
IN WELL-BALANCED
PORTFOLIOS."
[GRAPHIC OMITTED]
Market Outlook - Although stocks have recently captured more investor attention
and a larger share of their assets, we believe fixed-income investments play an
important role in well-balanced portfolios. Looking forward, we believe bonds
may remain in the shadow of stocks as long as economic growth continues in 2000.
However, tax-exempt bonds, which your Fund holds, offer several advantages that
make them an attractive long-term option for many investors including:
o Current income that is free from federal, and in the case of the Delaware
Tax-Free Pennsylvania, New Jersey and Ohio Funds, free of certain state and
local taxes as well.
o A wide range of choices to meet your investment objectives with regard to
investment quality, maturity, type of bond and geographical location.
We realize that the past 12 months have been a difficult period for fixed-income
investors. We applaud you for remaining committed to your investment plan and
thank you for your continued confidence in 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
Average Total Returns
For Period Ended February 29, 2000 One Year
- --------------------------------------------------------------------------------
Delaware Tax-Free Pennsylvania Fund Class A -5.18%
- --------------------------------------------------------------------------------
Lipper Pennsylvania Municipal Bond Fund Average (60 Funds) -4.81%
- --------------------------------------------------------------------------------
Delaware Tax-Free New Jersey Fund Class A -7.68%
- --------------------------------------------------------------------------------
Lipper New Jersey Municipal Bond Fund Average (59 Funds) -4.67%
- --------------------------------------------------------------------------------
Delaware Tax-Free Ohio Fund Class A -7.37%
- --------------------------------------------------------------------------------
Lipper Ohio Municipal Bond Fund Average (51 Funds) -3.99%
- --------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index -2.08%
- --------------------------------------------------------------------------------
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 7, 8 and 9. The Lipper categories
represent the average returns of municipal bond funds with similar investment
objectives tracked by Lipper Analytical. (Source: Lipper Analytical Services,
Inc.). The unmanaged Lehman Brothers Index is comprised of bonds with a variety
of quality ratings from many states. You cannot invest directly in an index.
Past performance does not guarantee future results. Unlike Treasuries, the U.S.
government does not guarantee principal and interest payments of municipal
bonds.
2
<PAGE>
PORTFOLIO MANAGEMENT REVIEW
===========================
Patrick P. Coyne
Senior Portfolio Manager
Mitchell L. Conery
Senior Portfolio Manager
March 22, 2000
"WHILE HIGHER INTEREST
RATES WERE PUSHING
MUNICIPAL BOND PRICES
LOWER, REDUCED
SUPPLY HELPED RELIEVE
ANOTHER POTENTIAL
SOURCE OF DOWNWARD
PRICE PRESSURE."
The Funds' Results
Over the past twelve months, the market environment for fixed-income investments
has been extremely difficult. The U.S. economy continued to expand rapidly
without any appreciable inflation, drawing substantial investor attention to
stocks of large, growing companies and technology companies. Shortly after the
start of your Fund's fiscal year in March 1999, equity markets as measured by
the Dow Jones Industrial Average and the S&P 500 reached all-time highs.
Global economies were growing as well, convincing investors that the worst of
the 1998 Asian recession was over and reducing the appeal of U.S. government
debt. As countries emerged from their slowdown, demand for some U.S. goods and
services began to pick up, creating concerns over inflation and higher interest
rates.
While higher interest rates were pushing municipal bond prices lower, reduced
supply helped relieve another potential source of downward price pressure. More
than $225 billion in new municipal bonds were issued during calendar 1999. This
was substantially less than the near record $285 billion sold during 1998.
Still, demand for municipal bonds was not nearly sufficient to meet the
available supply. The states of Pennsylvania, New Jersey and Ohio were three of
the nation's more aggressive bond issuers in 1999, ranking 6th, 7th and 9th
respectively in bond sales (Source: The Bond Buyer).
As the end of calendar year 1999 approached, investors seemed to be concerned
about the potential tax burden created by the appreciation of their equity
investments. In some cases, these investors attempted to offset equity gains by
redeeming shares of their municipal bond funds at a loss. According to the
Investment Company Institute, municipal bond mutual funds experienced $12.0
billion in redemptions during the fourth quarter of 1999. Redemptions remained
relatively heavy during January and February of 2000. This magnified the
imbalance between supply and demand and further reduced the value of most
municipal bonds.
Delaware Tax-Free Pennsylvania Fund
Against this challenging economic backdrop for municipal bond funds, Delaware
Tax-Free Pennsylvania Fund had a disappointing total return of -5.18% (Class A
shares at net asset value with distributions reinvested) for the 12 months ended
February 29, 2000. We were somewhat less successful than our peers in the Lipper
Pennsylvania Municipal Bond Fund Average at preserving capital during the
period.
A key reason for the underperformance was the length of the Fund's duration.
Duration, which measures a bond's sensitivity to fluctuating interest rates, is
a key factor in municipal bond performance. During the first six months of your
Fund's fiscal year, we modestly extended our duration by purchasing longer term
bonds, which generally offered higher yields.
3
<PAGE>
Delaware Tax-Free
Pennsylvania Fund
Portfolio Characteristics
February 29, 2000
- --------------------------------------------------------------------------------
Current 30-Day SEC Yield* 4.83%
- --------------------------------------------------------------------------------
Average Effective Duration** 8.24 years
- --------------------------------------------------------------------------------
Average Effective Maturity*** 14.82 years
- --------------------------------------------------------------------------------
Portfolio Turnover 38%
- --------------------------------------------------------------------------------
* For Class A shares measured according to Securities and Exchange Commission
(SEC) Guidelines. Current 30-day SEC yield for Class B and Class C shares
was 4.22%.
** 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.
[GRAPHIC OMITTED]
Delaware Tax-Free Pennsylvania Fund (continued)
The Fund's duration continued to extend throughout the second half of the year,
largely due to higher interest rates. Usually the duration of a callable bond is
based on the first date that it is likely to be redeemed by the issuer. When
interest rates go down, issuers often redeem their bonds prior to maturity and
issue new bonds at lower rates to save money. Issuers normally pay a premium
price to call a bond prior to maturing. When rates increase, however, there is
less chance that bonds will be redeemed prior to maturity. This means that their
effective duration increases, getting closer to the stated maturity of the bond,
which lowers the bond's value.
Health care bonds were another area of concern for the Fund. As of
February 29, 2000, more than 18% of Delaware Tax-Free Pennsylvania Fund's assets
were invested in health care bonds. This sector has historically provided an
attractive yield, however, since the widely publicized bankruptcy of Allegheny
Health Systems in 1998, investors have been less interested in hospital bonds.
During the past year, we avoided potential credit concerns by selling bonds
issued by the University of Pennsylvania and Temple University hospitals. We
plan to continue to selectively reduce your Fund's health care allocation in the
coming year.
Delaware Tax-Free Pennsylvania Fund's Top 10 Sectors
February 29, 2000
Sector Percentage of Net Assets
- --------------------------------------------------------------------------------
Pre-Refunded/Escrowed to Maturity 24.73%
- --------------------------------------------------------------------------------
Hospitals 18.44%
- --------------------------------------------------------------------------------
Pollution Control 12.48%
- --------------------------------------------------------------------------------
Higher Education 12.26%
- --------------------------------------------------------------------------------
Miscellaneous 8.08%
- --------------------------------------------------------------------------------
Housing 5.34%
- --------------------------------------------------------------------------------
Industrial Development 4.95%
- --------------------------------------------------------------------------------
School District 2.61%
- --------------------------------------------------------------------------------
Waste Disposal 2.41%
- --------------------------------------------------------------------------------
Water & Sewer 2.39%
- --------------------------------------------------------------------------------
Delaware Tax-Free New Jersey Fund
Over the last 12 months we struggled to preserve principal as rising interest
rates reduced the value of many of Delaware Tax-Free New Jersey Fund holdings. A
longer-than-average duration was the primary obstacle to more competitive
performance.
Since the Fund's inception in 1997, we have generally maintained an extended
duration to build a portfolio that delivers an attractive yield for our
investors. To accomplish this we invested significantly in longer term bonds,
which offered higher income potential in return for taking the chance that
rising interest rates would reduce the bond's price. While this strategy allowed
us to provide a
4
<PAGE>
Delaware Tax-Free
New Jersey Fund
Portfolio Characteristics
February 29, 2000
- --------------------------------------------------------------------------------
Current 30-Day SEC Yield*
Before Expense Limitation 4.27%
After Expense Limitation 5.11%
- --------------------------------------------------------------------------------
Average Effective Duration** 11.03 years
- --------------------------------------------------------------------------------
Average Effective Maturity*** 20.06 years
- --------------------------------------------------------------------------------
Portfolio Turnover 14%
- --------------------------------------------------------------------------------
* For Class A shares measured according to Securities and Exchange Commission
(SEC) Guidelines. Current 30-day SEC yield for Class B shares was 4.50%
(3.70% before expense limitation) and Class C shares was 4.49% (3.69% before
expense limitation).
** 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)
competitive yield, rising interest rates over the past year reduced the appeal
of long-term debt. This lowered the value of our long-term bonds and made it
difficult for us to shorten our duration.
Although the actual inflation rate has remained relatively benign, persistent
inflation concerns and rising interest rates during the Fund's fiscal year
resulted in a disappointing total return of -7.68% (Class A shares at net asset
value with distributions reinvested). This was less than the return of other
municipal bond funds in the Lipper New Jersey Municipal Bond Fund Average.
Nationally, new municipal bond issues fell significantly in 1999. New Jersey,
however, continued to offer bonds at a brisk pace. In fact, new municipal bond
sales fell only 1.7% in calendar 1999 compared to a national decline of more
than 21% (Source: The Bond Buyer). This heavy new supply during a period of
lackluster investor demand also contributed to your Fund's weak return.
New Jersey, like many other states, is enjoying a period of growth and economic
prosperity. High-tech industries, in particular, have taken a firm root in the
northern part of the Garden State, which is now being called a new "Silicon
Valley." This points to continued economic strength, which we believe will help
support the income paying ability of New Jersey municipalities in the future.
Delaware Tax-Free New Jersey Fund's Top 10 Sectors
February 29, 2000
Sector Percentage of Net Assets
- --------------------------------------------------------------------------------
Water & Sewer 25.12%
- --------------------------------------------------------------------------------
Higher Education 17.52%
- --------------------------------------------------------------------------------
School District 13.85%
- --------------------------------------------------------------------------------
Hospitals 8.71%
- --------------------------------------------------------------------------------
Territorial 8.03%
- --------------------------------------------------------------------------------
Miscellaneous 7.23%
- --------------------------------------------------------------------------------
Airports 6.08%
- --------------------------------------------------------------------------------
Parking 4.44%
- --------------------------------------------------------------------------------
Ports & Harbors 3.13%
- --------------------------------------------------------------------------------
Housing 1.15%
- --------------------------------------------------------------------------------
Delaware Tax-Free Ohio Fund
Delaware Tax-Free Ohio Fund provided a disappointing total return of -7.37%
(Class A shares at net asset value with distributions reinvested) for the 12
months ended February 29, 2000, falling short of the Lipper Ohio Municipal Bond
Fund Average. Similar to our tax-free fund in New Jersey, performance suffered
primarily due to the Fund's longer average duration.
5
<PAGE>
Delaware Tax-Free
Ohio Fund
Portfolio Characteristics
February 29, 2000
- --------------------------------------------------------------------------------
Current 30-Day SEC Yield*
Before Expense Limitation 3.93%
After Expense Limitation 5.18%
- --------------------------------------------------------------------------------
Average Effective Duration** 9.28 years
- --------------------------------------------------------------------------------
Average Effective Maturity*** 17.30 years
- --------------------------------------------------------------------------------
Portfolio Turnover 42%
- --------------------------------------------------------------------------------
* For Class A shares measured according to Securities and Exchange Commission
(SEC) Guidelines. Current 30-day SEC yield for Class B shares was 4.63%
(3.33% before expense limitation), and Class C shares was 4.63% (3.33%
before expense limitation).
** 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.
[GRAPHIC OMITTED]
Delaware Tax-Free Ohio Fund (continued)
Due to their long duration, a large percentage of the bonds in Delaware Tax-Free
Ohio Fund are currently priced at a "discount," well below their par value. When
bonds are bought for less than their original issue price the investor must pay
taxes on the appreciation between their purchase price and their par value when
the bond matures. Investors were reluctant to assume this potential tax burden,
which reduced demand for some of our bonds, contributing to the Fund's
disappointing annual return.
Ohio was the first state to impose an income tax on residents and remains a
relatively high-tax state. In 1999, Ohio ranked 14th nationally in terms of
state and local taxes as a percentage of income (Source: The Tax Foundation).
Despite our recent results, we believe this points to strong demand for
tax-exempt income in the state.
Delaware Tax-Free Ohio Fund's Top 10 Sectors
February 29, 2000
Sector Percentage of Net Assets
- --------------------------------------------------------------------------------
Pollution Control 24.80%
- --------------------------------------------------------------------------------
Airports 13.35%
- --------------------------------------------------------------------------------
Transportation 7.98%
- --------------------------------------------------------------------------------
Higher Education 7.35%
- --------------------------------------------------------------------------------
Waste Disposal 6.65%
- --------------------------------------------------------------------------------
Territorial 6.38%
- --------------------------------------------------------------------------------
School District 5.73%
- --------------------------------------------------------------------------------
Housing 5.02%
- --------------------------------------------------------------------------------
Miscellaneous 4.70%
- --------------------------------------------------------------------------------
Pre-Refunded 4.12%
- --------------------------------------------------------------------------------
Outlook
Rising interest rates during your Fund's fiscal year seem to have had little
impact on the robust U.S. economy, which shows no indication of slowing. The
Federal Reserve has demonstrated a commitment to keeping inflation in check,
which suggests that more interest rate hikes are possible.
However, despite continued U.S. economic growth, inflation has remained
surprisingly benign. Labor productivity gains appear to be the key that allows
the economy to expand without significant inflation. In calendar 1999, according
to the U.S. Department of Labor, U.S. employers continued to find ways to get
more work done without increasing their labor costs. Despite a tight job market,
labor costs in 1999 declined in both the third and fourth quarters, largely due
to productivity gains.
The positive news for municipal bond investors is that we are now finding many
opportunities to invest in attractive municipal bonds at compelling prices.
Credit quality remains very solid in the municipal bond markets. Given their
current value, relatively high credit quality and tax-exempt income, we think
municipal bonds offer an attractive long-term investment that can help diversify
portfolios that are heavily allocated to equities.
6
<PAGE>
FUND BASICS
===========
Fund Objective
Seeks a high level of current interest income exempt from federal income tax and
Pennsylvania state and local taxes, consistent with preservation of capital.
Total Fund Assets
$758 million
Number of Holdings
112
Fund Start Date
March 23, 1977
Your Funds' Managers
Mitchell L. Conery received a bachelor's degree from Boston University and an
MBA in Finance from the State University of New York in 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 1989.
NASDAQ Symbols
Class A DELIX
Class B DPTBX
Class C DPTCX
DELAWARE TAX-FREE PENNSYLVANIA FUND PERFORMANCE
===============================================
Performance of a $10,000 Investment
February 28, 1990 through February 29, 2000
<TABLE>
<CAPTION>
- ----- Lehman Brothers Muncipal Bond Index
- ----- Delaware Tax-Free New Jersey Fund Class A
- ----- U.S. Consumer Price Index
Lehman
Brothers
Tax-Free PA Consumer Price Index-Municipals
Period End Market Value NAV Period End Value Value
<S> <C> <C> <C> <C> <C> <C>
2/28/90 $ 9,630 7.8 2/28/90 $10,000 $10,000
2/28/91 $10,327 7.8 2/28/91 $10,531 $10,922
2/29/92 $11,474 8.11 2/29/92 $10,828 $12,013
2/28/93 $12,988 8.63 2/28/93 $11,180 $13,666
2/28/94 $13,718 8.61 2/28/94 $11,461 $14,423
2/28/95 $13,843 8.18 2/28/95 $11,789 $14,695
2/29/96 $15,237 8.46 2/29/96 $12,102 $16,318
2/28/97 $15,900 8.24 2/28/97 $12,469 $17,217
2/28/98 $17,123 8.42 2/28/98 $12,648 $18,790
2/28/99 $17,918 8.29 2/28/99 $12,852 $19,945
2/29/00 $16,986 7.46 2/29/00 $13,258 $19,495
Total $16,986 $13,258 $19,495
Total
</TABLE>
<PAGE>
Chart assumes $10,000 invested on February 28, 1990. Fund performance includes
the effect of a 3.75% front-end sales charge and reinvestment of all
distributions. Performance for other fund classes will vary due to different
charges and expenses. You cannot invest directly in an index. Past performance
does not guarantee future results.
<TABLE>
<CAPTION>
Average Total Returns
Through February 29, 2000 Lifetime Ten Years Five Years One Year
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 3/23/77)
Excluding Sales Charge +6.06% +5.85% +4.20% -5.18%
Including Sales Charge +5.89% +5.45% +3.40% -8.70%
- -------------------------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +3.37% +3.37% -5.94%
Including Sales Charge +3.24% +3.05% -9.54%
- -------------------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +2.13% -5.94%
Including Sales Charge +2.13% -6.84%
- -------------------------------------------------------------------------------------------------------
</TABLE>
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results, excluding sales charge, assume either that contingent deferred sales
charges did not apply 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 shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.
7
<PAGE>
FUND BASICS
===========
Fund Objective
Seeks a high level of current interest income exempt from federal income tax and
New Jersey state and local taxes, consistent with preservation of capital.
Total Fund Assets
$4 million
Number of Holdings
41
Fund Start Date
September 2, 1997
Your Fund Managers
Patrick P. Coyne
Mitchell L. Conery
NASDAQ Symbols
Class A DPJAX
Class B DPJBX
Class C DPJCX
[GRAPHIC OMITTED]
DELAWARE TAX-FREE NEW JERSEY FUND PERFORMANCE
=============================================
Performance of a $10,000 Investment
September 2, 1997 through February 29, 2000
- -----------------------------------------------------------
- ----- Lehman Brothers Muncipal Bond Index
- ----- U.S. Consumer Price Index
- ----- Delaware Tax-Free New Jersey Fund Class A
Lehman
Consumer Brothers Delaware Tax
Price Index-US Municipals Free-NJA
Period End Value Value Market Value
Sep-97 $10,000 $10,000 $ 9,620
Nov-97 $10,019 $10,123 $ 9,765
Feb-98 $10,043 $10,380 $10,013
May-98 $10,099 $10,506 $10,182
Aug-98 $10,136 $10,737 $10,414
Nov-98 $10,174 $10,909 $10,583
Feb-98 $10,205 $11,018 $10,607
May-99 $10,310 $11,002 $10,514
Aug-99 $10,366 $10,796 $10,054
Nov-99 $10,440 $10,792 $ 9,892
Feb-00 $10,527 $10,770 $ 9,790
Total $10,527 $10,770 $ 9,790
<PAGE>
Chart assumes $10,000 invested on September 2, 1997. Fund performance includes
the effect of a 3.75% front-end sales charge and reinvestment of all
distributions. Performance for other fund classes will vary due to different
charges and expenses. You cannot invest directly in an index. Past performance
does not guarantee future results.
Average Total Returns
Through February 29, 2000 Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 9/2/97)
Excluding Sales Charge +1.36% -7.68%
Including Sales Charge -0.15% -11.08%
- --------------------------------------------------------------------------------
Class B (Est. 9/2/97)
Excluding Sales Charge +0.42% -8.38%
Including Sales Charge -0.69% -11.90%
- --------------------------------------------------------------------------------
Class C (Est. 9/2/97)
Excluding Sales Charge +0.24% -8.37%
Including Sales Charge +0.24% -9.25%
- --------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results, excluding sales charge, assume either that contingent deferred sales
charges did not apply 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 shares are
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.
8
<PAGE>
Fund Basics
===========
Fund Objective
Seeks a high level of current interest income exempt from federal income tax and
Ohio state and local taxes, consistent with preservation of capital.
Total Fund Assets
$2 million
Number of Holdings
22
Fund Start Date
September 2, 1997
Your Fund Managers
Patrick P. Coyne
Mitchell L. Conery
NASDAQ Symbols
Class A DPOAX
Class B DPOBX
Class C DPOCX
DELAWARE TAX-FREE NEW JERSEY FUND PERFORMANCE
=============================================
Performance of a $10,000 Investment
September 2, 1997 through February 29, 2000
- --------------------------------------------------------------------------------
- ----- Lehman Brothers Muncipal Bond Index
- ----- U.S. Consumer Price Index
- ----- Delaware Tax-Free Ohio Fund Class A
Growth of a $10,000 Investment
Ohio
<TABLE>
<CAPTION>
Fund Name Sep-97 Nov-98 Feb-98 May-98 Aug-98 Nov-98 Feb-99 May-99 Aug-99 Nov-99 Feb-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Delaware Tax Free Ohion Fund $ 9,620 $ 9,767 $10,071 $10,173 $10,395 $10,462 $10,587 $10,555 $10,145 $ 9,925 $ 9,805
Lehman Brothers Municipal
Bond Index $10,000 $10,123 $10,380 $10,506 $10,737 $10,909 $11,018 $11,002 $10,796 $10,792 $10,770
U.S. Consumer Price Index $10,000 $10,919 $10,043 $10,999 $10,136 $10,174 $10,205 $10,310 $10,366 $10,440 $10,476
</TABLE>
Chart assumes $10,000 invested on September 2, 1997. Fund performance includes
the effect of a 3.75% front-end sales charge and reinvestment of all
distributions. Performance for other fund classes will vary due to different
charges and expenses. You cannot invest directly in an index. Past performance
does not guarantee future results.
Average Total Returns
Through February 29, 2000 Lifetime One Year
- --------------------------------------------------------------------------------
Class A (Est. 9/2/97)
Excluding Sales Charge +1.43% -7.37%
Including Sales Charge -0.08% -10.84%
- --------------------------------------------------------------------------------
Class B (Est. 9/2/97)
Excluding Sales Charge -0.15% -8.06%
Including Sales Charge -1.25% -11.59%
- --------------------------------------------------------------------------------
Class C (Est. 9/2/97)
Excluding Sales Charge -0.02% -8.08%
Including Sales Charge -0.02% -8.96%
- --------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Return and share value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
results, excluding sales charge, assume either that contingent deferred sales
charges did not apply 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 shares are
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.
9
<PAGE>
Statements of Net Assets
DELAWARE TAX-FREE PENNSYLVANIA FUND
===================================
Principal Market
February 29, 2000 Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 97.98%
Continuing Care/Retirement Revenue Bonds - 0.76%
Montgomery County Higher Education
and Health Authority Revenue
(Foulkeways at Gwynedd Project)
6.75% 11/15/30 ................................... $ 1,000,000 $ 935,160
Philadelphia Pennsylvania Authority for
Industrial Development Revenue
(Stapley Germantown Continuing Care
Community) 6.60% 1/1/16 .......................... 5,250,000 4,838,505
-----------
5,773,665
-----------
Higher Education Revenue Bonds - 12.26%
Allegheny County Higher Educational
Building Authority Revenue
(Robert Morris College)
6.00% 5/1/28 (ACA - CBI) ......................... 3,755,000 3,602,209
Dauphin County General Authority
College Revenue (Holy Family College)
7.50% 12/1/19 .................................... 3,025,000 3,088,344
Delaware County Authority College
Revenue (Eastern College) Series B
5.50% 10/1/19 .................................... 1,500,000 1,293,480
5.50% 10/1/24 .................................... 2,850,000 2,401,353
Delaware County Authority University
Revenue (Villanova University)
5.80% 8/1/25 (AMBAC) ............................. 7,000,000 6,782,720
Gettysburg Municipal Authority College
Revenue (Gettysburg College) Series B
4.75% 8/15/23 (AMBAC) ............................ 2,100,000 1,712,067
Harvey's Lake General Authority College
Revenue (College Misericordia)
5.75% 5/1/14 (ACA) ............................... 1,000,000 963,360
6.00% 5/1/19 (ACA) ............................... 2,640,000 2,552,326
Indiana County Industrial Development
Authority Revenue (Indiana University
Student Co-op Association Inc.)
Series A 5.875% 11/1/24 (AMBAC) .................. 2,785,000 2,695,017
Series A 5.875% 11/1/29 (AMBAC) .................. 1,000,000 961,290
Montgomery County Higher Education
and Health Authority Revenue
(Beaver College) 5.85% 4/1/21
(Connie Lee) ..................................... 5,465,000 5,367,340
Pennsylvania State Higher Educational
Facilities Authority Revenue
College Revenue
(Allegheny College) Series B
5.00% 11/1/26 (MBIA) ............................. 3,000,000 2,539,740
(Drexel University) 6.00% 5/1/29 ................. 3,400,000 3,268,658
(Elizabethtown College)
6.50% 6/15/15 .................................... 6,700,000 6,845,792
(Temple University) 5.75% 4/1/31 (MBIA) .......... 8,000,000 7,654,320
<PAGE>
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Higher Education Revenue Bonds (continued)
(University of Pennsylvania)
4.75% 7/15/33 .................................... $14,420,000 $11,337,579
5.90% 9/1/15 ..................................... 4,205,000 4,246,167
(Ursinus College)
5.90% 1/1/27 ..................................... 2,000,000 1,882,100
Pennsylvania State Higher Educational
Facilities Authority Revenue State System
Series M 5.75% 6/15/20 (AMBAC) ................... 17,730,000 17,252,708
Swarthmore Borough Authority
(Swarthmore College)
6.00% 9/15/12 .................................... 5,730,000 5,962,122
University Virgin Islands Series A
6.00% 12/1/19 (ACA) .............................. 500,000 497,655
-----------
92,906,347
-----------
Hospital Revenue Bonds - 18.44%
Allegheny County Pennsylvania Hospital
Development Authority Revenue
(Allegheny Valley Hospital)
7.50% 8/1/13 ..................................... 390,000 367,091
7.75% 8/1/20 ..................................... 2,840,000 2,589,086
Allegheny County Pennsylvania Hospital
Development Authority Revenue
Health Center (UPMC Health)
Series B 6.00% 7/1/23 (MBIA) ..................... 5,745,000 5,701,683
Series B 6.00% 7/1/24 (MBIA) ..................... 5,000,000 4,955,300
Series B 6.00% 7/1/26 (MBIA) ..................... 4,750,000 4,699,935
Series B 6.00% 7/1/27 (MBIA) ..................... 9,325,000 9,213,007
Allegheny County Pennsylvania Hospital
Authority Revenue Health System
Revenue (Catholic Health East)
4.875% 11/15/26 (AMBAC) .......................... 8,500,000 6,845,390
Berks County Pennsylvania Municipal
Authority Health Care Reading
Hospital Pooled Financing Project
5.00% 3/1/28 ..................................... 20,000,000 16,003,000
Chester County Pennsylvania Health and
Educational Facilities Authority Health
System Revenue
(Jefferson Health Systems)
Series B 5.375% 5/15/27 .......................... 18,270,000 14,754,487
Delaware County Authority Revenue
(Main Line & Haverford Nursing and
Rehabilitation Center)
9.00% 8/1/22 ..................................... 1,950,000 2,075,853
Monroeville Pennsylvania Hospital
Authority Revenue
(Forbes Health System)
6.25% 10/1/15 .................................... 3,500,000 3,228,260
7.00% 10/1/13 .................................... 7,265,000 6,737,125
10
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Tax-Free Pennsylvania Fund Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Philadelphia Pennsylvania Hospital
Higher Education Facilities Authority
Hospital Revenue
(Children's Hospital of Philadelphia)
Series A 5.50% 2/15/22 ........................... $ 5,600,000 $ 4,967,704
(Children's Seashore House)
Series A 7.00% 8/15/17 ........................... 3,100,000 3,162,496
(Children's Seashore House)
Series B 7.00% 8/15/22 ........................... 2,100,000 2,132,634
(Jeanes Health System Project)
6.85% 7/1/22 ..................................... 18,020,000 16,611,557
(Roxborough Memorial Hospital)
7.25% 3/1/24 ..................................... 12,015,000 10,643,127
Sayre Pennsylvania Health Care Facilities
(Gutherie Health Care System)
Series A 6.00% 3/1/21 (AMBAC) .................... 7,000,000 6,917,680
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 1,036,630
Series B 7.625% 12/1/15 (AMBAC) .................. 2,490,000 2,581,209
Scranton-Lackawanna Health and Welfare
Authority (Allied Services Rehabilitation
Hospitals) 7.60% 7/15/20 ......................... 5,640,000 5,851,726
Westmorland County Pennsylvania Industrial
Development Authority Hospital Revenue
(Citizen General Hospital)
5.25% 7/1/15 ..................................... 11,000,000 8,664,810
------------
139,739,790
------------
Housing Revenue Bonds - 5.34%
Montgomery County Pennsylvania
Redevelopment Authority Multi-Family
Housing (KBF Associates Project)
Series A 6.50% 7/1/25 ............................ 20,810,000 20,656,838
Series B 7.25% 7/1/25 ............................ 14,890,000 14,894,318
Pennsylvania Housing Finance Agency
Single Family Mortgage Series 57A
6.15% 4/1/27 (AMT) (MBIA) ........................ 5,000,000 4,915,600
------------
40,466,756
------------
Industrial Development Revenue Bonds - 4.95%
Allegheny County Authority Industrial
Development Environmental
Improvement Revenue
(USX Corp Project)
5.50% 12/1/29 .................................... 3,825,000 3,147,516
5.60% 9/1/30 ..................................... 15,250,000 12,723,075
<PAGE>
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Industrial Development Revenue Bonds (continued)
Pennsylvania Economic Development
Financing Authority Solid Waste
Disposal Revenue (USG Corp Project)
6.00% 6/1/31 (AMT) .............................. $24,200,000 $ 21,692,880
------------
37,563,471
------------
Pollution Control Revenue Bonds - 12.48%
Beaver County Pennsylvania Industrial
Development Authority Pollution
Control Revenue
(Cleveland Electric Illuminating Project)
7.625% 5/1/25 .................................... 8,500,000 8,925,510
Series A 7.75% 7/15/25 ........................... 10,000,000 10,583,600
(Atlantic Richfield Company Project)
5.95% 7/1/21 ..................................... 5,100,000 4,840,104
Bucks County Pennsylvania Industrial
Development Authority Environmental
Improvement Revenue
(USX Corp Project ) 5.60% 3/1/33 ................. 7,000,000 5,798,449
Cambria County Pennsylvania Industrial
Development Authority Pollution
Control Revenue (Pennsylvania
Electric Company Project)
5.80% 11/1/20 (MBIA) ............................. 4,500,000 4,378,230
6.05% 11/1/25 (MBIA) ............................. 9,700,000 9,525,497
Delaware County Pennsylvania Industrial
Development Authority Pollution
Control Revenue (Philadelphia Electric
Company) Series A 5.20% 4/1/21 ................... 15,500,000 15,172,485
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 7,180,180
Series B 6.40% 9/1/29 (MBIA) ..................... 15,000,000 15,262,350
Montgomery County Industrial Development
Authority Pollution Control Revenue
(Philadelphia Electric Company)
Series A 5.20% 10/1/30 ........................... 11,500,000 11,338,655
Schuylkill County Pennsylvania Industrial
Development Authority Resource
Recovery Center
(Schuylkill Energy Resource)
6.50% 1/1/10 (AMT) ............................... 1,600,000 1,572,528
------------
94,577,588
------------
11
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Tax-Free Pennsylvania Fund Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Port and Harbors Revenue Bonds - 1.29%
Delaware River Port Authority
5.70% 1/1/21 (FSA) .............................. $ 8,560,000 $ 8,375,532
Erie Western Pennsylvania Port
Authority General Revenue
6.25% 6/15/10 (AMT) ............................. 1,365,000 1,377,203
-----------
9,752,735
-----------
*Pre-Refunded/Escrowed to
Maturity Bonds - 24.73%
Abington School District
6.00% 5/15/26-06 (FGIC) ......................... 6,000,000 6,273,720
Allegheny County Pennsylvania Hospital
Development Authority Revenue
(Health Facilities)
6.00% 5/1/20-02 (MBIA) .......................... 1,500,000 1,538,580
Allegheny County Pennsylvania
Sanitation Authority Revenue
Series 91C
6.50% 12/1/16-01 (FGIC) ......................... 4,500,000 4,637,520
Cambria County Hospital Development
Authority Health Care Revenue
(Allegheny Luthern Social Ministries
Project) 8.25% 6/15/17-02 ....................... 3,250,000 3,487,218
Delaware County Authority University
Revenue (Haverford College)
7.375% 11/15/20-00 (MBIA) ....................... 3,275,000 3,412,812
(Villanova University) 9.625% 8/1/02
(Escrowed to Maturity) .......................... 285,000 301,755
Delaware County Pennsylvania Authority
(Mercy Health Corporation)
6.00% 12/15/26 (Escrowed to Maturity) ........... 3,500,000 3,516,205
Harrisburg Water Authority Revenue
7.00% 7/15/15-01 (FGIC) ......................... 12,000,000 12,384,360
Pennsylvania Higher Education Facilities
Authority College and University
Revenue (Hahnemann University)
6.90% 7/1/21-01 (MBIA) .......................... 13,000,000 13,633,100
Pennsylvania Intergovernmental
Cooperative Authority Special Tax
Revenue (City of Philadelphia Funding
Program) 6.80% 6/15/22-02 ....................... 2,125,000 2,218,946
Pennsylvania State Higher Educational
Facilities Authority Revenue College
Revenue (LaSalle University)
9.50% 5/1/03 (Escrowed to Maturity) ............. 300,000 320,190
<PAGE>
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
*Pre-Refunded/Escrowed to
Maturity Bonds (continued)
Pennsylvania State Turnpike Commission
Turnpike Revenue
Series I 7.20% 12/1/17-01 (FGIC) ................ $ 8,915,000 $ 9,455,338
Series J 7.20% 12/1/17-01 (FGIC) ................ 8,995,000 9,540,187
Philadelphia Authority for Industrial
Development Revenue (Cathedral
Village) 7.25% 4/1/15-03 ........................ 2,000,000 2,165,320
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 6,517,725
Philadelphia Pennsylvania Hospital
Higher Education Facilities Authority
Hospital Revenue (Presbyterian
Medical Center) 6.65% 12/1/19
(MBIA) (Escrowed to Maturity) ................... 13,000,000 14,239,030
Philadelphia Regional Port Authority
Lease Revenue
7.15% 8/1/20-00 (MBIA) .......................... 16,315,000 16,517,795
Philadelphia Water & Sewer Revenue
7.00% 8/1/18-01 ................................. 20,650,000 21,332,689
Pittsburgh Water & Sewer Revenue
7.25% 9/1/14 (FGIC)
(Escrowed to Maturity) .......................... 9,000,000 10,224,720
Pottsville Pennsylvania School District
9.375% 5/1/06 (AMBAC)
(Escrowed to Maturity) .......................... 900,000 1,040,175
Puerto Rico (Commonwealth of)
General Obligation
6.00% 7/1/22-02 ................................. 3,585,000 3,745,931
7.25% 7/1/10-00 ................................. 1,370,000 1,411,689
Swarthmore Borough Authority
(Swarthmore College)
6.00% 9/15/12-00 ................................ 1,270,000 1,329,690
7.375% 9/15/20-00 ............................... 14,000,000 14,376,180
University Area Joint Authority Water
and Sewer Revenue
7.10% 9/1/20-00 (MBIA) .......................... 6,000,000 6,147,480
Washington County Authority Revenue
(Shadyside Hospital) Series 85D
7.45% 12/15/18-00 (AMBAC) ....................... 7,500,000 7,792,500
York County Hospital Revenue
Authority (York Hospital)
7.00% 7/1/21-01 (AMBAC) ......................... 9,500,000 9,893,015
------------
187,453,870
------------
12
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Tax-Free Pennsylvania Fund Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
School District General Obligation Bonds - 2.61%
McGuffey Pennsylvania School District
Series B 4.75% 8/1/28 (AMBAC) .................. $ 2,750,000 $ 2,201,375
Norwin Pennsylvania School District
6.00% 4/1/30 (FGIC) ............................ 2,000,000 1,983,360
Philadelphia Pennsylvania School District
Series A 4.75% 4/1/27 (MBIA) ................... 19,450,000 15,632,549
-----------
19,817,284
-----------
Transportation Revenue Bonds - 2.24%
Allegheny County Pennsylvania Airport
Revenue (Pittsburgh International
Airport) 5.75% 1/1/14 (AMT) (MBIA) ............. 4,500,000 4,495,320
Pennsylvania State Turnpike Commission
Series L 6.25% 6/1/11 (AMBAC) .................. 9,000,000 9,331,380
Series N 6.50% 12/1/13 ......................... 3,000,000 3,113,700
-----------
16,940,400
-----------
Waste Disposal Revenue Bonds - 2.41%
Borough of New Morgan Pennsylvania
Guaranteed Revenue 8.00% 11/1/05 ............... 6,800,000 6,984,892
Chester (City of) Pennsylvania Guaranteed
Host Community Resource Recovery
7.25% 12/1/05 .................................. 9,865,000 10,067,035
Greater Lebanon Refuse Authority Solid
Waste Revenue Refunding (Lancaster
County) 7.00% 11/15/04 ......................... 1,145,000 1,194,716
-----------
18,246,643
-----------
Water & Sewer Revenue Bonds - 2.39%
Dauphin County Industrial Development
Authority Water Development Revenue
(Dauphin Consolidate Water Supply)
Series B 6.70% 6/1/17 .......................... 1,750,000 1,851,220
Delaware County Industrial Development
Authority Water Revenue
(Philadelphia Suburban Water Project)
6.00% 6/1/29 (AMT) (FGIC) ...................... 5,000,000 4,878,350
Philadelphia Pennsylvania Water & Waste
Water Revenue Series A
5.125% 8/1/27 (AMBAC) .......................... 13,200,000 11,384,340
-----------
18,113,910
-----------
Other General Obligation Bonds - 2.97%
Falls Township Pennsylvania
General Obligation
7.00% 12/15/10 (MBIA) .......................... 3,000,000 3,057,030
Philadelphia Pennsylvania General
Obligation 5.00% 5/15/25 (MBIA) ................ 4,190,000 3,574,950
<PAGE>
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Other General Obligation Bonds (contined)
Puerto Rico (Commonwealth of) General
Obligation 5.75% 7/1/17 ........................ $11,000,000 $ 10,868,440
Washington County Pennsylvania
Authority Revenue (Capital Funding
Capital Projects and Equipment Program)
6.15% 12/1/29 (AMBAC) .......................... 5,000,000 5,013,050
------------
22,513,470
------------
Other Revenue Bonds - 5.11%
Dauphin County Pennsylvania General
Authority Office and Parking Forum
Series A 6.00% 1/15/25 ......................... 3,750,000 3,282,938
Dauphin County Pennsylvania General
Authority Office and Parking/Riverfront
Office Center Project Series A
6.00% 1/1/25 ................................... 4,000,000 3,502,000
**First Albany Corporation Municipal
Series, Inverse Floater
6.22% 12/15/14 (AMBAC) ......................... 31,000,000 27,955,800
Harrisburg Pennsylvania Authority Office
and Parking Revenue Series A
6.00% 5/1/19 ................................... 3,000,000 2,712,090
+Philadelphia Gas Works Revenue
5.53% 1/1/12 (AMBAC) ........................... 2,500,000 1,283,050
--------------
38,735,878
--------------
Total Municipal Bonds
(cost $755,962,527) ............................ 742,601,807
--------------
Total Market Value of Securities - 97.98%
(cost $755,962,527) ............................ 742,601,807
Receivables and Other Assets
Net of Liabilities - 2.02% ..................... 15,343,480
--------------
Net Assets Applicable to 101,625,467
Shares Outstanding - 100.00% ................... $757,945,287
==============
Net Asset Value - Delaware Tax-Free
Pennsylvania Fund A Class
($716,645,725 / 96,088,007 Shares) ............. $7.46
-----
Net Asset Value - Delaware Tax-Free
Pennsylvania Fund B Class
($37,390,107 / 5,013,276 Shares) ............... $7.46
-----
Net Asset Value - Delaware Tax-Free
Pennsylvania Fund C Class
($3,909,455 / 524,184 Shares) .................. $7.46
-----
13
<PAGE>
Statement of Net Assets (continued)
Delaware Tax-free Pennsylvania Fund
- --------------------------------------------------------------------------------
- --------------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
**Inverse floaters represent a security that pays interest at rates that
increase (decrease) with a decrease (increase) in a specific index. Interest
rates disclosed are in effect on February 29, 2000.
+Zero coupon security. The interest rate shown is the effective yield at
February 29, 2000.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
CBI - Certificate of Bond Insurance
Connie Lee - Insured by College Construction Insurance Association
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 February 29, 2000:
Capital shares (unlimited authorization-no par) ............. $798,991,134
Accumulated net realized loss on investments ................ (27,685,127)
Net unrealized depreciation of investments .................. (13,360,720)
------------
Total net assets ............................................ $757,945,287
============
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Pennsylvania Fund
Net asset value A Class (A) ................................. $7.46
Sales charge (3.75% of offering price or 3.89% of
amount invested per share) (B) ............................ 0.29
-----
Offering price .............................................. $7.75
=====
- ----------------------
(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
<PAGE>
DELAWARE TAX-FREE NEW JERSEY FUND
=================================
Principal Market
February 29, 2000 Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 96.32%
Airport Revenue Bonds - 6.08%
New Jersey Economic Development Authority
Special Facilities Revenue
(Continental Airlines Project)
5.50% 4/1/28 (AMT) ............................... $ 50,000 $ 39,190
6.625% 9/15/12 (AMT) ............................. 200,000 200,416
--------
239,606
--------
Continuing Care/Retirement Revenue Bonds - 1.06%
New Jersey Economic Development Authority
Revenue Refunding First Mortgage
(The Evergreens) 6.00% 10/1/22 ................... 50,000 41,846
--------
41,846
--------
Higher Education Revenue Bonds - 17.52%
New Jersey State Educational Facilities Authority
Revenue
(Bloomfield College)
Series A 6.85% 7/1/30 ............................ 300,000 303,036
(Drew University) Series C
5.00% 7/1/17 (MBIA) .............................. 65,000 58,290
(Georgian Court College)
Series B 5.20% 7/1/15 ............................ 200,000 178,738
(Montclair State University)
Series F 5.40% 7/1/25 (AMBAC) .................... 30,000 27,365
(Princeton Theological Seminary)
Series A 5.00% 7/1/22 ............................ 20,000 17,392
(Richard Stockton College)
Series C 5.10% 7/1/23 (AMBAC) .................... 70,000 61,240
(University of Medicine and Dentistry)
5.25% 12/1/21 (AMBAC) ............................ 50,000 44,583
--------
690,644
--------
Hospital Revenue Bonds - 8.71%
New Jersey Health Care Facilities Financing
Authority
(AHS Hospital) Series A 5.00% 7/1/27
(AMBAC) .......................................... 150,000 126,494
(Holy Name Hospital) 5.25% 7/1/20
(AMBAC) .......................................... 50,000 44,975
(JFK Medical Center/Hartwyck)
5.00% 7/1/18 (MBIA) .............................. 100,000 87,671
(Palisades Medical Center)
5.25% 7/1/28 (ACA) ............................... 100,000 84,200
--------
343,340
--------
Housing Revenue Bonds - 1.15%
New Jersey State Housing and Mortgage
Finance Agency Series A 5.65% 5/1/40
(AMT)(AMBAC) ..................................... 50,000 45,466
--------
45,466
--------
14
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Tax-Free New Jersey Fund Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Parking Revenue Bonds - 4.44%
Essex County New Jersey Improvement
Authority Parking Facility Series B
5.25% 10/1/27 (MBIA) ............................. $ 40,000 $ 35,502
5.00% 10/1/22 (AMBAC) ............................ 60,000 51,936
New Brunswick New Jersey Parking
Authority Revenue 5.00% 1/1/20 (FGIC) ............ 100,000 87,370
--------
174,808
--------
Ports & Harbors Revenue Bonds - 3.13%
Delaware River and Bay Authority
5.25% 1/1/26 (FGIC) .............................. 50,000 44,983
Port Authority of New York and New Jersey
Consolidated 114th Series 4.75% 8/1/33 ........... 100,000 78,489
--------
123,472
--------
School District General Obligation Bonds - 13.85%
Carteret New Jersey Board of Education
4.75% 4/15/19 (MBIA) ............................. 300,000 253,320
Freehold Township New Jersey Board of Education
5.40% 7/15/23 (FSA) .............................. 50,000 46,728
Mount Olive Township New Jersey
Board of Education 5.00% 1/15/19 (FGIC) .......... 25,000 22,120
Newark New Jersey Schools
5.30% 9/1/15 (MBIA) .............................. 50,000 47,960
Sparta Township School District
5.00% 9/1/20 (MBIA) .............................. 200,000 175,948
--------
546,076
--------
Territorial General Obligation Bonds - 1.20%
Puerto Rico Commonwealth
5.375% 7/1/21 (MBIA) ............................. 50,000 47,065
--------
47,065
--------
Territorial Revenue Bonds - 6.83%
Puerto Rico Commonwealth Highway &
Transportation Authority (Highway
Improvements) Series Y 5.50% 7/1/26 .............. 250,000 230,443
Puerto Rico Industrial Tourist Educational Medical
and Envrionmental Control Facilities (Mennonite
General Hospital) Series A 5.625% 7/1/27 ......... 50,000 38,881
--------
269,324
--------
Water & Sewer Revenue Bonds - 25.12%
Bayonne New Jersey Municipal Utlities Authority
Water Systems 5.00% 1/1/28 (MBIA) ................ 50,000 42,582
Essex County New Jersey Improvement Authority
Revenue Utility System (East Orange Franchise)
5.00% 7/1/28 (MBIA) .............................. 100,000 85,102
Jersey City New Jersey Municipal Utilities
Authority Sewer Revenue 5.25% 12/1/13 (FSA) ...... 100,000 97,320
<PAGE>
Principal Market
Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Water & Sewer Revenue Bonds (continued)
Mount Holly New Jersey Municipal Utilities
Authority Sewer Revenue
4.75% 12/1/18 (MBIA) ............................. $140,000 $ 119,748
New Jersey Economic Development Water -
United Water 5.00% 11/1/28 (AMT) (AMBAC) ......... 300,000 249,231
New Jersey Environmental Infrastructure
4.50% 9/1/18 ..................................... 200,000 166,362
North Jersey District Water Supply
Series A (Wanaque North Project)
5.125% 11/15/21 (MBIA) ........................... 150,000 133,254
Stafford New Jersey Municipal Utilities
Authority Water and Sewer Revenue
5.00% 12/1/22 (FGIC) ............................. 60,000 52,010
Wanaque Borough New Jersey Sewer Authority
Sewer Revenue 5.25% 12/1/21 ...................... 50,000 44,529
----------
990,138
----------
Other General Obligation Bonds - 3.23%
Evesham Township New Jersey
Series A 5.00% 9/15/17 (FGIC) .................... 50,000 44,771
Summit New Jersey 4.50% 11/1/18 .................... 100,000 82,407
----------
127,178
----------
Other Revenue Bonds - 4.00%
Middlesex County New Jersey Improvement
Authority Revenue 4.70% 9/15/18 .................. 85,000 72,569
Union County New Jersey Utilities Authority
County Deficiency
Series A2 5.00% 6/15/28 (AMT) .................... 100,000 85,135
----------
157,704
----------
Total Municipal Bonds (cost $4,230,742) 3,796,667
----------
Total Market Value of Securities - 96.32%
(cost $4,230,742) ................................ 3,796,667
Receivables and Other Assets
Net of Liabilities - 3.68% ....................... 145,189
----------
Net Assets Applicable to 778,618
Shares Outstanding - 100.00% ..................... $3,941,856
==========
Net Asset Value - Delaware Tax-Free New Jersey
Fund A Class ($1,749,675 / 345,621 Shares) ....... $5.06
-----
Net Asset Value - Delaware Tax-Free New Jersey
Fund B Class ($2,031,981 / 401,356 Shares) ....... $5.06
-----
Net Asset Value - Delaware Tax-Free New Jersey
Fund C Class ($160,200 / 31,641 Shares) .......... $5.06
-----
15
<PAGE>
Statement of Net Assets (continued)
Delaware Tax-Free New Jersey Fund
- --------------------------------------------------------------------------------
Summary of Abbreviations:
ACA - Insured by American Capital Access
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 February 29, 2000:
Capital shares (unlimited authorization - no par) ................ $4,412,527
Accumulated net realized loss on investments ..................... (36,596)
Net unrealized depreciation of investments ....................... (434,075)
----------
Total net assets ................................................. $3,941,856
==========
Net Asset Value and Offering Price per Share -
Delaware Tax-Free New Jersey Fund
Net asset value A Class (A) ...................................... $5.06
Sales charge (3.75% of offering price or 3.95% of
amount invested per share) (B) ................................. 0.20
-----
Offering price ................................................... $5.26
=====
- -------------------------
(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
<PAGE>
DELAWARE TAX-FREE OHIO FUND
===========================
Principal Market
February 29, 2000 Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds - 96.16%
Airport Revenue Bonds - 13.35%
Cleveland Ohio Airport Special Revenue
(Continental Airlines Project) (AMT)
5.375% 9/15/27 ................................... $130,000 $101,793
Toledo Lucas County Ohio Port Authority Airport
Revenue Refunding Improvement Series 1
5.50% 5/15/20 .................................... 175,000 149,571
--------
251,364
--------
City General Obligation Bonds - 2.47%
Elyria Ohio General Obligations
5.40% 12/1/22 (FGIC) ............................. 50,000 46,474
--------
46,474
--------
Convention Center/Stadium Revenue Bonds - 2.46%
Cleveland Ohio Cleveland Stadium Project
5.25% 11/15/17 (AMBAC) ........................... 50,000 46,404
--------
46,404
--------
Higher Education Revenue Bonds - 7.35%
Ohio State Higher Educational Facility Revenue
(Case Western Reserve University)
5.125% 10/1/17 ................................... 50,000 45,360
University of Akron Ohio
5.25% 1/1/22 (AMBAC) ............................. 50,000 45,073
University of Cincinnati Ohio
Series T 5.00% 6/1/18 ............................ 55,000 48,007
--------
138,440
--------
Hospital Revenue Bonds - 2.44%
Lorain County Ohio Hospital Revenue
Catholic Healthcare Partners
5.50% 9/1/27 (MBIA) .............................. 50,000 45,900
--------
45,900
--------
Housing Revenue Bonds - 5.02%
Franklin County Ohio Mortgage Revenue
Briggs/Wedgewood 5.55% 11/20/17
(AMT) (GNMA) ..................................... 50,000 47,718
Ohio Housing Finance Agency Mortgage Revenue
Residential Series C 5.75% 9/1/28
(AMT) (GNMA) ..................................... 50,000 46,818
--------
94,536
--------
Pollution Control Revenue Bonds - 24.80%
Ohio State Air Quality Development Authority
Dayton Power & Light
6.40% 8/15/27 (MBIA) ............................. 400,000 405,840
Ohio State Air Quality Development Authority
JMG Funding Limited Partnership
5.625% 10/1/22 (AMT) (AMBAC) ..................... 65,000 61,087
--------
466,927
--------
16
<PAGE>
Statement of Net Assets (continued)
Principal Market
Delaware Tax-Free Ohio Fund Amount Value
- --------------------------------------------------------------------------------
Municipal Bonds (continued)
Power Authority Revenue Bonds - 1.36%
Cleveland Ohio Public Power Systems
Revenue 5.00% 11/15/24 (MBIA) .................. $ 30,000 $ 25,678
----------
25,678
----------
*Pre-Refunded Bonds - 4.12%
Ohio State Turnpike Commission Turnpike
Revenue 1996 Series A
5.50% 2/15/26 - 06 (MBIA) ...................... 75,000 77,515
----------
77,515
----------
Sales Tax Revenue Bonds - 1.35%
Hamilton County Ohio (Football Project)
Sales Tax 5.00% 12/1/27 (MBIA) ................. 30,000 25,362
----------
25,362
----------
School District General Obligation Bonds - 5.73%
Brecksville-Broadview Heights Ohio School
District 5.25% 12/1/21 (FGIC) .................. 50,000 45,871
Gahanna-Jefferson Ohio Public Schools
4.75% 12/1/21 .................................. 75,000 62,103
----------
107,974
----------
Territorial Revenue Bonds - 6.38%
Puerto Rico Industrial Tourist Educational
Medical and Environmental Control
Facilities (Mennonite General Hospital)
Series A 5.625% 7/1/27 ......................... 60,000 46,657
Virgin Islands Public Finance Authority Revenue
6.125% 10/1/29 (ACA) ........................... 75,000 73,541
----------
120,198
----------
Transportation Revenue Bonds - 7.98%
Dayton Ohio Special Facilities Revenue
(Emery Air Freight) 6.05% 10/1/09 .............. 150,000 150,207
----------
150,207
----------
Waste Disposal Revenue Bonds - 6.65%
Ohio Solid Waste Disposal Revenue
5.60% 8/1/32 (AMT) (USG) ....................... 150,000 125,264
----------
125,264
----------
Other General Obligation Bonds - 4.70%
Muskingham County Ohio
5.25% 12/1/27 (MBIA) ........................... 100,000 88,565
----------
88,565
----------
Total Municipal Bonds
(cost $1,952,587) 1,810,808
----------
<PAGE>
Total Market Value of Securities - 96.16%
(cost $1,952,587) ............................................. $1,810,808
Receivables and Other Assets
Net of Liabilities - 3.84% .................................... 72,282
----------
Net assets applicable to 377,961
Shares Outstanding - 100.00% .................................. $1,883,090
==========
Net Asset Value - Delaware Tax-Free Ohio Fund
A Class ($1,558,961 / 312,901 shares) ......................... $4.98
-----
Net Asset Value - Delaware Tax-Free Ohio Fund
B Class ($233,791 / 46,928 shares) ............................ $4.98
-----
Net Asset Value - Delaware Tax-Free Ohio Fund
C Class ($90,338 / 18,132 shares) ............................. $4.98
-----
- ---------------------------------
* For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMT - Subject to Alternative Minimum Tax
AMBAC - Insured by AMBAC Indemnity Corporation
FGIC - Insured by the Financial Guaranty Insurance Company
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
USG - Insured by the USG Corporation
Components of Net Assets at February 29, 2000:
Capital shares (unlimited authorization-no par) ............... $2,088,331
Accumulated net realized loss on investments .................. (63,462)
Net unrealized depreciation of investments .................... (141,779)
----------
Total net assets .............................................. $1,883,090
==========
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Ohio Fund
Net asset value A Class ....................................... $4.98
Sales charge (3.75% of offering price or 3.82% of
amount invested per share) (B) ................................ 0.19
-----
Offering price ................................................ $5.17
=====
- -------------------------
(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
17
<PAGE>
Statements of Assets and Liabilities
February 29, 2000 Delaware Tax-Free New Jersey Fund
- --------------------------------------------------------------------------------
Assets:
Investments at market ........................................... $3,796,667
Cash ............................................................ 405,442
Interest receivable ............................................. 60,902
Other assets .................................................... 17,228
----------
Total assets .................................................... 4,280,239
----------
Liabilities:
Payable for securities purchased ................................ 302,169
Liquidations payable ............................................ 10,389
Dividends payable ............................................... 2,958
Other accounts payable and accrued expenses ..................... 22,867
----------
Total liabilities ............................................... 338,383
----------
Total Net Assets ................................................ $3,941,856
----------
Investments at cost ............................................. $4,230,742
----------
See accompanying notes
February 29, 2000 Delaware Tax-Free Ohio Fund
- --------------------------------------------------------------------------------
Assets:
Investments at market ........................................... $1,810,808
Cash ............................................................ 43,627
Interest receivable ............................................. 26,191
Other assets .................................................... 18,157
----------
Total assets .................................................... 1,898,783
----------
Liabilities:
Dividends payable ............................................... 1,132
Other accounts payable and accrued expenses ..................... 14,561
----------
Total liabilities ............................................... 15,693
----------
Total Net Assets ................................................ $1,883,090
==========
Investments at cost ............................................. $1,952,587
==========
See accompanying notes
18
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free DelawareTax-Free
Year Ended February 29, 2000 Pennsylvania Fund New Jersey Fund Ohio Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment Income:
Interest ............................................................. $ 51,645,466 $ 211,317 $ 97,622
Expenses:
Management fees ...................................................... 4,512,746 22,125 9,840
Distribution expense ................................................. 2,061,769 26,202 6,640
Dividend disbursing and transfer agent fees and expenses ............. 637,812 4,020 1,732
Accounting and administration ........................................ 337,225 1,608 715
Reports and statements to shareholders ............................... 144,500 1,991 1,500
Taxes (other than taxes on income) ................................... 180 84 72
Professional fees .................................................... 56,257 7,200 7,800
Registration fees .................................................... 5,000 1,110 2,389
Custodian fees ....................................................... 221,161 5,769 3,011
Trustees' fees ....................................................... 19,332 937 901
Other ................................................................ 125,527 3,351 2,060
-------------------------------------------------------
8,121,509 74,397 36,660
Less expenses absorbed or waived ..................................... -- (32,627) (23,294)
Less expenses paid indirectly ........................................ (203,624) (5,460) (2,237)
-------------------------------------------------------
Total expenses ....................................................... 7,917,885 36,310 11,129
-------------------------------------------------------
Net Investment Income ................................................ 43,727,581 175,007 86,493
-------------------------------------------------------
Net Realized and Unrealized Loss on Investments:
Net realized loss on investments ..................................... (20,524,031) (36,596) (62,953)
Net change in unrealized appreciation/depreciation of investments .... (69,393,134) (481,895) (169,480)
-------------------------------------------------------
Net Realized and Unrealized Loss on Investments ...................... (89,917,165) (518,491) (232,433)
-------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations ................. $(46,189,584) $(343,484) $(145,940)
=======================================================
</TABLE>
See accompanying notes
19
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free
Pennsylvania Fund New Jersey Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
2/29/00 2/28/99 2/29/00 2/28/99
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................................. $ 43,727,581 $ 45,875,352 $ 175,007 $ 93,879
Net realized gain (loss) on investments ........................... (20,524,031) (1,073,741) (36,596) --
Net change in unrealized appreciation/depreciation
of investments .................................................. (69,393,134) (2,219,826) (481,895) 13,876
-------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ................................................. (46,189,584) 42,581,785 (343,484) 107,755
-------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
A Class ......................................................... (41,724,653) (44,094,893) (89,272) (64,796)
B Class ......................................................... (1,824,404) (1,652,189) (79,304) (27,121)
C Class ......................................................... (178,524) (128,270) (6,431) (1,962)
Net realized gain on investments:
A Class ......................................................... -- (10,135,844) -- (5,549)
B Class ......................................................... -- (457,794) -- (2,531)
C Class ......................................................... -- (37,685) -- (44)
-------------------------------------------------------------
(43,727,581) (56,506,675) (175,007) (102,003)
-------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ......................................................... 23,862,911 30,667,419 335,525 921,669
B Class ......................................................... 5,605,238 8,898,276 1,309,229 1,787,503
C Class ......................................................... 1,249,953 1,652,106 83,583 170,610
Net asset value of shares issued upon reinvestment of
distributions from net investment income and net realized
gain on investments:
A Class ......................................................... 24,002,904 32,513,835 72,704 64,130
B Class ......................................................... 1,052,295 1,335,707 60,517 20,735
C Class ......................................................... 134,166 131,038 3,871 1,277
-------------------------------------------------------------
55,907,467 75,198,381 1,865,429 2,965,924
-------------------------------------------------------------
Cost of shares repurchased:
A Class ......................................................... (117,904,345) (95,535,313) (467,080) (81,332)
B Class ......................................................... (7,834,490) (4,269,130) (763,068) (274,769)
C Class ......................................................... (1,003,067) (336,053) (77,836) (3)
-------------------------------------------------------------
(126,741,902) (100,140,496) (1,307,984) (356,104)
-------------------------------------------------------------
Increase (decrease) in net assets derived from capital
share transactions .............................................. (70,834,435) (24,942,115) 557,445 2,609,820
-------------------------------------------------------------
Net Increase (Decrease) in Net Assets ............................. (160,751,600) (38,867,005) 38,954 2,615,572
Net Assets:
Beginning of year ................................................. 918,696,887 957,563,892 3,902,902 1,287,330
-------------------------------------------------------------
End of year ....................................................... $757,945,287 $918,696,887 $3,941,856 $3,902,902
=============================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Delaware Tax-Free
Ohio Fund
- -----------------------------------------------------------------------------------------------
Year Ended
2/29/00 2/28/99
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................................. $ 86,493 $ 64,513
Net realized gain (loss) on investments ........................... (62,953) 15,175
Net change in unrealized appreciation/depreciation
of investments .................................................. (169,480) (9,770)
-------------------------
Net increase (decrease) in net assets resulting
from operations ................................................. (145,940) 69,918
-------------------------
Distributions to Shareholders from:
Net investment income:
A Class ......................................................... (74,362) (61,390)
B Class ......................................................... (9,020) (2,654)
C Class ......................................................... (3,111) (469)
Net realized gain on investments:
A Class ......................................................... -- (20,891)
B Class ......................................................... -- --
C Class ......................................................... -- (249)
-------------------------
(86,493) (85,653)
-------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ......................................................... 377,929 173,857
B Class ......................................................... 174,296 310,000
C Class ......................................................... 131,943 15,000
Net asset value of shares issued upon reinvestment of
distributions from net investment income and net realized
gain on investments:
A Class ......................................................... 59,163 76,004
B Class ......................................................... 9,050 480
C Class ......................................................... 3,284 708
-------------------------
755,665 576,049
-------------------------
Cost of shares repurchased:
A Class ......................................................... (106,696) (11,116)
B Class ......................................................... -- (233,046)
C Class ......................................................... (51,000) --
-------------------------
(157,696) (244,162)
-------------------------
Increase (decrease) in net assets derived from capital
share transactions .............................................. 597,969 331,887
-------------------------
Net Increase (Decrease) in Net Assets ............................. 365,536 316,152
Net Assets:
Beginning of year ................................................. 1,517,554 1,201,402
-------------------------
End of year ....................................................... $1,883,090 $1,517,554
=========================
</TABLE>
See accompanying notes
20
<PAGE>
Financial Highlights
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Tax-Free Pennsylvania Fund A Class
- ------------------------------------------------------------------------------------------------------------------------
Year Ended
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $8.290 $8.420 $8.240 $8.460 $8.180
Income (loss) from investment operations:
Net investment income ................................... 0.410 0.415 0.430 0.456 0.476
Net realized and unrealized gain (loss) on investments .. (0.830) (0.034) 0.193 (0.105) 0.330
------------------------------------------------------------
Total from investment operations ........................ (0.420) 0.381 0.623 0.351 0.806
------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.410) (0.415) (0.430) (0.456) (0.476)
Distributions from net realized gain on investments ..... none (0.096) (0.013) (0.115) (0.050)
------------------------------------------------------------
Total dividends and distributions ....................... (0.410) (0.511) (0.443) (0.571) (0.526)
------------------------------------------------------------
Net asset value, end of period ............................ $7.460 $8.290 $8.420 $8.240 $8.460
============================================================
Total return(1) ........................................... (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 average net assets .... 5.21% 4.96% 5.20% 5.52% 5.67%
Portfolio turnover ...................................... 38% 41% 32% 27% 25%
Delaware Tax-Free Pennsylvania Fund B Class
- ------------------------------------------------------------------------------------------------------------------------
Year Ended
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
Net asset value, beginning of period ...................... $8.290 $8.420 $8.240 $8.460 $8.180
Income (loss) from investment operations:
Net investment income ................................... 0.347 0.348 0.370 0.390 0.408
Net realized and unrealized gain (loss) on investments .. (0.830) (0.034) 0.193 (0.105) 0.330
------------------------------------------------------------
Total from investment operations ........................ (0.483) 0.314 0.563 0.285 0.738
------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.347) (0.348) (0.370) (0.390) (0.408)
Distributions from net realized gain on investments none (0.096) (0.013) (0.115) (0.050)
------------------------------------------------------------
Total dividends and distributions ....................... (0.347) (0.444) (0.383) (0.505) (0.458)
------------------------------------------------------------
Net asset value, end of period ............................ $7.460 $8.290 $8.420 $8.240 $8.460
============================================================
Total return(1) ........................................... (5.94%) 3.81% 6.92% 3.52% 9.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $37,390 $42,994 $37,631 $31,644 $20,861
Ratio of expenses to average net assets ................. 1.72% 1.75% 1.74% 1.71% 1.71%
Ratio of net investment income to average net assets .... 4.41% 4.16% 4.40% 4.72% 4.86%
Portfolio turnover ...................................... 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.
See accompanying notes
21
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Tax-Free Pennsylvania Fund C Class
- ------------------------------------------------------------------------------------------------------------------------
Period
11/29/95(1)
Year Ended to
2/29/00 2/28/99 2/28/98 2/28/97 2/29/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $8.290 $8.420 $8.240 $8.460 $8.510
Income (loss) from investment operations:
Net investment income ................................... 0.347 0.355 0.364 0.390 0.102
Net realized and unrealized gain (loss) on investments .. (0.830) (0.034) 0.193 (0.105) none
------------------------------------------------------------
Total from investment operations ........................ (0.483) 0.321 0.557 0.285 0.102
------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.347) (0.355) (0.364) (0.390) (0.102)
Distributions from net realized gain on investments ..... none (0.096) (0.013) (0.115) (0.050)
------------------------------------------------------------
Total dividends and distributions ....................... (0.347) (0.451) (0.377) (0.505) (0.152)
------------------------------------------------------------
Net asset value, end of period ............................ $7.460 $8.290 $8.420 $8.240 $8.460
============================================================
Total return(2) ........................................... (5.94%) 3.81% 6.92% 3.52% 1.19%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $3,909 $3,963 $2,569 $1,181 $123
Ratio of expenses to average net assets ................. 1.72% 1.75% 1.74% 1.71% 1.71%
Ratio of net investment income to average net assets .... 4.41% 4.16% 4.40% 4.72% 4.86%
Portfolio turnover ...................................... 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
22
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
New Jersey Fund New Jersey Fund New Jersey Fund
A Class B Class C Class(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Period Period
9/2/97(1) 9/2/97(1)
Year Ended to Year Ended to Year Ended
2/29/00 2/28/99 2/28/98 2/29/00 2/28/99 2/28/98 2/29/00 2/28/99
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $5.750 $5.700 $5.500 $5.750 $5.700 $5.500 $5.750 $5.700
Income (loss) from investment operations:
Net investment income ................................... 0.255 0.256 0.115 0.214 0.213 0.069 0.214 0.213
Net realized and unrealized gain (loss)
on investments ........................................ (0.690) 0.075 0.200 (0.690) 0.075 0.200 (0.690) 0.075
------------------------------------------------------------------------
Total from investment operations ........................ (0.435) 0.331 0.315 (0.476) 0.288 0.269 (0.476) 0.288
------------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.255) (0.256) (0.115) (0.214) (0.213) (0.069) (0.214) (0.213)
Distributions from net realized gain on investments ..... none (0.025) none none (0.025) none none (0.025)
------------------------------------------------------------------------
Total dividends and distributions ....................... (0.255) (0.281) (0.115) (0.214) (0.238) (0.069) (0.214) (0.238)
------------------------------------------------------------------------
Net asset value, end of period ............................ $5.060 $5.750 $5.700 $5.060 $5.750 $5.700 $5.060 $5.750
========================================================================
Total return(2) ........................................... (7.68%) 5.93% 5.77% (8.38%) 5.14% 4.90% (8.37%) 5.14%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $1,750 $2,052 $1,141 $2,032 $1,680 $146 $160 $171
Ratio of expenses to average net assets(4)............... 0.50% 0.50% 0.88% 1.25% 1.25% 1.56% 1.25% 1.25%
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% 2.20% 2.50%
Ratio of net investment income to average
net assets ............................................ 4.74% 4.42% 4.23% 3.99% 3.67% 3.63% 3.99% 3.67%
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% 3.04% 2.42%
Portfolio turnover ...................................... 14% 0% 47% 14% 0% 47% 14% 0%
</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.
(3) 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.
(4) 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.
See accompanying notes
23
<PAGE>
Financial Highlights (continued)
Selected data for each share of the Fund outstanding
throughout each period were as follows:
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Ohio Fund Ohio Fund Ohio Fund
A Class B Class(3) C Class(3)
- ---------------------------------------------------------------------------------------------------------------------------------
Period
9/2/97(1)
Year Ended to Year Ended Year Ended
2/29/00 2/28/99 2/28/98 2/29/00 2/28/99 2/29/00 2/28/99
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $5.650 $5.730 $5.500 $5.650 $5.690 $5.650 $5.690
Income (loss) from investment operations:
Net investment income ................................... 0.262 0.272 0.120 0.222 0.231 0.221 0.231
Net realized and unrealized gain (loss) on investments .. (0.670) 0.013 0.230 (0.670) 0.053 (0.670) 0.053
--------------------------------------------------------------------
Total from investment operations ........................ (0.408) 0.285 0.350 (0.448) 0.284 (0.449) 0.284
--------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.262) (0.272) (0.120) (0.222) (0.231) (0.221) (0.231)
Distributions from net realized gain on investments ..... none (0.093) none none (0.093) none (0.093)
--------------------------------------------------------------------
Total dividends and distributions ....................... (0.262) (0.365) (0.120) (0.222) (0.324) (0.221) (0.324)
--------------------------------------------------------------------
Net asset value, end of period ............................ $4.980 $5.650 $5.730 $4.980 $5.650 $4.980 $5.650
====================================================================
Total return(2) ........................................... (7.37%) 5.12% 6.41% (8.06%) 4.37% (8.08%) 4.37%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $1,559 $1,422 $1,201 $234 $80 $90 $16
Ratio of expenses to average net assets(4) .............. 0.50% 0.50% 0.88% 1.25% 1.25% 1.25% 1.25%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ......... 1.93% 1.86% 1.93% 2.68% 2.61% 2.68% 2.61%
Ratio of net investment income to average
net assets ............................................ 4.95% 4.75% 4.38% 4.20% 4.00% 4.20% 4.00%
Ratio of net investment income to average
net assets prior to expense limitation and
expenses paid indirectly .............................. 3.52% 3.39% 3.33% 2.77% 2.64% 2.77% 2.64%
Portfolio turnover ...................................... 42% 45% 66% 42% 45% 42% 45%
</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.
(3) Shares of the Ohio Fund B and C Classes were initially offered on September
2, 1997. For the period September 2, 1997 through February 28, 1998, there
was no shareholder activity besides the initial seed purchase of 1 share.
Financial highlights for this period are not presented because the data is
not believed to be meaningful.
(4) Ratios for the year ended February 29, 2000 including fees paid indirectly
in accordance with Securities and Exchange Commission rules were 0.63%,
1.38% and 1.38% for A Class, B Class and C Class, respectively. See
accompanying notes
See accompanying notes
24
<PAGE>
Notes to Financial Statements
February 29, 2000
- --------------------------------------------------------------------------------
Delaware Group State Tax-Free Income Trust (the "Trust") is registered
as a non-diversified open-end investment company under the Investment Company
Act of 1940, as amended. The Trust is organized as a Pennsylvania trust and
offers three series: the Delaware Tax-Free Pennsylvania Fund, the Delaware
Tax-Free New Jersey Fund, and the Delaware Tax-Free Ohio Fund (each referred to
as a "Fund" or collectively as the "Funds"). 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. The Delaware Tax-Free Ohio Fund seeks as high a level of current
interest income exempt from federal income tax and Ohio 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
Trust:
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 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 generally
accepted accounting principles.
Class Accounting - Investment income, common expenses and realized and
unrealized gain (loss) on investments are allocated to the various classes of
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.
<PAGE>
Certain expenses of the Trust are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and 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 year ended
February 29, 2000 are as follows:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
------------ ---------- ---------
"Soft Dollar" Expenses ................ $19,463 $ 93 $ 41
Earnings Credits ...................... 184,161 5,367 2,196
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 of the Funds,
an annual fee, based on its net assets. The management fee rates changed
effective April 1, 1999.
Following are the new management fees as a percentage of average daily net
assets:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
------------ ---------- ---------
On the first $500 million ............. 0.55% 0.55% 0.55%
On the next $500 million .............. 0.50% 0.50% 0.50%
On the next $1.5 billion .............. 0.45% 0.45% 0.45%
In excess of $2.5 billion ............. 0.425% 0.425% 0.425%
Prior to April 1, 1999, Delaware Tax-Free Pennsylvania Fund paid DMC an annual
fee at the rate of 0.60% on the first $500 million of average daily net assets
of the Fund, 0.575% on the next $250 million and 0.55% on the average daily net
assets over $750 million, less all amounts paid to the trustees, and the
Delaware Tax-Free New Jersey Fund and the Delaware Tax-Free Ohio Fund paid at
the rate of 0.55% on the first $500 million of average daily net assets, 0.525%
on the next $500 million and 0.50% on the average daily net assets over $1
billion.
25
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Investment Management and Other Transactions
with Affiliates (continued)
DMC has elected to waive its fees and reimburse the Delaware Tax-Free New Jersey
Fund and the Delaware Tax-Free Ohio Fund to the extent that annual operating
expenses exclusive of distribution expenses exceed 0.25% of average daily net
assets through April 30, 2000.
The Trust 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 February 29, 2000, the Funds had liabilities payable to affiliates as
follows:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
------------ ---------- ---------
Investment management fee
payable to DMC ...................... $23,417 -- --
Dividend disbursing, transfer
agent and accounting
services and other
expenses payable to DSC ............. 47,389 $573 $224
Other expenses payable
to DMC and affiliates ............... 24,312 337 277
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 and the Delaware Tax-Free Ohio Fund A Classes
and 1.00% of the average daily net assets of the B and C Class for all three
Funds.
For the year ended February 29, 2000, DDLP earned commissions on sales of the A
Class shares for each Fund as follows:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
------------ ---------- ---------
$73,810 $308 $146
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Trust. These officers, trustees and employees are paid no compensation by
the Trust. 3. Investments During the year ended February 29, 2000, each Fund had
purchases and sales of investment securities other than temporary cash
investments as follows:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
------------ ---------- ---------
Purchases ............................. $314,228,440 $1,099,522 $1,302,217
Sales. ................................ 385,533,961 546,941 723,717
3. Investments (continued)
At February 29, 2000, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund was as
follows:
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Pennsylvania New Jersey Ohio
Fund Fund Fund
------------ ---------- ---------
Cost of investments ................... $760,658,337 $4,230,742 $1,952,867
============ ========== ==========
Aggregate unrealized
appreciation ........................ $16,691,615 $3,036 $1,121
Aggregate unrealized
depreciation ........................ (34,748,145) (437,111) (143,180)
------------ ---------- ----------
Net unrealized appreciation
(depreciation) ...................... $(18,056,530) $(434,075) $(142,059)
============ ========== ==========
<PAGE>
For federal income tax purposes, the Funds had the following capital loss
carryforwards at February 29, 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
Delaware Tax-Free Ohio Fund $19,082
4. Capital Shares
Transactions in capital shares were as follows:
Delaware Tax-Free
Pennsylvania Fund
-----------------------
Year Ended
2/29/00 2/28/99
Shares sold:
A Class ................................. 3,061,342 3,665,847
B Class ................................. 707,397 1,063,689
C Class ................................. 156,389 197,267
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ................................. 3,059,519 3,887,283
B Class ................................. 134,274 159,712
C Class ................................. 17,135 15,678
----------- -----------
7,136,056 8,989,476
----------- -----------
Shares repurchased:
A Class ................................. (15,128,940) (11,413,196)
B Class ................................. (1,011,697) (509,600)
C Class ................................. (127,172) (40,253)
----------- -----------
(16,267,809) (11,963,049)
----------- -----------
Net decrease ............................ (9,131,753) (2,973,573)
=========== ===========
26
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
4. Capital Shares (continued)
Transactions in capital shares were as follows:
Delaware Tax-Free
New Jersey Fund
-----------------------
Year Ended
2/29/00 2/28/99
Shares sold:
A Class ................................. 63,332 159,315
B Class ................................. 243,724 310,636
C Class ................................. 15,199 29,510
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ................................. 13,639 11,163
B Class ................................. 11,394 3,597
C Class ................................. 731 221
------- -------
348,019 514,442
------- -------
Shares repurchased:
A Class ................................. (87,904) (14,068)
B Class ................................. (145,718) (47,921)
C Class ................................. (14,021) --
-------- --------
(247,643) (61,989)
-------- --------
Net increase .............................. 100,376 452,453
======== ========
Delaware Tax-Free
Ohio Fund
-----------------------
Year Ended
2/29/00 2/28/99
Shares sold:
A Class ................................. 71,029 30,632
B Class ................................. 30,958 54,573
C Class ................................. 23,810 2,636
Shares issued upon reinvestment of
distributions from net investment income
and net realized gain on investments:
A Class ................................. 11,177 13,367
B Class ................................. 1,733 85
C Class ................................. 620 125
------- -------
139,327 101,418
------- -------
Shares repurchased:
A Class ................................. (21,015) (1,925)
B Class ................................. -- (40,422)
C Class ................................. (9,060) --
-------- --------
(30,075) (42,347)
-------- --------
Net increase .............................. 109,252 59,071
======== ========
5. Lines of Credit
Effective October 8, 1999, the Funds, along with certain other funds in the
Delaware Investments Family of Funds (the "Participants"), participate in a
$683,500,000 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 Funds' allocation of the
entire facility. The Participants may borrow up to a maximum of one third of
their net assets under the agreement. Prior to October 8, 1999, the Delaware
Tax-Free Pennsylvania, New Jersey, and Ohio Funds had committed lines of credit
of $29,100,000, $100,000 and $100,000, respectively. The Funds had no amounts
outstanding at February 29, 2000 or at any time during the fiscal year.
<PAGE>
6. Market and Credit Risk
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, 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.
7. Tax Information (Unaudited)
The information set forth below is for each Fund's fiscal year as required
by federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2000. Please
consult your tax advisor for proper treatment of this information. For the
fiscal year ended February 29, 2000, each Fund designates as long-term capital
gains and ordinary income distributions paid during the year as follows:
(A) (B)
Long-Term Ordinary
Capital Gains Income
Distributions Distributions
Fund (Tax Basis) (Tax Basis)
---- ----------- -----------
Delaware Tax-Free Pennsylvania Fund ............. 0% 0%
Delaware Tax-Free New Jersey Fund ............... 0% 0%
Delaware Tax-Free Ohio Fund ..................... 0% 0%
(C) (D)
Tax-Exempt Total
Interest Distributions
Fund (Tax Basis) (Tax Basis)
---- ----------- -----------
Delaware Tax-Free Pennsylvania Fund ............. 100% 100%
Delaware Tax-Free New Jersey Fund ............... 100% 100%
Delaware Tax-Free Ohio Fund ..................... 100% 100%
- ----------
*Items (A), (B) and (C) are based on a percentage of the fund's total
distributions.
27
<PAGE>
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group State Tax-Free Income Trust
We have audited the accompanying statements of net assets of Delaware Group
State Tax-Free Income Trust (the "Trust") (comprised of Delaware Tax-Free
Pennsylvania Fund, Delaware Tax-Free New Jersey Fund and Delaware Tax-Free Ohio
Fund) and the statements of assets and liabilities of Delaware Tax-Free New
Jersey Fund and Delaware Tax-Free Ohio Fund as of February 29, 2000, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of February 29, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Delaware Group State Tax-Free Income
Trust at February 29, 2000, the results of their operations for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and their financial highlights for each of the periods indicated
therein, in conformity with accounting principles generally accepted in the
United States.
/s/ Ernst & Young LLP
--------------------------
Ernst & Young LLP
Philadelphia, Pennsylvania
April 3, 2000
28
<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>
<S> <C> <C>
Growth of Capital International and Global Tax-Exempt Income
o Technology and o Emerging Markets Fund o National High-Yield
Innovation 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 o Global Equity Fund o Tax-Free USA
Fund* o Global Bond Fund Intermediate Fund
o Small Cap Value Fund o State Tax-Free Funds**
o U.S. Growth Fund Current Income
o Tax-Efficient Equity Fund o Delchester Fund Stability of Principal
o Social Awareness Fund o High-Yield o Cash Reserve
Opportunities Fund o Tax-Free Money Fund
Total Return o Strategic Income Fund
o Blue Chip Fund o Corporate Bond Fund Asset Allocation
o Devon Fund o Extended Duration o Foundation Funds
o Growth and Income Fund Bond Fund Growth Portfolio
o Decatur Equity o American Government Balanced Portfolio
Income Fund Bond Fund Income Portfolio
o REIT Fund o U.S. Government
o Balanced Fund 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 annual report is for the information of Delaware Tax-Free Pennsylvania
Fund, Delaware Tax-Free New Jersey Fund, and Delaware Tax-Free Ohio Fund
shareholders, but it may be used with prospective investors when preceded or
accompanied by a current Prospectus for Delaware Tax-Free Pennsylvania Fund,
Delaware Tax-Free New Jersey Fund, and Delaware Tax-Free Ohio 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>
<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
Walter P. Babich St. Paul, MN
Board Chairman National Distributor
Citadel Constructors, Inc. AFFILIATED OFFICERS Delaware Distributors, L.P.
King of Prussia, PA Philadelphia, PA
Charles E. Haldeman, Jr.
David K. Downes President and Chief Executive Officer Shareholder Servicing, Dividend
President and Chief Executive Officer Delaware Management Holdings, Inc. Disbursing and Transfer Agent
Delaware Investments Family of Funds Philadelphia, PA Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA
Richard J. Flannery
John H. Durham Executive Vice President 1818 Market Street
Private Investor and General Counsel Philadelphia, PA 19103-3682
Horsham, PA Delaware Investments
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>
(2947) Printed in the USA
AR-007 [2/00] PPL 4/00 (J5756)
