<PAGE>
FOR TAX-EXEMPT INCOME
NATIONAL TAX-FREE FUNDS
TAX-FREE USA FUND
TAX-FREE INSURED FUND
TAX-FREE USA INTERMEDIATE FUND
TAX-FREE NATIONAL HIGH YIELD FUND
service and guidance
professional management
goals
(photo of illustration from Tax-Exempt Brochure)
1999
SEMI-ANNUAL
REPORT
DELAWARE(SM)
INVESTMENTS
- ------------------------
Philadelphia o London
<PAGE>
for tax-
exempt
income
2
March 12, 1999
DEAR SHAREHOLDER:
GLOBAL ECONOMIC UNCERTAINTY CHANGED the landscape for fixed income investing
during the first half of fiscal 1999. Concerns about credit risk during the late
summer and early fall of 1998 drove foreign and domestic investors to the safety
and liquidity of U.S. Treasuries. Treasury prices rose as a result, pushing bond
yields to record lows.
Yields on municipal bonds fell modestly compared to Treasury yields. This
created what we considered attractive buying opportunities as the typical gap
between yields on municipal bonds and taxable fixed income securities narrowed
significantly.
By late October, at the height of the Treasury market's price rally, longer
term municipal bonds offered as much as 98% of the income potential of
comparable Treasuries. Although the gap has widened since then, 30-year
municipal bonds are still yielding about 89% of what Treasuries are yielding.
Traditionally, 83% has been the normal ratio between municipal bonds and
Treasuries. (Source: Municipal Market Data)
Over the past six months, we increased the average duration of our four
national municipal bond funds. Our goal was to take advantage of higher yields
available on bonds at the longer end of the maturity range.
Since last fall, new issuance of municipal bonds has tapered off. This gave
the market time to absorb last year's $285 billion in total municipal bond
supply--the second largest annual volume in the market's history.
CUMULATIVE TOTAL RETURN AT NET ASSET VALUE
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
FEBRUARY 28, 1999
- --------------------------------------------------------------------------------
TAX-FREE USA FUND A CLASS +1.54%
Lehman Brothers Municipal Bond Index +2.62%
Lipper General Municipal Debt Fund Average (264 funds) +1.76%
- --------------------------------------------------------------------------------
TAX-FREE INSURED FUND A CLASS +1.98%
Lehman Brothers Insured Bond Index +2.54%
Lipper Insured Municipal Debt Fund Average (47 funds) +1.95%
- --------------------------------------------------------------------------------
TAX-FREE USA INTERMEDIATE FUND A CLASS +2.36%
Merrill Lynch Three-to-Seven Year Municipal Bond Index +2.66%
Lipper Intermediate Municipal Debt Fund Average (145 funds) +2.15%
- --------------------------------------------------------------------------------
NATIONAL HIGH-YIELD MUNICIPAL BOND FUND A CLASS +2.48%
Lehman Brothers Municipal Bond Index +2.62%
Lipper High-Yield Municipal Debt Fund Average (66 funds) +1.52%
All performance shown above is at net asset value and assumes reinvestment of
distributions. For complete performance information for all Classes, see pages 8
and 9. Each index shown above is unmanaged. The Lehman Brothers and Merrill
Lynch indexes are composed of municipal bonds with a variety of quality ratings.
<PAGE>
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3
Refunding activity--up 42% since 1997--contributed to the large supply. Just
as homeowners take advantage of low interest rates to refinance their mortgages,
municipalities can refinance bonds to raise capital that is then used to pay off
older bonds with higher interest rates. Many states have used lower interest
rates to reduce existing debt payments.
On the pages that follow, Patrick Coyne and Mitchell Conery--the Fund's
portfolio managers--review key events in the municipal bond market during the
past six months and each Fund's current positioning. They also share their
outlook for the remainder of fiscal 1999.
We thank you for your investment, and look forward to reporting to you again
next fall.
Sincerely,
/s/ Jeffrey J. Nick
- ------------------------------------
JEFFREY J. NICK
Chairman, President and
Chief Executive Officer
Delaware Investments Family of Funds
JEFFREY J. NICK NAMED CHAIRMAN
On December 17, 1998, Jeffrey J. Nick was named Chairman of the Delaware
Investments Family of Funds. He replaces Wayne A. Stork who has retired as
Chairman of the Board of Directors, but continues to serve as a Board Member.
Mr. Nick was named President and Chief Executive Officer of Delaware Investments
Family of Funds in October 1997. He has been CEO of Lincoln National Investment
Companies, an indirect parent company of Delaware Investments, since October
1996 and previously managed Lincoln's operations in the United Kingdom. Mr. Nick
holds an MBA from the University of Chicago and a Bachelor of Arts degree from
Princeton University.
<PAGE>
for tax-
exempt
income
4
PORTFOLIO MANAGERS' REVIEW
BY
PATRICK P. COYNE AND
MITCHELL L. CONERY
Vice President/Senior Portfolio Managers
March 12, 1999
MUNICIPAL BONDS STILL
OFFER VALUE
As economic and currency problems escalated in Russia and Asia last summer,
investors sought refuge in U.S. Treasury bonds. Bond prices rose and the yield
on the 30-year U.S. Treasury hit an historic low in October. Falling Treasury
yields allowed municipal bond yields to nearly catch up to Treasuries.
By October, 30-year AAA (the highest quality rating) general obligation
municipal bonds yielded as much as 98% of the yield available from comparable
maturity Treasuries. We considered this a compelling value given that the
interest on municipal bonds is exempt from federal income tax.
As we finished the first half of fiscal 1999, the yield on the 30-year U.S.
Treasury had risen to 5.57%, once again widening the yield gap between
Treasuries and municipal bonds. However, with 30-year tax-exempt bonds still
yielding more than their historic average of 83% of Treasuries, we believe
municipal bonds remain attractively priced compared to Treasuries.
IMPROVING CREDIT QUALITY ADDS APPEAL
Other reasons municipal bonds appear attractive, in our view, are the financial
strength of state and local governments and the improving credit quality of
their debt issues. Over the past year, credit quality upgrades have exceeded
downgrades by a seven-to-one margin, according to Standard and Poor's.
During the past six months, the difference between yields of bonds with a
quality rating of AAA (the highest rating available) and those with lower
ratings has narrowed. We felt it more prudent to purchase higher quality
securities because we weren't being rewarded sufficiently for the additional
risk related to lower grade securities.
STRATEGIC POSITIONING
TAX-FREE USA FUND
In keeping with our more conservative approach to investing, we have
traditionally kept Tax-Free USA Fund's average duration (sensitivity to interest
rates) shorter than many of its mutual fund peers.
<PAGE>
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5
However, because we believe long-term rates have offered a significant yield
advantage over short-term rates, we are maintaining a somewhat longer duration
on the Tax-Free USA Fund. As of February 28, Tax-Free USA Fund's average
duration was 6.4 years. Our goal is to increase the Fund's income potential.
Even with the increase, the Fund's duration was still relatively short compared
to its peers and its index. This contributed to the Fund's underperformance.
We will probably continue to lengthen the Fund's average duration as long as
we believe long-term bonds offer substantially more income than short-term
bonds. We remain focused on high-grade bonds so that as we strive to increase
the Fund's income potential, we are not increasing our credit risks. At the end
of February, over 80% of the Fund's net assets were allocated to bonds rated
investment-grade (bonds with ratings of BBB or higher).
TAX-FREE INSURED FUND
As we did with Tax-Free USA Fund, we have also extended the average duration of
Tax-Free Insured Fund. As of February 28, the Fund's average duration was 7.1
years. This was slightly shorter than the average of the Fund's peer group.
Although the Fund was still able to keep pace with the average of the funds in
Lipper's Insured Municipal Debt Fund category, it fell a bit short of its
benchmark.
As we noted last September, Tax-Free Insured Fund has benefited from the fact
that most new bond issues have been insured. According to The Bond Buyer, a
trade publication, insurance companies guaranteed 51% of all new municipal bonds
issued in 1998, up from 49% in 1997 and about 48% in 1996. This has offered us
vast opportunities for investment selection and credit protection.
Illinois was the Fund's largest state allocation-representing 25% of the
Fund's net assets. Issues from Illinois, including a revenue bond issued for
Chicago's O'Hare
PORTFOLIO CREDIT QUALITY
- --------------------------------------------------------------------------------
FEBRUARY 28, 1999
<TABLE>
<CAPTION>
TAX-FREE TAX-FREE TAX-FREE USA NAT'L HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL FUND
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AAA 33.99% 84.12% 58.90% 4.40%
AA 12.34% 2.60% 10.49% 2.20%
A 16.45% 4.07% 0% 3.59%
BBB 21.55% 7.07% 24.68% 28.43%
BB & B 6.36% 0.89% 5.93% 9.85%
Not Rated 9.31% 1.25% 0% 51.53%
</TABLE>
<PAGE>
for tax-
exempt
income
6
International Airport, filled three spots among the Fund's top 10 holdings.
Pre-refunded bonds made up 30% of net assets. With interest rates at their
lowest levels in years, municipalities used this opportunity to refinance
existing debt to reduce their long-term obligations. Many of our pre-refunded
holdings have high coupon rates (the stated rate of interest on the bond) and
have contributed nicely to the Fund's income stream. In 1999, we expect
refundings to slow since many state and local issuers have already refinanced.
TAX-FREE USA INTERMEDIATE FUND
During the past six months, we increased Tax-Free USA Intermediate Fund's
average duration by approximately one year to 6.3 years. In an effort to earn
extra income for the Fund, we sold shorter duration bonds with low yields and
bought bonds with longer maturities, but still within the intermediate-term
maturity range (which traditionally is 3 to 10 years).
This strategy worked well for us. The Fund provided a six-month total return
of 2.36%, outpacing its peers in the Lipper Intermediate Municipal Debt Fund
Average and nearly matching the unmanaged Merrill Lynch Three-to-Seven Year
Municipal Bond Index. As we sold bonds that offered little yield incentive, we
replaced them with comparable high-quality bonds with potential for greater
income.
The overall credit quality of the portfolio is essentially unchanged from six
months ago. Investment-grade bonds (those rated BBB or better) represented 94%
of the Fund's net assets, compared to 93% at the end of August.
Pennsylvania and Florida were our two largest state allocations. They were
also among the nation's top five issuers of municipal bonds in 1998.
NATIONAL HIGH YIELD MUNICIPAL BOND FUND
The first half of fiscal 1999 was a fairly good period for National High Yield
Municipal Bond Fund. Although the Fund provided a total return slightly shy of
its benchmark, the Lehman Brothers Municipal Bond Index, it significantly
outpaced the average return of its peers in the Lipper High Yield Municipal Debt
Fund Average.
Since last fall, the gap between yields of investment-grade bonds and lower
rated securities has narrowed. This means that investors have been rewarded less
for taking on the higher credit risks of lower quality issues. In our search for
higher yields, we raised the Fund's average duration to 7.2 years, and invested
half of the portfolio in unrated bonds.
Because unrated bonds are usually priced lower than rated bonds, we often
find opportunities to increase the Fund's income potential with the possibility
for future price appreciation.
There are two main reasons why a bond might be unrated. The issuer may have a
poor credit rating, or, on the other hand, an issuer may be unable or unwilling
to pay the rating fees charged
<PAGE>
for tax-
exempt
income
7
by national rating agencies. This is often the case among smaller issuers who
have limited budgets.
We carefully research these small issuers trying to uncover those with strong
underlying financial strength. In this way, we strive to capture higher income
without significantly changing our quality profile.
MARKET OUTLOOK
As long as long-term interest rates offer a significant advantage over
short-term rates, we expect to continue our strategy of adding to each Fund's
income potential by extending average duration. Although we still think
municipal bonds are relatively inexpensive based on their income potential
compared to Treasuries, we see the real value opportunities in longer term bonds
where interest rates are currently higher.
To help manage the risks of investing in longer term bonds, we continue to
focus on securities with investment-grade quality ratings. With state and local
governments' credit quality improving, we believe municipal bonds remain a sound
choice for most investors seeking to increase their income potential without
increasing their income tax liability.
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
FEBRUARY 28, 1999
<TABLE>
<CAPTION>
TAX-FREE TAX-FREE TAX-FREE USA NAT'L HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL FUND
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of Securities 104 41 28 86
Average Effective Maturity 10.8 years 10.1 years 8.80 years 12.20 years
Average Duration 6.42 years 7.10 years 6.30 years 7.2 years
AMT Income* 11.49% 5.34% 10.04% 5.27%
Average Coupon 6.44% 5.92% 5.00% 6.44%
Current 30-Day SEC Yield**
A Class 3.76% 3.45% 3.50% 4.30%
B Class 3.16% 2.79% 2.74% 3.70%
C Class 3.16% 2.79% 2.74% 3.70%
</TABLE>
*Amount of income subject to the federal alternative minimum tax for the six
months ended February 28, 1999.
**Calculated according to Securities and Exchange Commission Guidelines.
<PAGE>
for tax-
exempt
income
8
PERFORMANCE SUMMARY
TAX-FREE USA FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH FEBRUARY 28, 1999
<TABLE>
<CAPTION>
LIFETIME TEN YEARS FIVE YEARS ONE YEAR
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 1/11/84)
Excluding Sales Charge +9.05% +7.14% +5.09% +4.61%
Including Sales Charge +8.78% +6.73% +4.29% +0.68%
- -------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.87% +3.78%
Including Sales Charge +4.54% -0.19%
- -------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +4.17% +3.78%
Including Sales Charge +4.17% +2.79%
</TABLE>
TAX-FREE INSURED FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH FEBRUARY 28, 1999
<TABLE>
<CAPTION>
LIFETIME TEN YEARS FIVE YEARS ONE YEAR
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 3/25/85)
Excluding Sales Charge +7.81% +6.94% +5.48% +4.79%
Including Sales Charge +7.51% +6.53% +4.68% +0.88%
- -------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +5.37% +3.96%
Including Sales Charge +5.02% +0.00%
- -------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +4.73% +3.96%
Including Sales Charge +4.73% +2.97%
</TABLE>
RETURNS REFLECT REINVESTMENT OF DISTRIBUTIONS AND ANY APPLICABLE SALES CHARGES
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 ASSUMES EITHER THAT CONTINGENT SALES CHARGES DID
NOT APPLY OR THE INVESTMENT WAS NOT REDEEMED. PAST PERFORMANCE IS NOT A
GUARANTEE OF FUTURE RESULTS. EACH FUND MAY INVEST IN MUNICIPAL SECURITIES THAT
GENERATE INCOME SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
Voluntary expense limitations were in effect for Tax-Free USA Intermediate Fund
and National High Yield Municipal Bond Fund for the periods shown. Returns would
have been lower without the limitations.
CLASS A SHARE returns for all Funds except Tax-Free USA Intermediate Fund
reflect the effect of a 3.75% maximum front-end sales charge and a 12b-1 fee (in
effect after 6/1/92 for Tax-Free USA and Tax-Free Insured Funds). Class A
returns for Tax-Free USA Intermediate Fund reflect the effect of a 2.75%
front-end sales charge and a 12b-1 fee.
CLASS B SHARE do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales charge
of up to 4% if redeemed before the end of the sixth year, except Tax-Free USA
Intermediate Fund, which has a 2% deferred sales charge if redeemed before the
end of the third year.
CLASS C SHARE have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
<PAGE>
for tax-
exempt
income
9
TAX-FREE USA INTERMEDIATE FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH FEBRUARY 28, 1999
LIFETIME FIVE YEARS ONE YEAR
- --------------------------------------------------------------------------------
Class A (Est. 1/7/93)
Excluding Sales Charge +6.34% +5.50% +5.60%
Including Sales Charge +5.87% +4.91% +2.70%
- --------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +5.29% +4.71%
Including Sales Charge +5.29% +2.71%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +4.88% +4.71%
Including Sales Charge +4.88% +3.71%
NATIONAL HIGH YIELD MUNICIPAL BOND FUND PERFORMANCE
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH FEBRUARY 28, 1999
<TABLE>
<CAPTION>
LIFETIME TEN YEARS FIVE YEARS ONE YEAR
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 9/22/86)
Excluding Sales Charge +8.05% +8.45% +7.30% +6.18%
Including Sales Charge +7.72% +8.04% +6.49% +2.18%
- -------------------------------------------------------------------------------------
Class B (Est. 12/18/96)
Excluding Sales Charge +7.54% +5.38%
Including Sales Charge +6.28% +1.38%
- -------------------------------------------------------------------------------------
Class C (Est. 5/26/97)
Excluding Sales Charge +7.70% +5.47%
Including Sales Charge +7.70% +4.47%
</TABLE>
RETURNS REFLECT REINVESTMENT OF DISTRIBUTIONS AND ANY APPLICABLE SALES CHARGES
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 ASSUMES EITHER THAT CONTINGENT SALES CHARGES DID
NOT APPLY OR THE INVESTMENT WAS NOT REDEEMED. PAST PERFORMANCE IS NOT A
GUARANTEE OF FUTURE RESULTS. EACH FUND MAY INVEST IN MUNICIPAL SECURITIES THAT
GENERATE INCOME SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM TAX.
Voluntary expense limitations were in effect for Tax-Free USA Intermediate Fund
and National High Yield Municipal Bond Fund for the periods shown. Returns would
have been lower without the limitations.
CLASS A SHARE returns for all Funds except Tax-Free USA Intermediate Fund
reflect the effect of a 3.75% maximum front-end sales charge and a 12b-1 fee (in
effect after 6/1/92 for Tax-Free USA and Tax-Free Insured Funds). Class A
returns for Tax-Free USA Intermediate Fund reflect the effect of a 2.75%
front-end sales charge and a 12b-1 fee.
CLASS B SHARE do not carry a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a deferred sales charge
of up to 4% if redeemed before the end of the sixth year, except Tax-Free USA
Intermediate Fund, which has a 2% deferred sales charge if redeemed before the
end of the third year.
CLASS C SHARE have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
<PAGE>
10 for tax-exempt income
FINANCIAL STATEMENTS
DELAWARE GROUP TAX-FREE FUND, INC.
TAX-FREE USA FUND
STATEMENT OF NET ASSETS
FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS - 100.44%
CONTINUE CARE/RETIREMENT REVENUE BONDS - 1.26%
Clark County, Nevada Assisted Living Homestead
Boulder City Project / Volunteers of America
6.50% 12/01/27 ....................................... $500,000 $516,730
Delaware County, Pennsylvania Authority Revenue
Main Line & Haverford Nursing Home
9.00% 08/01/22 ....................................... 1,975,000 2,276,425
Delaware State Economic Development Authority
First Mortgage Peninsula United Methodist
Series A 6.20% 05/01/15 .............................. 4,000,000 4,273,200
Delaware State Economic Development Authority
Unrefunded Balance First Mortgage Peninsula
United Methodist Series A 8.50% 05/01/22 ............. 455,000 509,195
---------
7,575,550
---------
GENERAL OBLIGATION BONDS - 5.81%
Florida State Board of Education Capital Outlay
Unrefunded Balance Series A
7.25% 06/01/23 ....................................... 2,445,000 2,602,654
Florida State Board of Education Capital Outlay
Series A 4.75% 6/01/28 ............................... 7,000,000 6,670,090
Gahanna-Jefferson Public Schools, Ohio
4.75% 12/01/21 ....................................... 1,400,000 1,336,188
New York, New York Series H
6.125% 08/01/25 ...................................... 10,000,000 10,996,600
New York, New York Unrefunded Balance
Series E 6.00% 08/01/26 .............................. 9,220,000 10,018,083
Texas State (Veterans Land Bank)
7.40% 12/01/20 ....................................... 3,000,000 3,251,490
----------
34,875,105
----------
HIGHER EDUCATION REVENUE BONDS - 5.51%
California Educational Facilities Authority
Revenue (California Institute of Technology)
4.50% 10/01/27 ....................................... 5,000,000 4,643,250
California Educational Facilities Authority
(University of Southern California) Series A
5.00% 10/01/28 ....................................... 5,000,000 4,954,050
District of Columbia Higher Education Revenue
(Georgetown University) Series B
7.15% 04/01/21 ....................................... 7,000,000 7,155,400
Hillsboro County, Florida Educational Facilities
Authority Revenue (University of Tampa)
5.00% 12/01/23 (ASSET GTY) ........................... 250,000 242,725
Missouri State Health and Educational Facilities
Authority Revenue (Washington University)
Series A 4.75% 11/15/37 .............................. 15,000,000 14,164,350
New Hampshire Higher Education & Health Facilities
Authority Revenue (New Hampton School)
5.375% 10/01/28 ...................................... 2,000,000 1,880,100
----------
33,039,875
----------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
HOSPITAL REVENUE BONDS - 3.91%
Allegheny County, Pennsylvania Hospital Development
Authority Revenue (Allegheny Valley Hospital)
7.00% 08/01/15 ....................................... $375,000 $332,696
Allegheny County, Pennsylvania Hospital Development
Authority Revenue (Allegheny Valley Hospital)
7.75% 08/01/20 ....................................... 1,000,000 884,390
Monroeville, Pennsylvania Hospital Authority Revenue
(Forbes Health System)
6.25% 10/01/15 ....................................... 2,000,000 1,796,800
7.00% 10/01/03 ....................................... 2,435,000 2,312,422
7.00% 10/01/13 ....................................... 3,000,000 2,785,530
Philadelphia, Pennsylvania Hospital & Higher
Education Facilities Authority Hospital Revenue
(Jeanes Health System Project)
5.875% 07/01/17 ...................................... 4,575,000 4,744,916
6.85% 07/01/22 ....................................... 7,000,000 7,525,700
Westmoreland County, Pennsylvania Industrial Development
Authority Revenue (Citizens General Hospital)
5.25% 07/01/15 ....................................... 3,185,000 3,056,581
----------
23,439,035
----------
HOUSING REVENUE BONDS - 5.49%
Alaska State Housing Finance Corp Collateralized Mortgage
Obligation Series A 7.05% 6/1/25
(GNMA/FNMA) .......................................... 360,000 378,590
Dade County Housing Finance Authority Single
Family Mortgage 6.70% 04/01/28
(GNMA/FNMA) AMT ...................................... 4,500,000 4,787,820
Illinois Housing Development Authority
Subseries A2 (Homeowner Mortgage)
7.125% 08/01/26 ...................................... 640,000 690,010
Massachusetts State Housing Finance Agency
Residential Development Series C
6.875% 11/15/11 (FNMA) ............................... 2,955,000 3,225,028
Massachusetts State Housing Finance Agency
Revenue Family Mortgage
6.95% 06/01/16 ....................................... 2,500,000 2,650,325
Montgomery County, Pennsylvania Redevelopment
Authority Multi-Family Housing Revenue
(KBF Associates L.P.) 7.25% 7/01/25 .................. 4,970,000 5,274,214
Tennessee Housing Development Agency
Series B 6.60% 07/01/25 AMT .......................... 2,330,000 2,499,554
Utah State Housing Finance Agency, Single Family
Mortgage Series A 7.20% 01/01/27
(FHA/VA) AMT ......................................... 1,245,000 1,330,619
Virginia State Housing Development Authority
7.10% 01/01/25 Series A
7.10% 01/01/25 ....................................... 7,500,000 7,895,775
<PAGE>
for tax-exempt income 11
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
MUNICIPAL BONDS (CONTINUED) AMOUNT VALUE
HOSPITAL REVENUE BONDS (CONTINUED) --------- ------
Wisconsin Housing & Economic Development
Authority Home Ownership Series B
6.75% 09/01/25 AMT ................................... $3,950,000 $4,186,487
----------
32,918,422
----------
INDUSTRIAL DEVELOPMENT BONDS - 7.14%
Alliance, Texas Special Facilities Revenue
(Federal Express Corp. Project)
6.375% 04/01/21 AMT .................................. 6,000,000 6,432,900
Atlanta, Georgia Special Purpose Facilities
Revenue (Delta Airlines Project) Series A
7.50% 12/01/19 ....................................... 1,500,000 1,563,030
Chicago, Illinois O'Hare International Airport
(United Airlines Project) Series A
5.35% 09/01/16 ....................................... 5,000,000 4,983,100
Dallas-Fort Worth, Texas Intl. Airport Facilities
Improvement (American Airlines Inc.)
7.50% 11/01/25 AMT ................................... 8,250,000 8,816,445
Indianapolis, Indiana Airport Authority Special Facilities
(Federal Express Corp. Project)
7.10% 01/15/17 AMT ................................... 7,800,000 8,713,068
Kenton County, Kentucky Airport Board Special
Facilities (Delta Airlines Project)
Series A 7.50% 02/01/12 .............................. 2,000,000 2,190,700
Series B 7.25% 02/01/22 .............................. 4,250,000 4,621,748
Tulsa, Oklahoma Municipal Airport (American Airlines)
7.35% 12/01/11 ....................................... 5,000,000 5,550,050
----------
42,871,041
----------
POLLUTION CONTROL REVENUE BONDS - 14.88%
Claiborne County, Mississippi Pollution Control
Revenue (System Energy Resources Inc.)
7.30% 05/01/25 ....................................... 3,000,000 3,145,470
8.25% 06/01/14 ....................................... 7,365,000 7,643,323
Clark County, Nevada Industrial Development
Revenue (Nevada Power Co. Project) Series C
7.20% 10/01/22 ....................................... 9,000,000 9,866,250
Illinois Development Finance Authority
(Central Illinois Public Service Co.)
Series A 7.60% 03/01/14 .............................. 6,000,000 6,316,020
Michigan State Strategic Funding Limited
Obligation Revenue Refunding Detroit Edison
Series A 5.55% 09/01/29 AMT .......................... 5,000,000 5,044,850
New Hampshire State Business Finance Authority
Pollution Control Revenue (Public
Service Co. of New Hampshire) Series D
6.00% 05/01/21 AMT ................................... 3,000,000 3,056,370
Nez Perce County, Idaho Refunding (Potlatch Corp
Project) 6.00% 10/01/24 .............................. 7,000,000 7,472,360
Parish of Saint Charles, Louisiana
(Louisiana Power & Light Co.)
8.25% 06/01/14 ....................................... 1,350,000 1,402,650
Parish of West Feliciana, Louisiana
(Gulf States Utilities Co. Project)
Series A 7.50%0 5/01/15 .............................. 22,700,000 25,040,597
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
POLLUTION CONTROL REVENUE BONDS (CONTINUED)
Petersburg, Indiana
(Indianapolis Power & Light Co. Project)
6.625% 12/01/24 ...................................... $9,350,000 $10,515,291
Sabine River Authority Texas
(Southwestern Electric Power)
6.10% 04/01/18 (MBIA) ................................ 4,000,000 4,401,440
Sweetwater County, Wyoming Pollution Control
Revenue (Idaho Power Company) Series A
6.05% 07/15/26 ....................................... 5,000,000 5,380,750
----------
89,285,371
----------
POWER AUTHORITY REVENUE BONDS - 7.78%
Georgia Municipal Electric Authority Series L
6.20% 01/01/09 ....................................... 5,000,000 2,998,800
Intermountain Power Agency, Utah Series 87D
Power Supply Revenue 7.07% 07/01/20 .................. 95,575,000 17,359,287
Lower Colorado River Authority, Texas Series B
6.00% 01/01/15 (AMBAC) ............................... 5,000,000 5,167,100
Northern Municipal Power Agency, Minnesota
Electric System Revenue Series A
5.00% 01/01/21 ....................................... 8,500,000 8,300,760
Puerto Rico Electric Power Authority Series EE
4.75% 07/01/24 ....................................... 5,000,000 4,752,350
Tallahassee, Florida Energy Systems Revenue Series A
4.75% 10/01/26 (FSA) ................................. 8,500,000 8,085,965
----------
46,664,262
----------
*PRE-REFUNDED - 20.82%
City of Chicago, Illinois Skyway Toll Bridge
Revenue 6.75% 01/01/17-04 ............................ 3,300,000 3,772,626
Delaware State Economic Development Authority
Peninsula United Methodist First Mortgage
Series A 8.50% 05/01/22-02 ........................... 3,045,000 3,536,219
Florida State Board of Education Series A
Prerefunded Balance 7.25% 06/01/23-00 ................ 2,555,000 2,729,200
Kentucky State Turnpike Authority
7.25% 05/15/10-00 .................................... 1,145,000 1,215,624
Louisiana Public Facilities Authority Hospital
Revenue (Southern Baptist Hospital, Inc.)
(Escrowed to Maturity) 8.00% 05/15/12-99
(AETNA) .............................................. 8,860,000 10,879,726
Massachusetts State General Obligation
7.50% 12/01/07-00 .................................... 3,295,000 3,592,670
7.50% 12/01/07-00 .................................... 3,320,000 3,619,929
Massachusetts State Water Resource Authority Series A
7.00% 04/01/18-00 .................................... 14,510,000 15,377,553
7.50% 04/01/09-00 .................................... 1,080,000 1,150,243
7.50% 04/01/16-00 .................................... 7,300,000 7,774,792
Michigan State Hospital Finance Authority
Revenue (Genesys Health Systems) Series A
7.50% 10/01/27-05 .................................... 8,130,000 9,813,317
8.125% 10/01/21-05 ................................... 4,000,000 5,020,760
New Hampshire State Turnpike System Revenue
7.40% 04/01/20-00 .................................... 11,675,000 12,415,662
7.375% 04/01/12-00 ................................... 3,000,000 3,189,510
<PAGE>
12 for tax-exempt income
STATEMENT OF NET ASSETS (CONTINUED)
- -------------------------------------------------------------------------------
PRINCIPAL MARKET
MUNICIPAL BONDS (CONTINUED) AMOUNT VALUE
POLLUTION CONTROL REVENUE BONDS (CONTINUED) --------- ------
New York, New York Prerefunded Series E
6.00% 08/01/26-06 .................................... $780,000 $885,199
New York City Municipal Water Finance Authority,
New York Water & Sewer System Revenue
A 6.00% 06/15/20-00 .................................. 1,675,000 1,732,335
Philadelphia Hospital & Higher Education Facilities
Authority Hospital Revenue
(Albert Einstein Medical Center)
7.625% 04/01/11-99 ................................... 15,000,000 15,352,050
Tampa, Florida (Florida Aquarium Project)
7.75% 05/01/27-00 .................................... 20,000,000 22,815,000
-----------
124,872,415
-----------
SOLID WASTE DISPOSAL REVENUE BONDS - 6.74%
Ashland, Kentucky Waste Water Treatment Sewer &
Solid Waste Revenue (Ashland, Inc. Project)
7.125% 02/01/22 AMT .................................. 13,200,000 14,802,216
+Marion County West Virginia County Solid Waste
Disposal Facility Revenue-Adirondack Recycling
Series A 8.00% 12/01/25 .............................. 7,906,768 7,116,091
Series B 10.00% 12/01/25 AMT ......................... 1,122,862 1,010,575
Massachusetts State Finance Agency Solid Waste
Disposal Revenue Senior Lien
(Massachusetts Paper Co. Project)
8.5% 11/01/12 ........................................ 10,862,712 10,645,458
Pennsylvania Economic Development Financing
Authority Wastewater Treatment
(Sun Co. R & M Project)
7.60% 12/01/24 AMT ................................... 6,000,000 6,866,760
----------
40,441,100
----------
TRANSPORTATION REVENUE BONDS - 12.98%
Chicago, Illinois Midway Airport Revenue
Series B 5.00% 01/01/31 (MBIA) ....................... 5,000,000 4,822,250
Connector 2000 Assn Inc. South Carolina Toll
Road Revenue Senior (Southern Connector Project)
Series A 5.375% 01/01/38 ............................. 4,000,000 3,636,040
Foothill/Eastern Transportation Corridor Agency
California Toll Road Revenue Senior Lien
Series A 6.00% 01/01/34 .............................. 20,000,000 21,808,600
Kentucky Turnpike Authority
7.25% 05/15/10 ....................................... 6,855,000 7,277,816
Massachusetts State Turnpike Authority
Metropolitan Highway System Revenue Series A
5.00% 01/01/37 ....................................... 15,000,000 14,456,700
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
TRANSPORTATION REVENUE BONDS (CONTINUED)
Oklahoma Turnpike Authority 1st Senior
6.00% 01/01/22 ....................................... $7,465,000 $7,492,695
6.00% 01/01/22 ....................................... 13,535,000 15,384,153
Puerto Rico Commonwealth Highway & Transportation
Authority (Highway Improvements) Series Y
5.00% 07/01/36 ....................................... 3,000,000 2,984,700
----------
77,862,954
----------
WATER & SEWER REVENUE BONDS - 1.82%
Birmingham Alabama Water & Sewer Revenue
4.75% 01/01/29 ....................................... 3,500,000 3,282,510
Harrison County Mississippi Wastewater Management
& Solid Waste 4.75% 02/01/27 (FGIC) .................. 5,000,000 4,684,300
North Jersey District Water Supply
(Wanaque North Project) Series A
5.125% 11/15/21 (MBIA) ............................... 850,000 854,454
North Springs, Florida Water & Sewer Revenue
4.75% 10/01/23 (MBIA) ................................ 1,000,000 956,640
Texas Water Resources Finance Authority Revenue
7.50% 08/15/13 (AMBAC) ............................... 1,125,000 1,145,531
----------
10,923,435
----------
OTHER REVENUE BONDS - 6.30%
Albuquerque, New Mexico Gross Receipts Tax Revenue
Series B 5.00% 07/01/25 .............................. 5,000,000 4,871,100
Austin, Texas Revenue
5.25% 05/15/25 (MBIA) ................................ 10,000,000 10,350,000
Illinois Development Finance Authority Revenue
(School District No. U-46)
5.15% 01/01/19 (FSA) ................................. 3,500,000 3,605,455
Luzerne County, Pennsylvania Industrial Development
Authority (Pennsylvania Gas & Water Co. Project)
Series A 7.00% 12/01/17 AMT (AMBAC) .................. 4,000,000 4,582,600
Metropolitan Pier & Exposition Authority Illinois
Hospitality Facilities Revenue (McCormick PL
Convention) 6.25% 07/01/17 ........................... 3,300,000 3,564,426
Missouri State Water Pollution Control
(Property Tax) Series A
5.00% 6/01/23 ........................................ 1,675,000 1,688,450
Puerto Rico Commonwealth
4.75% 07/01/23 ....................................... 5,000,000 4,790,900
Southeast Wisconsin Professional Baseball Park
District Sales Tax Revenue Series A
5.50% 12/15/26 (MBIA) ................................ 4,000,000 4,342,640
-----------
37,795,571
-----------
TOTAL MUNICIPAL BONDS (COST $552,399,525) 602,564,136
-----------
<PAGE>
for tax-exempt income 13
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES - 100.44%
(COST $552,399,525) ........................................ $602,564,136
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (0.44%) ........................................... (2,655,972)
-------------
NET ASSETS APPLICABLE TO 51,334,517 SHARES ($0.01 PAR VALUE)
OUTSTANDING - 100.00% ...................................... $599,908,164
============
NET ASSET VALUE - USA FUND A CLASS
($558,679,825 / 47,806,616 SHARES) ............................... $11.69
======
NET ASSET VALUE - USA FUND B CLASS
($37,879,172 / 3,241,310 SHARES) ................................. $11.69
======
NET ASSET VALUE - USA FUND C CLASS
($3,349,167 / 286,591 SHARES) .................................... $11.69
======
- ------------
*For Pre-Refunded Bonds, the stated maturity is followed
by the year in which each bond is pre-refunded.
**The interest rate shown for this security is the effective yield.
+Security in default.
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Federal Alternative Minimum Tax
ASSET GTY - Insured by the Asset Guaranty Insurance Corporation
FHA/VA - Insured by the Federal Housing Association/Veterans Association
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 1999:
Common stock, $0.01 par value, 500,000,000 shares authorized to
the Tax-Free USA Fund ....................................... $568,988,363
Undistributed net investment income ............................ 110,603
Accumulated net realized loss on investments ................... (19,355,413)
Net unrealized appreciation of investments ..................... 50,164,611
------------
Total net assets ............................................... $599,908,164
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
TAX-FREE USA FUND A CLASS
Net asset value A Class (A) ......................................... $11.69
Sales charge (3.75% of offering price or 3.94% of amount
invested per share) (B) .......................................... 0.46
------
Offering price ...................................................... $12.15
======
- ------------
(A) Net asset value per share, as illustrated, is the
estimated amount which would be paid upon redemption
or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for
purchases of $100,000 or more.
See accompanying notes
<PAGE>
DELAWARE GROUP TAX-FREE FUND, INC. -
TAX-FREE INSURED FUND
STATEMENT OF NET ASSETS
FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
MUNICIPAL BONDS - 99.08 --------- ------
HIGHER EDUCATION REVENUE BONDS - 6.01%
California Educational Facilities Authority
(LA College Chiropractic) 5.60% 11/01/17 ............. $1,000,000 $1,038,150
California Educational Facilities Authority
(California Institute of Technology)
4.50% 10/01/27 ....................................... 2,500,000 2,321,625
Massachusetts State Health & Education Facilities
Authority (Boston College) Series J
6.625% 07/01/21 (FGIC) ............................... 80,000 86,431
Massachusetts State Industrial Finance Agency
Revenue Higher Education (Clark University Project)
6.10% 07/01/16 ....................................... 1,250,000 1,346,575
---------
4,792,781
---------
HOSPITAL REVENUE BONDS - 6.50%
Monroeville, Pennsylvania Hospital Authority
Hospital Revenue (Forbes Health System)
7.00% 10/01/03 ....................................... 745,000 707,497
Wisconsin State Health & Education Facilities Authority
(Sisters Sorrowful Mother) Series A
5.70% 08/15/26 (MBIA) ................................ 4,200,000 4,468,800
---------
5,176,297
---------
HOUSING REVENUE BONDS - 11.30%
California Housing Finance Agency Series B
6.85% 08/01/23 (MBIA) ................................ 3,860,000 4,098,394
Illinois Development Finance Authority
Refunding Mortgage Federal Housing
Authvority Section 8 Series A
5.80% 07/01/28 (MBIA) ................................ 2,790,000 2,881,679
New Brunswick, New Jersey Housing Authority
(Rutgers University)
4.75% 07/01/18 (FGIC) ................................ 1,000,000 972,810
New Mexico Mortgage Finance Authority
Single Family Mortgage Program Series C
6.20% 07/01/26 (GNMA/FNMA) ........................... 1,000,000 1,049,580
---------
9,002,463
---------
POLLUTION CONTROL REVENUE BONDS - 12.41%
Jefferson County, Arkansas Pollution Control
(Entergy Arkansas Inc. Project)
5.60% 10/01/17 ....................................... 1,000,000 1,019,560
Luzerne County Industrial Development Authority
(Pennsylvania Gas & Water Co. Project)
7.00% 12/01/17 (AMBAC) ............................... 1,000,000 1,145,650
Northampton County Industrial Development Authority
(Citizens Utilities Co.) 6.95% 08/01/15 .............. 1,000,000 1,059,660
Ohio State Air Quality Development Authority
JMG Funding LTD Partnership Project
5.625% 10/01/22 (AMBAC) .............................. 35,000 36,377
<PAGE>
14 for tax-exempt income
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
POLLUTION CONTROL REVENUE BONDS (CONTINUED)
Ohio State Air Quality Development Authority
(Ohio Edison) Series A
7.45% 03/01/16 (FGIC) ................................ $2,000,000 $2,108,500
Salem County, New Jersey Industrial Pollution
Control Financing Authority
(Public Service & Gas Co.)
Series D 6.55% 10/01/29 (MBIA) ....................... 4,000,000 4,524,240
---------
9,893,987
---------
POWER AUTHORITY BONDS - 2.51%
Central Valley Financing Authority California
Cogeneration Project Revenue
(Carson Ice-General Project)
5.00% 07/01/18 ....................................... 2,000,000 2,003,300
---------
2,003,300
---------
*PRE-REFUNDED BONDS - 30.19%
Austin Texas Utility System
6.00% 05/15/15-00 (FGIC) ............................. 185,000 188,996
Austin Texas Utility Systems
6.00% 05/15/15-00 (FGIC) ............................. 1,090,000 1,126,242
Fort Wayne Indiana Hospital Authority
Parkview Memorial Hospital
6.40% 11/15/22-02 (MBIA) ............................. 2,250,000 2,505,713
Massachusetts State Health & Educational
Facilities Authority
6.625% 07/01/21-01 (FGIC) ............................ 2,420,000 2,637,848
Michigan State Hospital Finance Authority
Series A (Genesys Health Systems)
7.50% 10/01/27-05 .................................... 1,500,000 1,810,575
Ohio State Turnpike Commision Series A
5.50% 02/15/26-06 (MBIA) ............................. 1,115,000 1,232,521
Regional Transportation Authority Illinois Revenue
Series D 6.75% 06/01/25-04 (FGIC) .................... 7,970,000 9,188,055
Seattle, Washington Municipality Metropolitan
Seattle Sewer Revenue Series U
6.60% 01/01/32-01 (FGIC) ............................. 5,000,000 5,374,950
----------
24,064,900
----------
SCHOOL DISTRICTS BONDS - 0.67%
Hillsborough County, Florida School Board
Certificates of Participation Master Lease Program
Series A 5.00% 07/01/23 (MBIA) ....................... 100,000 98,471
Miami-Dade County, Florida School Board
Certificates of Participation Series A
5.00% 08/01/26 (AMBAC) ............................... 250,000 245,232
Oak Hills, Ohio Local School District
5.125% 12/01/25 (MBIA) ............................... 190,000 191,072
---------
534,775
---------
TRANSPORTATION REVENUE BONDS - 8.69%
Alameda Corridor Transportation Authority Series 1999 A
(Capital Appreciation Bonds)
5.188% 10/01/30 (MBIA) ............................... 10,000,000 1,952,700
Chicago, Illinois O'Hare International Airport Senior
Lein Series A 5.00% 01/01/16 (MBIA) .................. 5,000,000 4,971,550
---------
6,924,250
---------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
--------- ------
MUNICIPAL BONDS (CONTINUED)
WATER & SEWER REVENUE BONDS - 4.93%
Melrose Park, Illinois Water Revenue Series A
5.00% 07/01/20 (MBIA) ................................ $2,400,000 $2,344,440
North Springs, Florida Water & Sewer Revenue
4.75% 10/01/23 (MBIA) ................................ 1,550,000 1,482,792
Peace River/Manasota Regional Water Supply
Authority Florida Series A
5.00% 10/01/28 (MBIA) ................................ 100,000 98,778
---------
3,926,010
---------
OTHER REVENUE BONDS - 15.87%
Alliance, Texas Special Facility Revenue
(Federal Express Corp. Project)
6.375% 04/01/21 AMT .................................. 1,000,000 1,072,150
Dayton, Ohio Special Facilities Revenue
(Emery Air Freight) Series F
6.05% 10/01/09 ....................................... 2,320,000 2,508,222
Louisiana Stadium & Expo Hotel Occupancy & Stadium
Revenue Series B 4.75% 07/01/21 (FGIC) ............... 2,000,000 1,899,520
Marin, California Emergency Radio Authority Revenue
(Public Saftey & Emergency Radio)
4.75% 08/15/21 (AMBAC) ............................... 1,255,000 1,212,920
Massacusetts State Finance Agency Solid Waste
Disposal Revenue Senior Lein (Massachusetts
Paper Co. Project) 8.50% 11/01/12 .................... 1,018,379 998,011
Trinity River, Texas Pollution Control
(Texas Instruments Inc. Project)
6.20% 03/01/20 ....................................... 1,750,000 1,894,200
Village Center Community Development District
Florida Recreational Series A
5.00% 11/01/21 (MBIA) ................................ 1,000,000 993,230
Washington State Housing Finance Commission
Nonprofit (Virginia Mason Research Center Project)
Series A 5.70% 01/01/24
(LOC US Bank Trust N.A.) ............................. 2,000,000 2,071,780
----------
12,650,033
----------
TOTAL MUNICIPAL BONDS (COST $73,080,740) ................ 78,968,796
----------
<PAGE>
for tax-exempt income 15
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL MARKET VALUE OF SECURITIES - 99.08%
(cost $73,080,740) ....................................... $78,968,796
RECEIVABLES AND OTHER ASSETS NET OF LIABILITIES - 0.92% ..... 735,724
-----------
NET ASSETS APPLICABLE TO 7,251,948 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% .................. $79,704,520
===========
NET ASSET VALUE - INSURED FUND A CLASS
($73,362,191/6,674,886 SHARES) ........................... $10.99
======
NET ASSET VALUE - INSURED FUND B CLASS
($5,008,699/455,721 SHARES) .............................. $10.99
======
NET ASSET VALUE - INSURED FUND C CLASS
$1,333,630/121,341 SHARES) ............................... $10.99
======
- ----------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
ASSET GTY - Insured by the Asset Guaranty Insurance Corporation
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Federal Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 1999:
Common stock, $0.01 par value, 500,000,000 shares authorized to
the Tax-Free Insured Fund ........................... $ 75,698,355
Undistributed net investment income .................... 8,068
Accumulated net realized loss on investments............ (1,889,959)
Net unrealized appreciation of investments ............. 5,888,056
------------
Total net assets ....................................... $ 79,704,520
============
NET ASSET VALUE AND OFFERING PRICE PER SHARE -
TAX-FREE INSURED FUND A CLASS
Net asset value A Class (A) ............................ $ 10.99
Sales charge (3.75% of offering price or 3.91% of amount
invested per share) (B) ............................. 0.43
------------
Offering price ......................................... $ 11.42
============
- -------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more.
See accompanying notes
<PAGE>
DELAWARE GROUP TAX-FREE FUND, INC. -
TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF NET ASSETS
FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------
MUNICIPAL BONDS - 95.95%
CONVENTION CENTER/STADIUM REVENUE BONDS - 1.82%
Metropolitan Pier & Exposition Authority Illinois
Hospitality Facilities - McCormick PL Convention
5.75% 7/1/06 .................................... $ 500,000 $ 535,420
---------
535,420
---------
ESCROWED TO MATURITY - 0.73%
Easton, Pennsylvania Joint Sewer Authority
5.60% 4/1/03 (ASSET GTY) ........................ 200,000 213,864
---------
213,864
---------
HIGHER EDUCATION BONDS - 3.48%
Virginia College Building Authority
(University of Richmond Project)
6.40% 11/1/22 ................................... $1,000,000 1,028,240
---------
1,028,240
---------
HIGHWAY REVENUE BONDS - 15.73%
Dunes Community Development District-Intracoastal
Waterway Bridge (ITT Industries Corporation)
5.50% 10/1/07 ................................... 825,000 864,320
*Foothill/ Eastern Transportation Corridor Agency
California Toll Road Revenue Senior Lien Series A
5.93% 1/1/05 .................................... 1,500,000 1,156,680
New Mexico Finance Authority Revenue Federal
Highway Grant Series A
4.75% 9/1/08 (AMBAC) ............................ 1,000,000 1,037,930
Oklahoma State Turnpike Authority Turnpike Revenue
Second Senior Series A 5.50% 1/1/06 ............. 1,450,000 1,585,082
---------
4,644,012
---------
HOSPITAL REVENUE BONDS - 3.31%
Palm Beach County, Florida Health Facilities
Hospital 5.00% 12/1/23 .......................... 1,000,000 977,700
---------
977,700
---------
HOUSING REVENUE BONDS - 16.80%
Iowa Finance Authority MultiFamily Housing
Forest Glen Apartments Project Series A
5.60% 11/1/22 (FNMA) ............................ 755,000 775,687
Maryland State Community Development Administration
Department of Housing & Community Development
(Single Family Program) 6th Series
5.90% 4/1/01 .................................... 1,000,000 1,036,070
Montgomery County, Pennsylvania Redevelopment
Authority Multifamily Housing Revenue
(KBF Associates) 6.00% 7/1/04 ................... 2,000,000 2,088,580
Palatine, Illinois MultiFamily Housing
(Prairiebrook Project) Series A
5.50% 12/1/06 (FNMA) ............................ 1,000,000 1,058,170
---------
4,958,507
---------
<PAGE>
16 for tax-exempt income
STATEMENT OF NET ASSETS (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
-------------------------
MUNICIPAL BONDS (CONTINUED)
INDUSTRIAL DEVELOPMENT REVENUE BONDS - 5.13%
New York City, New York Industrial Development Agency
Civic Facility Revenue YMCA Greater NY Project
5.40% 8/1/04 .................................... $1,440,000 $1,514,981
----------
1,514,981
----------
POLITICAL SUBDIVISION - 2.15%
*North Slope, Alaska Series A
4.57% 6/30/09 (MBIA) ............................ 1,000,000 634,810
----------
634,810
----------
POLLUTION CONTROL REVENUE BONDS - 3.38%
Mississippi Business Finance Corp
Mississippi Pollution Control Revenue
5.88% 4/1/22 .................................... 1,000,000 998,820
----------
998,820
----------
POWER AUTHORITY REVENUE BONDS - 3.63%
New Madrid, Missouri Power Plant
5.65% 6/1/03 (AMBAC) ............................ 1,000,000 1,071,820
----------
1,071,820
----------
SALES TAX REVENUE BONDS - 10.03%
Bay City, Florida Sales Tax Revenue
4.75% 9/1/23 .................................... 1,500,000 1,435,125
Louisiana Stadium & Expo Hotel Tax Revenue
4.75% 7/1/21 (FGIC) ............................. 1,000,000 949,760
Page, Arizona Municipal Property Excise Tax Revenue
5.00% 7/1/16 .................................... 565,000 575,475
----------
2,960,360
----------
SCHOOL DISTRICT GENERAL OBLIGATION BONDS - 3.59%
Philadelphia, Pennsylvania School District
Series A 6.25% 5/15/01 (AMBAC) .................. 1,000,000 1,058,120
----------
1,058,120
----------
STATE AGENCY BONDS - 12.49%
Indiana Bond Bank (State Revolving Fund Program)
Series A 6.00% 2/1/01 ........................... 500,000 524,125
Michigan Municipal Bond Bank Authority Revenue
Local Government Loan Program-Series G
5.85% 5/1/01(AMBAC) ............................. 2,000,000 2,099,460
West Virginia School Building Authority
Capital Improvement 5.625% 7/1/02 (MBIA) ........ 1 ,000,000 1,061,630
----------
3,685,215
----------
TRANSPORTATION REVENUE BONDS - 12.96%
*Alameda Corridor Transportation Authority
Series A 5.17% 10/1/30 .......................... 5,000,000 976,350
Harris County Texas Industrial Development
Corporate Airport Facilities, Refunding
(Continental Airlines Project) AMT
5.00% 7/1/07 .................................... 1,720,000 1,718,727
Rhode Island Port Authority and Economic
5.80% 7/1/02 (FSA) .............................. 565,000 600,160
5.90% 7/1/03 (FSA) .............................. 490,000 528,852
----------
3,824,089
----------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
-----------------------------
MUNICIPAL BONDS (CONTINUED)
WATER & SEWER REVENUE BONDS - 0.72%
Marysville, Washington Water & Sewer Revenue
5.50% 12/1/02 (MBIA) ....................... $200,000 $ 212,900
-----------
212,900
-----------
TOTAL MUNICIPAL BONDS (COST $27,295,373) ...... 28,318,858
-----------
TOTAL MARKET VALUE OF SECURITIES - 95.95%
(COST $27,295,373) ......................... $28,318,858
RECEIVABLES AND OTHER ASSETS
NET OF LIABILITIES - 4.05% ................. 1,196,048
-----------
NET ASSETS APPLICABLE TO 2,752,283 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% .... $29,514,906
===========
NET ASSET VALUE - USA INTERMEDIATE FUND A CLASS
($24,063,001/2,243,893 SHARES) ............. $10.72
======
NET ASSET VALUE - USA INTERMEDIATE FUND B CLASS
($2,428,757/226,478 SHARES) ................ $10.72
======
NET ASSET VALUE - USA INTERMEDIATE FUND C CLASS
($3,023,148/281,912 SHARES) ................ $10.72
======
- ----------
*The interest rate shown for this security is the effective yield.
ASSET GTY - Insured by the Asset Guaranty Insurance Corporation
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Federal Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 1999:
Common stock, $0.01 par value, 500,000,000 shares authorized to
the Tax-Free USA Intermediate Fund ......................... $ 29,076,276
Distributions in excess of net investment income .............. (1,241)
Accumulated net realized loss on investments .................. (583,614)
Net unrealized appreciation of investments .................... 1,023,485
------------
Total net assets .............................................. $ 29,514,906
============
NETASSET VALUE AND OFFERING PRICE PER SHARE -
TAX-FREE USA INTERMEDIATE FUND A CLASS
Net asset value A Class (A) ................................... $10.72
Sales charge (2.75% of offering price or 2.80% of amount
invested per share) (B) .................................... 0.30
------
Offering price ................................................ $11.02
======
- ---------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See How to Buy Shares in the current Prospectus for purchases of $100,000 or
more.
See accompanying notes
<PAGE>
for tax-exempt income 17
VOYAGEUR MUTUAL FUNDS, INC.
NATIONAL HIGH YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS
FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
--------------------
MUNICIPAL BONDS - 97.25%
CONTINUING CARE / RETIREMENT REVENUE BONDS - 10.71%
Bridgeton, Missouri Industrial Development
Authority Senior Housing Revenue (The Sarah
Community Project) 5.90% 05/01/28 ................. $ 1,000,000 $ 991,650
Clark County, Nevada Assisted Living Homestead
(Boulder City) 6.50% 12/1/27 ...................... 2,575,000 2,661,160
Indianapolis, Indiana Economic Development Revenue
(National Benevolent Association)
7.25% 10/01/10 .................................... 700,000 770,217
Marion County, Missouri Nursing Home Revenue
7.00% 08/01/13 .................................... 1,050,000 1,110,932
Philadelphia, Pennsylvania Hospitals & Highered
Facilites Authority Revenue
(The Philadelphia Protestant Home Project) Series A
6.50% 7/01/27 ..................................... 1,100,000 1,141,360
South Dakota Health and Education Facilities
Revenue (Westhills Retirement Village)
7.25% 09/01/13 .................................... 1,125,000 1,196,010
State Tammany, Louisiana Public Transportation
Financing Authority Revenue (Christwood Project)
5.70% 11/15/28 .................................... 1,500,000 1,441,815
Spring Park, Minnesota Twin Birch Health Care Center
8.25% 08/01/11 (Guarantor: Presbyterian Homes
of Minnesota) ..................................... 500,000 529,485
Volusia, Florida Industrial Development Authority
(Bishops Glen Project Retirement Health Facilities)
7.50% 11/1/16 ..................................... 1,065,000 1,253,803
----------
11,096,432
----------
GENERAL OBLIGATION - 4.73%
Illinois State Development Finance Authority East
St. Louis Debt Restructure Revenue
7.375% 11/15/11 ................................... 1,100,000 1,237,665
Niles, Illinois Park District Unlimited Tax
6.65% 12/1/14 ..................................... 860,000 953,069
Orange Beach, Alabama Refunding and Capital
Improvement Unlimited Tax 6.25% 10/1/13 ........... 1,500,000 1,604,325
Romeoville, Illinois Recreational Facilities
Unlimited Tax 7.80% 1/1/11 ........................ 1,000,000 1,099,270
----------
4,894,329
----------
HIGHER EDUCATION REVENUE BONDS - 5.37%
New Hampshire Education and Health Authority
(Brewster Academy) 6.75% 6/1/25 ................... 1,000,000 1,073,780
New Hampshire Higher Education & Health Facilities
Authority Revenue (New Hampton School Issue)
5.375% 10/1/28 .................................... 1,070,000 1,005,854
New Jersey State Educational Facilities Revenue
(Fairleigh Dickinson University) Series G
5.70% 07/01/28 .................................... 2,000,000 2,008,100
Scranton-Lackawana, PA Health & Welfare Revenue
5.75% 11/01/20 .................................... 1,510,000 1,478,033
----------
5,565,767
----------
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
----------------------
MUNICIPAL BONDS (CONTINUED)
HOSPITALS REVENUE BONDS - 11.76%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue (Allegheny Valley
Hospital) 7.75% 8/1/20 ............................ $ 1,000,000 $ 884,390
Boston Biomedical Research 5.75% 2/01/29 ............. 1,000,000 997,110
Cuyahoga County, Ohio Health Care Facilities
Revenue ( Benjamin Rose Institute Project)
5.50% 12/1/28 ..................................... 1,750,000 1,699,968
Illinois Health Facilities Authority Revenue
(Midwest Physician Group Limited)
5.50% 11/15/19 .................................... 1,685,000 1,634,248
Monroeville, Pennsylvania Hospital Authority
Hospital Revenue (Forbes Health System)
6.25% 10/1/15 ..................................... 1,000,000 898,400
Monroeville, Pennsylvania Hospital Authority
Hospital Revenue (Forbes Health System)
7.00% 10/1/03 ..................................... 2,000,000 1,899,320
Saint Joseph County Industrial Economic
Development (Madison Center Project)
5.50% 2/15/21 ..................................... 1,150,000 1,151,714
South Dakota Health and Education Facilities
Revenue (Huron Regional Medical Center)
7.00% 4/1/10 ...................................... 1,000,000 1,098,080
Westmorland County, PA Industrial Development
5.25% 7/1/15 ...................................... 2,000,000 1,919,360
----------
12,182,590
----------
HOUSING REVENUE BONDS - 1.97%
Arlington County, Virginia Development Authority
Multi-Family Revenue (Housing Mortgage Woodbury
Park Apts) Series B 6.50% 7/1/24 .................. 1,000,000 1,005,540
Bernalillo County, New Mexico Multifamily
Housing (Topke Commons/Arbors Project)
Series D 7.70% 4/1/27 ............................. 1,000,000 1,035,380
----------
2,040,920
----------
INDUSTRIAL DEVELOPMENT REVENUE BONDS - 10.96%
Chicago, Illinois O'Hare International Airport
(United Air Lines Project) Series A
5.35% 9/1/16 ...................................... 4,000,000 3,986,480
Cleveland, Ohio Airport Special Revenue
(Continental Airlines Project)
5.375% 9/15/27 .................................... 470,000 455,660
Moundville, Alabama Industrial Development Board
Revenue (Lawter International, Inc. Project) Series
LI 6.75% 12/1/11 .................................. 1,500,000 1,599,090
Newbern, Tennessee Industrial Develpment Board
Newbern Rubber, Inc. (Dana Corporation)
7.90% 3/1/00 ...................................... 1,000,000 1,041,130
New Jersey Economic Development Authority
(Kapkowski Road Landfill) Series A
6.375% 4/1/18 ..................................... 1,150,000 1,196,748
<PAGE>
18 for tax-exempt income
STATEMENT OF NET ASSETS (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
------------------------
MUNICIPAL BONDS (CONTINUED)
INDUSTRIAL DEVELOPMENT REVENUE BONDS (CONTINUED)
New York City Industrial Development Agency
Revenue (Field Hotel Association LP JFK)
6.00% 11/1/28 ..................................... $ 1,500,000 $ 1,511,115
Ohio State Water Development Authority Solid
Waste Disposal (Bay Shore Power Project)
Series A 5.875% 09/01/20 .......................... 500,000 510,685
Virginia Beach Development Authority Revenue
On The Beach) 6.625% 12/01/09 ..................... 1,000,000 1,044,660
----------
11,345,568
----------
LEASE / CERTIFICATES OF PARTICIPATION - 4.40%
Dauphin County, Pennsylvania General Authority
Series A 5.75% 01/01/10 ........................... 2,125,000 2,127,848
Dauphin County, Pennsylvania General Authority
(Office and Packaging Forum) Series A
6.00% 01/15/25 .................................... 1,100,000 1,110,989
Illinois State Development Finance Authority
(Harrisburg Medical Center Project)
7.00% 03/01/06 .................................... 400,000 437,320
7.20% 03/01/07 .................................... 400,000 440,796
7.20% 03/01/08 .................................... 400,000 440,796
----------
4,557,749
----------
POLLUTION CONTROL REVENUE BONDS - 10.66%
California Pollution Control Authority
(Pollution Control Revenue - Laidlaw Environmental)
6.70% 7/1/07 ...................................... 1,000,000 1,066,150
Connecticut State Development Authority Pollution
Control Revenue 5.850% 09/01/28 ................... 2,000,000 2,009,200
Mississippi Pollution Control Revenue
(Mississippi Business Finance Corp)
5.875% 04/01/22 ................................... 3,000,000 2,996,460
New Hampshire State Business Finance Authority
Pollution Control Revenue Public Service Company
Series D 5/1/98 6.00% 05/01/21 .................... 3,000,000 3,056,370
Ohio State Air Quality Development Authority
Revenue (Pollution Control) Series B
6.00% 08/01/20 .................................... 975,000 995,368
Yarmouth, Maine Pollution Control Revenue (Central
Maine Power) 6.75% 06/01/02 ....................... 910,000 917,216
----------
11,040,764
----------
*PRE-REFUNDED - 9.76%
Alexandria Health Care Facility Revenue (Board of
Social Ministry) 8.75% 08/01/21-01 ................ 500,000 569,990
Bedford Park, Illinois Tax Increment Revenue
8.00% 12/01/10-04 ................................. 1,200,000 1,421,736
Colorado Technical Center Metropolitan District
Unlimited Tax 9.75% 06/01/09-99 ................... 545,000 562,456
Easton, Pennsylvania Area Joint Sewer Authority
6.20% 04/01/09-03 ................................. 1,000,000 1,091,810
<PAGE>
PRINCIPAL MARKET
AMOUNT VALUE
------------------------
MUNICIPAL BONDS (CONTINUED)
*PRE-REFUNDED (CONTINUED)
Elizabeth Borough, Pennsylvania Municipal Authority
Guaranteed Sewer 7.15% 01/01/21-02 ............... $ 500,000 $ 555,605
Etowah County, Alabama Refunding Warrants
8.50% 11/01/10-00 ................................ 800,000 870,856
Illinois Health Facility Authority Revenue (Midwest
Physician Group Project)
8.10% 11/15/14-04 ................................ 960,000 1,154,947
Lehigh County General Purpose Authority (Wiley
House) 8.75% 11/01/14-99 ......................... 750,000 792,675
Panorama, Colorado Metropolitan District Unlimited
Tax 9.00% 12/01/09-99 ............................ 750,000 789,870
Pennsylvania Higher Education Facility Authority
(Drexel University) 6.750% 05/01/12-03 ........... 1,300,000 1,468,467
West Chicago, Illinois Tax Increment
7.375% 12/01/12-02 ............................... 720,000 830,498
----------
10,108,910
----------
TRANSPORTATION REVENUE BONDS - 2.15%
Houston, Texas Airport Special
Facilities (Continental Airline) Series B
6.125% 07/15/27 .................................. 900,000 921,492
Toledo Lucas County, Ohio Port Authority Airport
Revenue (Improvement Series 1)
5.50% 05/15/20 ................................... 1,325,000 1,302,263
----------
2,223,755
----------
UTILITY REVENUE BONDS - 1.43%
Chelsea, Oklahoma Gas Authority
7.30% 07/01/19 ................................... 700,000 773,395
7.25% 07/01/13 ................................... 600,000 663,006
Cleveland,Ohio Public Power Systems Revenue
5.00% 11/15/24 ................................... 50,000 49,491
----------
1,485,892
----------
WASTE DISPOSAL REVENUE BONDS - 0.96%
Gulf Coast Waste Disposal Revenue
5.70% 4/01/32 .................................... 1,000,000 994,050
----------
994,050
----------
WATER & SEWER REVENUE BONDS - 6.37%
Franklin County, Missouri Public Water Supply
(District Waterworks and Sewer System)
7.375% 12/01/18 .................................. 1,255,000 1,360,922
Hopewell Township, Pennsylvania Guaranteed Sewer
6.00% 11/1/13 .................................... 1,215,000 1,237,575
New Kensington, Pennsylvania Municipal Sanitation
Authority Revenue 7.50% 10/01/11 ................. 1,000,000 1,058,710
Upper Bear Creek, Alabama Water, Sewer, and Fire
Revenue District 6.250% 08/01/15 ................. 1,250,000 1,291,150
Vance Alabama Governmental Utility Services
Corporate Sewer Services Revenue
7.50% 10/01/15 ................................... 1,550,000 1,646,085
----------
6,594,442
----------
<PAGE>
for tax-exempt income 19
STATEMENT OF NET ASSETS (Continued)
- --------------------------------------------------------------------------------
PRINCIPAL MARKET
AMOUNT VALUE
------------------------
MUNICIPAL BONDS (CONTINUED)
OTHER REVENUE BONDS - 16.02%
Arbor Greene Community Development District
Special Assessment Revenue
7.00% 05/01/03 ................................... $ 220,000 $ 226,750
Colorado Postsecondary Education Facilities
Authority (Colorado Ocean Journey Project)
8.00% 12/01/06 ................................... 1,000,000 1,168,940
Connector 2000 Association South Carolina Toll Road
Revenue Senior (Southern Connector Project)
Series A 5.375% 01/01/38 ......................... 2,000,000 1,818,020
Lowry Economic Redevelopment Authority Colorado
Revenue Series A 7.00% 12/01/10 .................. 1,000,000 1,132,370
Mashantucket, Connecticut Revenue Series A
5.50% 09/01/28 ................................... 1,700,000 1,658,826
Mashantucket Western Pequot Tribe Connecticutt
Special Revenue Series B 5.75% 09/01/27 .......... 1,000,000 1,014,280
Massachusetts State Industrial Finance Agency
Revenue (The Tabor Academy Issue)
5.40% 12/01/28 ................................... 2,000,000 1,749,843
North Charleston Golf Centers Revenue
5.50% 05/01/24 ................................... 1,000,000 978,590
Oklahoma City Public Property Authority (City Golf
System) 8.30% 10/01/16 ........................... 1,000,000 1,135,580
Orlando Special Assesment Series B
5.25% 05/01/05 ................................... 1,500,000 1,495,995
Pocatello Development Authority and Tax Increment
Revenue 7.25% 12/01/08 ........................... 250,000 264,083
Prescott Valley Arizona Improvement District
(Special Assessment) 7.90% 01/01/12 .............. 500,000 569,070
Santa Fe, New Mexico Municipal Record Complex Net
Revenue 5.625% 12/01/23 .......................... 1,140,000 1,124,154
Washington State Housing Finance Commission (State
School Directors' Association-Private Placement)
8.25% 07/01/02 ................................... 140,000 149,183
8.25% 07/01/12 ................................... 625,000 719,013
Washington State Housing Finance Commonwealth
(Nonprofit Virginia Mason Research Center Project)
Series A 5.70% 01/01/24 .......................... 1,000,000 1,035,890
Westminster, Colorado Shaw Heights (Special
Improvement District) 7.50% 12/01/07 ............. 350,000 352,146
-----------
16,592,733
-----------
TOTAL MUNICIPAL BONDS (COST $96,798,779) ............ 100,723,901
-----------
NUMBER
OF SHARES
---------
SHORT TERM INVESTMENTS - 1.71%
Norwest Advantage Municipal Money
Market Fund ...................................... 1,767,788 1,767,788
-----------
TOTAL SHORT TERM INVESTMENTS
(COST $1,767,788) ................................ 1,767,788
-----------
<PAGE>
TOTAL MARKET VALUE OF SECURITIES -98.96%
(COST $98,566,567) ........................................... $102,491,689
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - 1.04% 1,073,346
------------
NET ASSETS APPLICABLE TO 9,622,912 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00% ...................... $103,565,035
============
NET ASSET VALUE - NATIONAL HIGH YIELD MUNICIPAL BOND
FUND A CLASS ($79,335,155 / 7,375,529 SHARES) ................ $10.76
======
NET ASSET VALUE - NATIONAL HIGH YIELD MUNICIPAL BOND
FUND B CLASS ($15,629,391 / 1,450,174 SHARES) ................ $10.78
======
NET ASSET VALUE - NATIONAL HIGH YIELD MUNICIPAL BOND
FUND C CLASS ($8,600,489 / 797,209 SHARES) ................... $10.79
======
- ----------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
AMT - Subject to Federal Alternative Minimum Tax
LOC - Line of Credit
COMPONENTS OF NET ASSETS AT FEBRUARY 28, 1999:
Common stock, $0.01 par value, 100,000,000,000 shares
authorized to the Fund with 10,000,000,000 shares
allocated to National High Yield Municipal Bond
Fund A Class, 10,000,000,000 shares allocated to
National High Yield Municipal Bond Fund B Class,
and 10,000,000,000 shares allocated to
National High Municipal Bond Fund C Class .......... $ 99,596,025
Distributions in excess of net investment income ...... (232)
Accumulated net realized gain on investments .......... 44,120
Net unrealized appreciation of investments ............ 3,925,122
-------------
Total net assets ...................................... $ 103,565,035
=============
NET ASSET VALUE AND OFFERING PRICE PER SHARE - NATIONAL
HIGH YIELD MUNICIPAL BOND FUND A CLASS
Net asset value per share A ........................... $10.76
Sales charge (3.75% of offering price or 3.90% of
amount invested per share) B ....................... 0.42
------
Offering price ........................................ $11.18
======
- ----------
(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 How to Buy Shares in the current Prospectus for purchases of $100,000 or
more.
See accompanying notes
<PAGE>
20 for tax-exempt income
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 28, 1999 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
TAX-FREE TAX-FREE TAX-FREE USA NATIONAL HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL BOND FUND
-------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $18,629,620 $2,224,435 $718,759 $2,894,665
----------- ---------- -------- ----------
EXPENSES:
Management fees 1,817,547 236,357 68,261 303,163
Distribution expense 767,393 100,783 39,933 188,210
Dividend disbursing and transfer agent
fees and expenses 287,948 29,773 12,850 39,740
Accounting and administration 172,760 22,856 8,128 25,738
Reports and statements to shareholders 65,000 7,500 2,100 25,900
Professional fees 36,400 1,375 1,075 13,000
Taxes (other than taxes on income) 31,980 4,278 1,285 3,250
Registration fees 23,850 12,000 12,000 17,200
Custodian fees 12,100 1,710 (3,600) 1,900
Directors' fees 6,320 1,715 1,264 525
Other 54,045 (1,631) 998 21,457
----------- ---------- -------- ----------
3,275,343 416,716 144,294 640,083
Less expenses absorbed or waived - - (28,351) (102,069)
----------- ---------- -------- ----------
Total expenses 3,275,343 416,716 115,943 538,014
----------- ---------- -------- ----------
NET INVESTMENT INCOME 15,354,277 1,807,719 602,816 2,356,651
----------- ---------- -------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on investments (17,428,611) (1,763,356) 137,634 144,720
Net change in unrealized appreciation/
depreciation of investments 11,163,555 1,453,399 (97,494) (307,205)
----------- ---------- -------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (6,265,056) (309,957) 40,140 (162,485)
----------- ---------- -------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $9,089,221 $1,497,762 $642,956 $2,194,166
=========== ========== ======== ==========
</TABLE>
See accompanying notes
<PAGE>
for tax-exempt income 21
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------
TAX-FREE TAX-FREE
USA FUND INSURED FUND
---------------------------- ----------------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
2/28/99 8/31/98 2/28/99 8/31/98
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................... $15,354,277 $32,032,797 $1,807,719 $3,692,531
Net realized gain (loss)
on investments ............................... (17,428,611) 1,046,343 (1,763,356) 1,157,316
Net change in unrealized appreciation/
depreciation of investments .................. 11,163,555 15,815,410 1,453,399 1,050,199
------------ ------------ ----------- -----------
Net increase in net assets
resulting from operations .................... 9,089,221 48,894,550 1,497,762 5,900,046
------------ ------------ ----------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................... (14,390,041) (30,412,332) (1,695,221) (3,545,965)
B Class ...................................... (794,628) (1,548,295) (87,969) (138,959)
C Class ...................................... (59,005) (72,170) (16,461) (7,607)
Net realized gain on investments:
A Class ...................................... (1,168,704) (9,769,741) (816,386) (1,342,436)
B Class ...................................... (77,263) (575,564) (50,900) (61,524)
C Class ...................................... (5,129) (23,804) (7,792) (1,755)
------------ ------------ ----------- -----------
(16,494,770) (42,402,906) (2,674,729) (5,098,246)
------------ ------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................... 126,025,323 144,108,439 2,714,810 6,530,589
B Class ...................................... 4,229,890 5,979,720 854,655 1,369,816
C Class ...................................... 1,309,382 1,308,160 1,058,630 348,248
Net asset value of shares issued
upon reinvestment of dividends
from net investment income
and net realized gain
on investments:
A Class ...................................... 8,575,823 22,556,978 1,475,369 2,762,483
B Class ...................................... 503,318 1,254,576 84,411 114,231
C Class ...................................... 43,775 69,729 21,611 7,917
------------ ------------ ----------- -----------
140,687,511 175,277,602 6,209,486 11,133,284
------------ ------------ ----------- -----------
Cost of shares repurchased:
A Class ...................................... (155,866,761) (201,784,187) (3,987,504) (14,181,256)
B Class ...................................... (3,305,141) (5,728,548) (127,572) (877,799)
C Class ...................................... (311,368) (559,386) (47,686) (126,525)
------------ ------------ ----------- -----------
(159,483,270) (208,072,121) (4,162,762) (15,185,580)
------------ ------------ ----------- -----------
Increase (decrease) in net assets
derived from capital share
transactions ................................. (18,795,759) (32,794,519) 2,046,724 (4,052,296)
------------ ------------ ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS: ............................... (26,201,308) 26,302,875 869,757 (3,250,496)
NET ASSETS:
Beginning of period ............................. 626,109,472 652,412,347 78,834,763 82,085,259
------------ ------------ ----------- -----------
End of period ................................... $599,908,164 $626,109,472 $79,704,520 $78,834,763
============ ============ =========== ===========
</TABLE>
<PAGE>
[RESTUBBED FROM PREVIOUS TABLE]
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
TAX-FREE
USA INTERMEDIATE FUND
---------------------------
SIX MONTHS YEAR
ENDED ENDED
2/28/99 8/31/98
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................... $602,816 $1,180,406
Net realized gain (loss)
on investments ............................... 137,634 274,027
Net change in unrealized appreciation/
depreciation of investments .................. (97,494) 322,706
----------- -----------
Net increase in net assets
resulting from operations .................... 642,956 1,777,139
----------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................... (521,116) (1,042,578)
B Class ...................................... (36,302) (72,412)
C Class ...................................... (46,639) (65,416)
Net realized gain on investments:
A Class ...................................... - -
B Class ...................................... - -
C Class ...................................... - -
----------- -----------
(604,057) (1,180,406)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................... 3,684,596 7,382,578
B Class ...................................... 508,065 373,870
C Class ...................................... 1,328,721 953,661
Net asset value of shares issued
upon reinvestment of dividends
from net investment income
and net realized gain
on investments:
A Class ...................................... 333,459 639,979
B Class ...................................... 26,604 49,194
C Class ...................................... 34,505 58,692
----------- -----------
5,915,950 9,457,974
----------- -----------
Cost of shares repurchased:
A Class ...................................... (2,551,549) (7,609,474)
B Class ...................................... (41,125) (366,489)
C Class ...................................... (338,782) (480,482)
----------- -----------
(2,931,456) (8,456,445)
----------- -----------
Increase (decrease) in net assets
derived from capital share
transactions ................................. 2,984,494 1,001,529
----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS: ............................... 3,023,393 1,598,262
NET ASSETS:
Beginning of period ............................. 26,491,513 24,893,251
----------- -----------
End of period ................................... $29,514,906 $26,491,513
=========== ===========
</TABLE>
<PAGE>
[RESTUBBED FROM PREVIOUS TABLE]
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
NATIONAL HIGH YIELD
MUNICIPAL BOND FUND
------------------------------------------------
SIX MONTHS EIGHT MONTHS YEAR
ENDED ENDED ENDED
2/28/99 8/31/98 12/31/97
(UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income ........................... $2,356,651 $2,627,253 $3,409,883
Net realized gain (loss)
on investments ............................... $144,720 116,864 1,305,512
Net change in unrealized appreciation/
depreciation of investments .................. (307,205) 680,352 1,305,512
------------ ----------- -----------
Net increase in net assets
resulting from operations .................... 2,194,166 3,424,269 5,498,170
------------ ----------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income:
A Class ...................................... (1,929,029) (2,315,936) (3,329,293)
B Class ...................................... (280,554) (228,487) (69,276)
C Class ...................................... (146,601) (83,530) (16,936)
Net realized gain on investments:
A Class ...................................... (172,510) (224,098) (361,157)
B Class ...................................... (28,565) (33,528) (20,891)
C Class ...................................... (16,175) (14,611) (6,153)
------------ ----------- -----------
(2,573,434) (2,900,190) (3,803,706)
------------ ----------- -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class ...................................... 10,770,293 16,001,177 5,556,071
B Class ...................................... 5,233,410 7,552,082 3,486,119
C Class ...................................... 4,268,975 3,689,595 1,199,065
Net asset value of shares issued
upon reinvestment of dividends
from net investment income
and net realized gain
on investments:
A Class ...................................... 1,178,628 1,441,346 2,223,087
B Class ...................................... 191,336 149,917 42,767
C Class ...................................... 120,263 55,914 9,665
------------ ----------- -----------
21,762,905 28,890,031 12,516,774
------------ ----------- -----------
Cost of shares repurchased:
A Class ...................................... (1,913,670) (3,739,701) (13,058,929)
B Class ...................................... (365,112) (711,513) (92,987)
C Class ...................................... (455,649) (298,771) (794)
------------ ----------- -----------
(2,734,431) (4,749,985) (13,152,710)
------------ ----------- -----------
Increase (decrease) in net assets
derived from capital share
transactions ................................. 19,028,474 24,140,046 (635,936)
------------ ----------- -----------
NET INCREASE (DECREASE)
IN NET ASSETS: ............................... 18,649,206 24,664,325 1,058,528
NET ASSETS:
Beginning of period ............................. 84,915,829 60,251,504 59,192,976
------------ ----------- -----------
End of period ................................... $103,565,035 $84,915,829 $60,251,504
============ =========== ===========
</TABLE>
See accompanying note
<PAGE>
22 for tax-exempt income
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE USA FUND A CLASS
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
2/28/99(1)
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $11.830 $11.710 $11.550 $12.070 $12.040 $12.640
Income from investment operations:
Net investment income ................................. 0.298 0.597 0.666 0.696 0.746 0.751
Net realized and unrealized gain (loss) on
investments ......................................... (0.118) 0.310 0.210 (0.460) 0.030 (0.566)
-------- -------- -------- -------- -------- --------
Total from investment operations ...................... 0.180 0.907 0.876 0.236 0.776 0.185
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Dividends from net investment income .................. (0.296) (0.597) (0.666) (0.696) (0.746) (0.751)
Distributions from net realized gain
on investments ....................................... (0.024) (0.190) (0.050) (0.060) none (0.034)
-------- -------- -------- -------- -------- --------
Total dividends and distributions ..................... (0.320) (0.787) (0.716) (0.756) (0.746) (0.785)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ........................... $11.690 $11.830 $11.710 $11.550 $12.070 $12.040
======== ======== ======== ======== ======== ========
Total return(2) .......................................... 1.54% 8.00% 7.79% 1.91% 6.74% 1.49%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $558,680 $586,848 $615,852 $700,853 $758,470 $745,796
Ratio of expenses to average net assets ............... 1.03% 0.97% 0.94% 0.94% 0.92% 0.89%
Ratio of net investment income to average net assets .. 5.11% 5.08% 5.73% 5.82% 6.29% 6.07%
Portfolio turnover .................................... 52% 81% 44% 42% 27% 10%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
for tax-exempt income 23
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE USA FUND B CLASS
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31, 5/22/94
2/28/99(1) TO
(UNAUDITED) 1998 1997 1996 1995 8/31/94
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $11.830 $11.710 $11.550 $12.070 $12.040 $12.080
Income from investment operations:
Net investment income ................................. 0.251 0.503 0.573 0.600 0.649 0.214
Net realized and unrealized gain (loss) on
investments ......................................... (0.118) 0.310 0.210 (0.460) 0.030 (0.040)
------- ------- ------- ------- ------- -------
Total from investment operations ...................... 0.133 0.813 0.783 0.140 0.679 0.174
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.249) (0.503) (0.573) (0.600) (0.649) (0.214)
Distributions from net realized gain
on investments ....................................... (0.024) (0.190) (0.050) (0.060) none none
------- ------- ------- ------- ------- -------
Total dividends and distributions ..................... (0.273) (0.693) (0.623) (0.660) (0.649) (0.214)
------- ------- ------- ------- ------- -------
Net asset value, end of period ........................... $11.690 $11.830 $11.710 $11.550 $12.070 $12.040
======= ======= ======= ======= ======= =======
Total return(2) .......................................... 1.14% 7.15% 6.94% 1.11% 5.88% 1.45%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $37,879 $36,919 $35,055 $29,773 $17,779 $3,937
Ratio of expenses to average net assets ............... 1.83% 1.77% 1.74% 1.74% 1.74% 1.74%
Ratio of net investment income to average net
assets .............................................. 4.31% 4.28% 4.93% 5.03% 5.47% 5.22%
Portfolio turnover .................................... 52% 81% 44% 42% 27% 10%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
24 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE USA FUND C CLASS
-----------------------------------------------
SIX MONTHS 11/29/95(3)
ENDED YEAR ENDED AUGUST 31, TO
2/28/99(1) 1998 1997 8/31/96
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.830 $11.710 $11.550 $12.230
Income from investment operations:
Net investment income ................................... 0.250 0.504 0.573 0.450
Net realized and unrealized gain (loss) on investments .. (0.117) 0.310 0.210 (0.620)
------- ------- ------- -------
Total from investment operations ........................ 0.133 0.814 0.783 (0.170)
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................... (0.249) (0.504) (0.573) (0.450)
Distributions from net realized gain
on investments ......................................... (0.024) (0.190) (0.050) (0.060)
------- ------- ------- -------
Total dividends and distributions ....................... (0.273) (0.694) (0.623) (0.510)
------- ------- ------- -------
Net asset value, end of period ............................. $11.690 $11.830 $11.710 $11.550
======= ======= ======= =======
Total return(2) ............................................ 1.14% 7.15% 6.94% (1.44%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $3,349 $2,343 $1,505 $805
Ratio of expenses to average net assets ................. 1.83% 1.77% 1.74% 1.74%
Ratio of net investment income to average net assets .... 4.31% 4.28% 4.93% 5.03%
Portfolio turnove ....................................... 52% 81% 44% 42%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
for tax-exempt income 25
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE INSURED FUND A CLASS
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
2/28/99(1)
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.150 $11.050 $10.860 $11.050 $11.020 $11.680
Income from investment operations:
Net investment income ................................... 0.254 0.517 0.573 0.588 0.639 0.622
Net realized and unrealized gain (loss) on
investments ........................................... (0.037) 0.295 0.281 (0.160) 0.030 (0.560)
------- ------- ------- ------- ------- -------
Total from investment operations ........................ 0.217 0.812 0.854 0.428 0.669 0.062
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................... (0.254) (0.517) (0.573) (0.588) (0.639) (0.622)
Distributions from net realized gain
on investments ......................................... (0.123) (0.195) (0.091) (0.030) none (0.100)
------- ------- ------- ------- ------- -------
Total dividends and distributions ....................... (0.377) (0.712) (0.664) (0.618) (0.639) (0.722)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............................. $10.990 $11.150 $11.050 $10.860 $11.050 $11.020
======= ======= ======= ======= ======= =======
Total return(2) ............................................ 1.98% 7.57% 8.07% 3.88% 6.33% 0.54%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $73,362 $74,246 $78,377 $81,149 $86,756 $91,235
Ratio of expenses to average net assets ................. 1.00% 1.10% 1.05% 0.98% 0.98% 0.98%
Ratio of net investment income to average net
assets ................................................ 4.65% 4.65% 5.23% 5.29% 5.89% 5.48%
Portfolio turnover ...................................... 50% 63% 42% 45% 68% 56%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
26 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE INSURED FUND B CLASS
--------------------------------------------------------------------------
SIX MONTHS ENDED 5/2/94(3)
2/28/99(1) YEAR ENDED AUGUST 31, TO
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $11.150 $11.050 $10.860 $11.050 $11.020 $10.990
Income from investment operations:
Net investment income ................................... 0.210 0.427 0.485 0.499 0.550 0.179
Net realized and unrealized gain (loss) on investments .. (0.037) 0.295 0.281 (0.160) 0.030 0.030
------- ------- ------- ------- ------- -------
Total from investment operations ........................ 0.173 0.722 0.766 0.339 0.580 0.209
------- ------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................... (0.210) (0.427) (0.485) (0.499) (0.550) (0.179)
Distributions from net realized gain
on investments ......................................... (0.123) (0.195) (0.091) (0.030) none none
------- ------- ------- ------- ------- -------
Total dividends and distributions ....................... (0.333) (0.622) (0.576) (0.529) (0.550) (0.179)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............................. $10.990 $11.150 $11.050 $10.860 $11.050 $11.020
======= ======= ======= ======= ======= =======
Total return(2) ............................................ 1.58% 6.72% 7.21% 3.05% 5.47% 1.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $5,009 $4,268 $3,619 $3,375 $0 $826
Ratio of expenses to average net assets ................. 1.80% 1.90% 1.85% 1.78% 1.80% 1.83%
Ratio of net investment income to average net assets .... 3.85% 3.85% 4.43% 4.48% 5.07% 4.63%
Portfolio turnover ...................................... 50% 63% 42% 45% 68% 56%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
for tax-exempt income 27
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE INSURED FUND C CLASS
----------------------------------------------------------
SIX MONTHS 11/29/95(3)
ENDED YEAR ENDED AUGUST 31, TO
2/28/99(1) 1998 1997 8/31/96
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............................. $11.150 $11.050 $10.860 $11.260
Income from investment operations:
Net investment income .......................................... 0.210 0.425 0.485 0.375
Net realized and unrealized gain (loss) on investments ......... (0.037) 0.295 0.281 (0.370)
------- ------- ------- -------
Total from investment operations ............................... 0.173 0.720 0.766 0.005
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income ........................... (0.210) (0.425) (0.485) (0.375)
Distributions from net realized gain
on investments ............................................... (0.123) (0.195) (0.091) (0.030)
------- ------- ------- -------
Total dividends and distributions .............................. (0.333) (0.620) (0.576) (0.405)
------- ------- ------- -------
Net asset value, end of period .................................... $10.990 $11.150 $11.050 $10.860
======= ======= ======= =======
Total return(2) ................................................... 1.58% 6.72% 7.21% 0.01%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................ $1,334 $321 $89 $120
Ratio of expenses to average net assets ........................ 1.80% 1.90% 1.85% 1.78%
Ratio of net investment income to average net assets ........... 3.85% 3.85% 4.43% 4.48%
Portfolio turnover ............................................. 50% 63% 42% 45%
</TABLE>
- -----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
28 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE USA INTERMEDIATE FUND A CLASS
---------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
2/28/99(1)
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.710 $10.460 $10.320 $10.410 $10.320 $10.630
Income from investment operations:
Net investment income .................................. 0.241 0.501 0.524 0.550 0.550 0.530
Net realized and unrealized gain (loss)
on investments ........................................ 0.010 0.250 0.140 (0.090) 0.090 (0.310)
------- ------- ------- ------- ------- -------
Total from investment operations ....................... 0.251 0.751 0.664 0.460 0.640 0.220
------- ------- ------- ------- ------- -------
Less dividends:
Dividends from net investment income ................... (0.241) (0.501) (0.524) (0.550) (0.550) (0.530)
------- ------- ------- ------- ------- -------
Total dividends ........................................ (0.241) (0.501) (0.524) (0.550) (0.550) (0.530)
------- ------- ------- ------- ------- -------
Net asset value, end of period ............................ $10.720 $10.710 $10.460 $10.320 $10.410 $10.320
======= ======= ======= ======= ======= =======
Total return(2) ........................................... 2.36% 7.34% 6.57% 4.52% 6.43% 2.09%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $24,063 $22,562 $21,635 $22,617 $20,492 $28,193
Ratio of expenses to average net assets ................ 0.70% 0.67% 0.43% 0.25% 0.25% 0.25%
Ratio of expenses to average net assets prior to
expense limitation .................................... 0.91% 1.33% 1.02% 0.95% 1.07% 1.19%
Ratio of net investment income to average net assets ... 4.51% 4.73% 5.03% 5.29% 5.37% 5.00%
Ratio of net investment income to average net assets
prior to expense limitation ........................... 4.30% 4.07% 4.44% 4.59% 4.55% 4.06%
Portfolio turnover ..................................... 132% 104% 34% 15% 63% 81%
</TABLE>
- -----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
See accompanying notes
<PAGE>
for tax-exempt income 29
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE USA INTERMEDIATE FUND B CLASS
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED AUGUST 31, 5/2/94(3)
2/28/99(1) TO
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.710 $10.460 $10.320 $10.410 $10.320 $10.230
Income from investment operations:
Net investment income .................................. 0.196 0.411 0.436 0.460 0.460 0.150
Net realized and unrealized gain (loss)
on investments ........................................ 0.010 0.250 0.140 (0.090) 0.090 0.090
------- ------ ------ ------ ------ ------
Total from investment operations ....................... 0.206 0.661 0.576 0.370 0.550 0.240
------- ------ ------ ------ ------ ------
Less dividends:
Dividends from net investment income ................... (0.196) (0.411) (0.436) (0.460) (0.460) (0.150)
------- ------ ------ ------ ------ ------
Total dividends ........................................ (0.196) (0.411) (0.436) (0.460) (0.460) (0.150)
------- ------ ------ ------ ------ ------
Net asset value, end of period ............................ $10.720 $10.710 $10.460 $10.320 $10.410 $10.320
======= ======= ======= ======= ======= =======
Total return(2) ........................................... 1.93% 6.43% 5.67% 3.63% 5.53% 2.31%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $2,429 $1,933 $1,832 $1,490 $949 $597
Ratio of expenses to average net assets ................ 1.55% 1.52% 1.28% 1.10% 1.10% 1.10%
Ratio of expenses to average net assets prior to
expense limitation .................................... 1.76% 2.18% 1.87% 1.80% 1.92% 2.04%
Ratio of net investment income to average net assets ... 3.66% 3.88% 4.18% 4.44% 4.52% 4.15%
Ratio of net investment income to average net assets
prior to expense limitation ........................... 3.45% 3.22% 3.59% 3.74% 3.70% 3.21%
Portfolio turnover ..................................... 132% 104% 34% 15% 63% 81%
</TABLE>
- -----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
30 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
TAX-FREE USA INTERMEDIATE FUND C CLASS
----------------------------------------------------------
SIX MONTHS 11/29/95(3)
ENDED YEAR ENDED AUGUST 31, TO
2/28/99(1) 1998 1997 8/31/96
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period .............................. $10.710 $10.460 $10.320 $10.480
Income from investment operations:
Net investment income .......................................... 0.196 0.411 0.436 0.350
Net realized and unrealized gain (loss) on investments ......... 0.010 0.250 0.140 (0.160)
------ ------ ------ ------
Total from investment operations ............................... 0.206 0.661 0.576 0.190
------ ------ ------ ------
Less dividends:
Dividends from net investment income ........................... (0.196) (0.411) (0.436) (0.350)
------ ------ ------ ------
Total dividends ................................................ (0.196) (0.411) (0.436) (0.350)
------ ------ ------ ------
Net asset value, end of period .................................... $10.720 $10.710 $10.460 $10.320
======= ======= ======= =======
Total return(2) ................................................... 1.93% 6.43% 5.67% 1.84%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ........................ $3,023 $1,996 $1,426 $193
Ratio of expenses to average net assets ........................ 1.55% 1.52% 1.28% 1.10%
Ratio of expenses to average net assets prior to expense
limitation .................................................... 1.76% 2.18% 1.87% 1.80%
Ratio of net investment income to average net assets ........... 3.66% 3.88% 4.18% 4.44%
Ratio of net investment income to average net assets prior
to expense limitation ......................................... 3.45% 3.22% 3.59% 3.74%
Portfolio turnover ............................................. 132% 104% 34% 15%
</TABLE>
- -----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Date of commencement of trading; ratios have been annualized and total
return has not been annualized.
See accompanying notes
<PAGE>
for tax-exempt income 31
FINANCIAL HIGHLIGHTS (CONTINUED)
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
NATIONAL HIGH YIELD
MUNICIPAL BOND FUND A CLASS
------------------------------------------------------------------------
SIX MONTHS EIGHT MONTHS YEAR PERIOD FROM
ENDED ENDED ENDED 8/1/96 TO
2/28/99(1) 8/31/1998(1) 12/31/97(4) 12/31/96(5) 7/31/96
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.800 $10.720 $10.400 $10.190 $10.170
Income from investment operations:
Net investment income ................................. 0.279 0.398 0.648 0.260 0.630
Net realized and unrealized gain (loss)
on investments ...................................... (0.015) 0.115 0.390 0.210 0.140
------- ------- ------- ------- -------
Total from investment operations ...................... 0.264 0.513 1.038 0.470 0.770
------- ------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.279) (0.398) (0.647) (0.260) (0.630)
Distributions from net realized gain on
investments ......................................... (0.025) (0.035) (0.071) none (0.120)
------- ------- ------- ------- -------
Total dividends and distributions ..................... (0.304) (0.433) (0.718) (0.260) (0.750)
------- ------- ------- ------- -------
Net asset value, end of period ........................... $10.760 $10.800 $10.720 $10.400 $10.190
======= ======= ======= ======= =======
Total return(2) .......................................... 2.48% 4.87% 10.32% 4.52% 7.78%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $79,335 $69,606 $55,458 $59,105 $63,460
Ratio of expenses to average net assets ............... 1.00% 0.92% 0.84% 0.87%(3) 0.85%
Ratio of expenses to average net assets prior
to expense limitation ............................... 1.22% 1.12% 1.12% 1.07%(3) 0.96%
Ratio of net investment income to
average net assets .................................. 5.21% 5.52% 6.15% 6.06%(3) 6.10%
Ratio of net investment income to average net
assets prior to expense limitation .................. 4.99% 5.32% 5.87% 5.86%(3) 5.99%
Portfolio turnover .................................... 24% 43% 45% 7% 0%
</TABLE>
<PAGE>
[RESTUBBED FROM PREVIOUS TABLE]
<TABLE>
<CAPTION>
NATIONAL HIGH YIELD
MUNICIPAL BOND FUND A CLASS
---------------------------
YEAR ENDED
7/31/95 7/31/94
<S> <C> <C>
Net asset value, beginning of period ..................... $10.170 $10.500
Income from investment operations:
Net investment income ................................. 0.650 0.620
Net realized and unrealized gain (loss)
on investments ...................................... 0.040 (0.310)
------- -------
Total from investment operations ...................... 0.690 0.310
------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.650) (0.620)
Distributions from net realized gain on
investments ......................................... (0.040) (0.020)
------- -------
Total dividends and distributions ..................... (0.690) (0.640)
------- -------
Net asset value, end of period ........................... $10.170 $10.170
======= =======
Total return(2) .......................................... 7.16% 2.99%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $66,357 $72,172
Ratio of expenses to average net assets ............... 0.79% 0.91%
Ratio of expenses to average net assets prior
to expense limitation ............................... 0.90% 1.01%
Ratio of net investment income to
average net assets .................................. 6.45% 5.98%
Ratio of net investment income to average net
assets prior to expense limitation .................. 6.34% 5.88%
Portfolio turnover .................................... 8% 28%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(5) On November 6, 1996, the Fund's shareholders approved a change of investment
adviser from IFG Asset Management Services, Inc. to Voyageur Fund Managers,
Inc.
See accompanying notes
<PAGE>
32 for tax-exempt income
FINANCIAL HIGHLIGHTS (CONTINUED)
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
<CAPTION>
NATIONAL HIGH YIELD
MUNICIPAL BOND FUND B CLASS
-----------------------------------------------------
SIX MONTHS EIGHT MONTHS YEAR PERIOD FROM
ENDED ENDED ENDED 12/18/96(5)
2/28/99(1) 8/31/98(1) 12/31/97(4) TO 12/31/96
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.820 $10.730 $10.400 $10.370
Income from investment operations:
Net investment income ................................. 0.239 0.348 0.534 0.010
Net realized and unrealized gain (loss)
on investments ...................................... (0.015) 0.122 0.433 0.030
------- ------- ------- -------
Total from investment operations ...................... 0.224 0.470 0.967 0.040
------- ------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.239) (0.345) (0.566) (0.010)
Distributions from net realized gain
on investments ...................................... (0.025) (0.035) (0.071) --
------- ------- ------- -------
Total dividends and distributions ..................... (0.264) (0.380) (0.637) (0.010)
------- ------- ------- -------
Net asset value, end of period ........................... $10.780 $10.820 $10.730 $10.400
======= ======= ======= =======
Total return(2) .......................................... 2.09% 4.44% 9.57% 0.43%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $15,629 $10,620 $3,573 $88
Ratio of expenses to average net assets ............... 1.75% 1.67% 1.56% 1.45%(3)
Ratio of expenses to average net assets
prior to expense limitation ......................... 1.97% 1.87% 1.84% 1.66%(3)
Ratio of net investment income to average net assets .. 4.46% 4.77% 5.43% 4.65%(3)
Ratio of net investment income to average net assets
prior to expense limitation ......................... 4.24% 4.57% 5.15% 4.44%(3)
Portfolio turnover .................................... 24% 43% 45% 7%
</TABLE>
<PAGE>
[RESTUBBED FROM PREVIOUS TABLE]
<TABLE>
<CAPTION>
NATIONAL HIGH YIELD
MUNICIPAL BOND FUND C CLASS
-----------------------------------------
SIX MONTHS EIGHT MONTHS PERIOD FROM
ENDED ENDED 5/26/97(5)
2/28/99(1) 8/31/98(1) TO 12/31/97(4)
(UNAUDITED)
<S> <C> <C> <C>
Net asset value, beginning of period ..................... $10.830 $10.740 $10.440
Income from investment operations:
Net investment income ................................. 0.239 0.345 0.315
Net realized and unrealized gain (loss)
on investments ...................................... (0.015) 0.128 0.391
------- ------- -------
Total from investment operations ...................... 0.224 0.473 0.706
------- ------- -------
Less dividends and distributions:
Dividends from net investment income .................. (0.239) (0.348) (0.335)
Distributions from net realized gain
on investments ...................................... (0.025) (0.035) (0.071)
------- ------- -------
Total dividends and distributions ..................... (0.264) (0.383) (0.406)
------- ------- -------
Net asset value, end of period ........................... $10.790 $10.830 $10.740
======= ======= =======
Total return(2) .......................................... 2.09% 4.44% 6.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $8,600 $4,690 $1,220
Ratio of expenses to average net assets ............... 1.75% 1.67% 1.62%(3)
Ratio of expenses to average net assets
prior to expense limitation ......................... 1.97% 1.87% 1.90%(3)
Ratio of net investment income to average net assets .. 4.46% 4.77% 5.37%(3)
Ratio of net investment income to average net assets
prior to expense limitation ......................... 4.24% 4.57% 5.09%(3)
Portfolio turnover .................................... 24% 43% 45%
</TABLE>
- ----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Annualized.
(4) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
(5) Commencement of operations.
See accompanying notes
<PAGE>
FOR TAX-EXEMPT INCOME 33
DELAWARE GROUP TAX-FREE FUND, INC.
VOYAGEUR MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
Delaware Group Tax-Free Fund, Inc. is registered as a diversified open-end
investment company under the Investment Company Act of 1940 (as amended). The
Fund is organized as a Maryland Corporation and offers three portfolios, the
Tax-Free USA Fund, the Tax-Free Insured Fund, and the Tax-Free USA Intermediate
Fund. National High Yield Municipal Bond Fund, a series of Voyageur Mutual
Funds, Inc., is registered under the Investment Company Act of 1940 (as amended)
as a non-diversified, open-end management investment company. The Tax-Free USA
Fund, Tax-Free Insured Fund, Tax-Free USA Intermediate Fund and National High
Yield Municipal Bond Fund (each referred to as a "Fund" or, collectively, as the
"Funds") each offer three classes of shares. The A Class carries a front-end
sales charge of 3.75% for the Tax-Free USA Fund, Tax-Free Insured Fund and
National High Yield Municipal Bond Fund, and 2.75% for the Tax-Free USA
Intermediate Fund. The B Class carries a back-end deferred sales charge. The C
Class carries a level load deferred sales charge.
The investment objective of the Tax-Free USA Fund and the Tax-Free USA
Intermediate Fund is to seek as high a level of current interest income exempt
from federal income tax as is available from municipal bonds and is consistent
with prudent investment management and preservation of capital.
The investment objective of the Tax-Free Insured Fund is to provide investors
with preservation of capital and, as a secondary objective, seek as high a level
of current interest income exempt from federal income tax as is available from
municipal bonds which are protected by insurance guaranteeing the payment of
principal and interest when due and is consistent with prudent investment
management.
The investment objective of the National High Yield Municipal Bond Fund is to
seek a high level of current income exempt from federal income tax through
investing primarily in a portfolio of medium and lower grade municipal bonds.
1. FUND REORGANIZATION
On April 30, 1997, Lincoln National Corporation ("LNC") acquired Voyageur Fund
Manager Inc.'s ("Voyageur") parent, Dougherty Financial Group, Inc. ("DFG")
pursuant to an agreement and plan of merger dated January 15, 1997, in which LNC
would acquire DFG including the mutual fund investment advisory business of DFG
conducted by Voyageur. Upon completion of the acquisition, Delaware Management
Company, Inc. ("DMC") became the investment adviser to the Funds, Delaware
Distributors, L.P. ("DDLP") became the distributor for the Funds and Delaware
Service Company, Inc. ("DSC") became the transfer, dividend-disbursing,
shareholder servicing agent and accounting service agent for the Funds.
2. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies are in accordance with generally accepted
accounting principles and are consistently followed by the Funds.
SECURITY VALUATION - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Funds' Board
of Directors.
<PAGE>
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
the Funds 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
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
OTHER - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis.Original issue discounts and
market premiums are amortized to interest income over the lives of the
respective securities. The Funds declare dividends from net investment income
daily and pay such dividends monthly, and capital gains, if any, are distributed
annually.
Certain expenses of the Funds are paid through "soft dollar" arrangements with
brokers. The amount of these expenses is less than 0.01% of the Fund's average
daily net assets.
3. INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH AFFILIATES
In accordance with the terms of the Investment Management Agreement, the Fund
pays DMC, the Investment Manager of the Fund, an annual fee which is calculated
daily at the rate of 0.60% of 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 for the Tax-Free USA Fund, 0.60% of the average daily
net assets of the Tax-Free Insured Fund, 0.50% of the average daily net assets
of the Tax-Free Intermediate Fund and 0.65% of the average daily net assets of
the National High Yield Municipal Bond Fund. Effective February 2, 1999, DMC has
elected voluntarily to waive its fee and reimburse the Tax-Free USA Intermediate
Fund to the extent that the annual operating expenses, exclusive of distribution
expenses, exceed 0.60% of average daily net assets through June 30, 1999. Prior
to February 1, 1999, DMC absorbed expenses in the Tax-Free USA Intermediate Fund
to the extent that annual operating expenses, exclusive of distribution
expenses, exceeded 0.55% of average daily net assets. Total expenses absorbed or
waived by DMC in the Tax-Free USA Intermediate Fund, for the period ended
February 28, 1999, were $28,351. DMC has elected to waive their fee and
reimburse the National High Yield Municipal Bond Fund to the extent that annual
operating expenses exclusive of distribution fees, taxes, interest, brokerage
commissions and extraordinary expenses, exceed 0.75% of average daily net assets
through June 30, 1999. Total expenses absorbed by DMC in the National High Yield
Municipal Bond Fund, for the six months ended February 28, 1999, were $102,069.
<PAGE>
34 FOR TAX-EXEMPT INCOME
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT AND OTHER TRANSACTIONS WITH AFFILIATES (CONTINUED)
On February 28, 1999, the Fund had payables to affiliates as follows:
<TABLE>
<CAPTION>
TAX-FREE TAX-FREE TAX-FREE USA NATIONAL HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL BOND FUND
-------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Investment management fees and other
expenses payable to DMC .................. $28,527 - - $139,547
Dividend disbursing, transfer agent
fees accounting fees and other
expenses payable to DSC .................. 18,449 $5,000 - 90,179
</TABLE>
Pursuant to the Distribution Agreement, the Funds pay 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 Tax-Free USA Fund and the Tax-Free Insured Fund,
0.15% of the average daily net assets of the A Class for the Tax-Free USA
Intermediate Fund, 0.25% of the average daily net assets of the A Class for the
National High Yield Municipal Bond Fund and 1.00% of the average daily net
assets of the B and C Classes for all four Funds.
For the period ended February 28, 1999, DDLP for commissions on sales of the
Class A shares for each Fund were as follows:
<TABLE>
<CAPTION>
TAX-FREE TAX-FREE TAX-FREE USA NATIONAL HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL BOND FUND
-------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
$127,242 $6,780 $7,833 $135,708
</TABLE>
Certain officers of DMC, DSC and DDLP are officers, directors and/or employees
of the Funds. These officers, directors and employees are paid no compensation
by the Funds.
4.INVESTMENTS
During the six months ended February 28, 1999, the Fund had purchases and sales
of investment securities other than U.S. government securities and temporary
cash investments as follows:
<TABLE>
<CAPTION>
TAX-FREE TAX-FREE TAX-FREE USA NATIONAL HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL BOND FUND
-------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Purchases ............................... $19,452,860 $20,510,281 $159,251,766 $32,664,483
Sales ................................... 18,366,078 19,402,342 196,699,156 11,060,170
</TABLE>
At February 28, 1999, the aggregate cost of securities and unrealized
appreciation (depreciation) for federal income tax purposes for each Fund were
as follows:
<TABLE>
<CAPTION>
TAX-FREE TAX-FREE TAX-FREE USA NATIONAL HIGH YIELD
USA FUND INSURED FUND INTERMEDIATE FUND MUNICIPAL BOND FUND
-------- ------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Cost of investments..................... $552,448,790 $73,080,740 $27,295,373 $98,566,567
============ =========== =========== ===========
Unrealized appreciation................. 52,478,084 6,031,996 1,045,735 4,182,576
Unrealized depreciation................. (2,365,657) (143,940) (22,250) (257,454)
------------ ----------- ----------- -----------
Net unrealized appreciation............. $ 50,112,427 $ 5,888,056 $ 1,023,485 $ 3,925,122
============ =========== =========== ===========
</TABLE>
For federal income tax purposes, the Tax-Free USA Intermediate Fund had
accumulated capital losses at August 31, 1998 of $721,248 which may be carried
forward and applied against future capital gains. The capital loss carryforward
expires as follows: 2002 -$97,594 and 2003 -$623,654.
<PAGE>
5. CAPITAL STOCK
Transactions in capital stock shares were as follows:
<TABLE>
<CAPTION>
TAX-FREE USA FUND TAX-FREE INSURED FUND
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
2/28/99 8/31/98 2/28/99 8/31/98
---------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C>
Shares sold:
A Class ......................................... 10,707,991 12,260,232 244,843 589,585
B Class ......................................... 358,707 508,224 77,021 123,658
C Class ......................................... 111,324 111,168 94,941 31,430
Shares issued upon reinvestment of dividends
from net investment income and net
realized gain on investment transactions:
A Class ......................................... 728,626 1,922,998 133,585 249,570
B Class ......................................... 42,779 106,985 7,646 10,322
C Class ......................................... 3,721 5,944 1,960 715
----------- ----------- -------- ----------
11,953,148 14,915,551 559,996 1,005,280
----------- ----------- -------- ----------
Shares repurchased:
A Class ......................................... (13,234,981) (17,159,307) (359,860) (1,277,871)
B Class ......................................... (280,821) (487,504) (11,539) (79,031)
C Class ......................................... (26,520) (47,557) (4,302) (11,448)
----------- ----------- -------- ----------
(13,542,322) (17,694,368) (375,701) (1,368,350)
----------- ----------- -------- ----------
Net Increase (Decrease) ............................ (1,589,174) (2,778,817) 184,295 (363,070)
=========== =========== ======== ==========
</TABLE>
<PAGE>
FOR TAX-EXEMPT INCOME 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. CAPITAL STOCK (CONTINED)
<TABLE>
<CAPTION>
TAX-FREE USA INTERMEDIATE FUND NATIONAL HIGH YIELD MUNICIPAL BOND FUND
SIX MONTHS ENDED YEAR ENDED SIX MONTHS EIGHT MONTHS ENDED YEAR ENDED
2/28/99 8/31/98 2/28/99 8/31/98 12/31/97
---------------- ---------- ---------- ------------------ ----------
<S> <C> <C> <C> <C> <C>
Shares sold:
A Class ........................................ 343,361 696,975 998,446 1,486,196 514,279
B Class ........................................ 47,302 35,185 484,567 700,850 329,079
C Class ........................................ 123,946 89,880 395,097 342,031 112,800
Shares issued upon reinvestment of dividends
from net investment income:
A Class ........................................ 31,065 60,354 109,342 133,856 211,092
B Class ........................................ 2,479 4,640 17,725 13,876 4,026
C Class ........................................ 3,215 5,534 11,130 5,179 908
-------- -------- --------- --------- ----------
551,368 892,568 2,016,307 2,681,988 1,172,184
-------- -------- --------- --------- ----------
Shares repurchased:
A Class ........................................ (237,552) (718,872) (177,569) (347,504) (1,237,478)
B Class ........................................ (3,830) (34,488) (33,771) (65,936) (8,739)
C Class ........................................ (31,664) (45,293) (42,150) (27,712) (74)
-------- -------- --------- --------- ----------
(273,046) (798,653) (253,490) (441,152) (1,246,291)
Net increase (decrease) 278,322 93,915 1,762,817 2,240,836 (74,107)
======== ======== ========= ========= ==========
</TABLE>
- -------------------
(1) Commenced operations May 26, 1997.
6. LINES OF CREDIT
The Funds have committed lines of credit for the following amounts:
<TABLE>
<CAPTION>
TAX-FREE USA FUND TAX-FREE INSURED FUND TAX-FREE USA INTERMEDIATE FUND NATIONAL HIGH YIELD MUNICIPAL BOND FUND
<S> <C> <C> <C>
$19,500,000 $2,400,000 $800,000 $3,000,000
</TABLE>
No amounts were outstanding at February 28, 1999, or at any time during the
period.
7. 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 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
Statements of Net Assets.
The National High Yield Municipal Bond Fund may invest in high-yield fixed
income securities which carry ratings of BB or lower by S&P and/or Ba or lower
by Moody's. Investments in these higher yielding securities may be accompanied
by a greater degree of credit risk than higher rated securities. Additionally,
lower rated securities may be more susceptible to adverse economic and
competitive industry conditions than investment grade securities.
<PAGE>
THIS SEMI-ANNUAL REPORT IS FOR THE INFORMATION OF NATIONAL TAX-FREE FUNDS
SHAREHOLDERS, BUT IT MAY BE USED WITH prospective investors when preceded or
accompanied by a current National Tax-Free Funds Prospectus and the Delaware
Investments Performance Update for the most recently completed calendar quarter.
The prospectus sets forth details about charges, expenses, investment objectives
and operating policies of the Fund. You should read the prospectus carefully
before you invest. Summary investment results are documentated in the Fund's
current Statement of Additional Information. The figures in this report
represent past results which are not a guarantee of future results. The return
and principal value of an investment in the Fund will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Delaware Management Company
Philadelphia, Pennsylvania
INTERNATIONAL AFFILIATE
Delaware International Advisers Ltd.
London, England
NATIONAL DISTRIBUTOR
Delaware Distributors, L.P.
Philadelphia, Pennsylvania
SHAREHOLDER SERVICING,
DIVIDEND DISBURSING
AND TRANSFER AGENT
Delaware Service Company, Inc.
Philadelphia, Pennsylvania
1818 Market Street
Philadelphia, PA 19103-3682
[photo of globes]
FOR SHAREHOLDERS
1.800.523.1918
FOR SECURITIES DEALERS
1.800.362.7500
FOR FINANCIAL INSTITUTIONS
REPRESENTATIVES ONLY
1.800.659.2265
www.delawarefunds.com
Be sure to consult your financial adviser when making investments. Mutual funds
can be a valuable part of your financial plan; however, shares of the Fund are
not FDIC or NCUSIF insured, are not guaranteed by any bank or any credit union,
and involve investment risk, including the possible loss of the principal amount
invested. Shares of the Funds are not bank or credit union deposits.
(C) Delaware Distributors, L.P.
DELAWARE(SM)
INVESTMENTS
- ---------------------
Philadelphia o London
Printed in the USA
on recycled paper
SA-011[2/99] PP4/99
(1609)
