DELAWARE GROUP TAX FREE FUND, N-30D, 1999-10-29

DELAWARE GROUP TAX FREE FUND
N-30D, 1999-10-29

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<PAGE>
Delaware Tax-Free USA Fund
Delaware Tax-Free Insured Fund
Delaware Tax-Free USA Intermediate Fund
Delaware National High-Yield Municipal Bond Fund

For Tax-exempt Income

service and guidance
professional management
goals

(various photos of demonstrating service and guidance,
professional management and goals)

1999
Annual Report

DELAWARE (SM)
INVESTMENTS
- ---------------------
Philadelphia o London

<PAGE>

A TRADITION OF SOUND INVESTING

commitment

A Commitment
To Our Investors

(photos of computer keyboard, houses)
(illustration of airport)

Delaware Investments has a tradition of money management that dates back to
1929. We have a long and distinguished history of helping individuals and
institutions--including some of America's largest pension funds--reach their
financial goals.
Headquartered in Philadelphia, a block from the nation's oldest stock
exchange, the Delaware organization established its first mutual fund in 1938.
Delaware International Advisers Ltd., our international affiliate, was
established in 1990 and is headquartered in London.
Delaware Investments offers a full range of mutual funds. We also manage
investments for variable annuities and closed-end funds as well as offer a wide
range of retirement plan services for individuals and businesses.
Delaware Investments manages approximately $47 billion in mutual fund
assets and institutional advisory accounts for more than half-a-million
investors.

Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.

Fund Objectives
Delaware Tax-Free USA Fund
Delaware Tax-Free Insured Fund
Delaware Tax-Free USA Intermediate Fund
To seek as high a level of current income exempt from federal income tax as
is available from municipal bonds and as is consistent with prudent
investment management and preservation of capital.

Delaware National High-Yield Municipal Bond Fund
To seek a high level of current income exempt from federal income tax
primarily through investment in a portfolio of medium and lower grade
municipal obligations.

Table of Contents
LETTER TO SHAREHOLDERS Page 1
PORTFOLIO MANAGERS' REVIEW Page 3
DELAWARE TAX-FREE USA FUND Page 5
DELAWARE TAX-FREE INSURED FUND Page 6
DELAWARE TAX-FREE USA
INTERMEDIATE FUND Page 7
DELAWARE NATIONAL HIGH-YIELD
MUNICIPAL BOND FUND Page 8
PERFORMANCE SUMMARY Page 10
STATEMENTS OF NET ASSETS Page 13
FINANCIAL HIGHLIGHTS Page 27

tax-exempt
income

tradition

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for tax-exempt
income
1

August 4, 1999

Dear Shareholder:

Three key factors--global economic uncertainty, fluctuating interest rates, and
a booming stock market--substantially influenced municipal bond fund performance
throughout fiscal 1999.
During the late summer and fall of 1998, a simmering flight to quality
reached full boil. Credit problems in Russia and Brazil added to investors
concerns about the well-documented Pacific Rim recession, creating strong
worldwide demand for the security of U.S. Treasury bonds. Municipal bond yields
fell along with Treasuries, but not as sharply since they offered no real tax
advantages to foreign investors.
The Federal Reserve Board effectively calmed financial markets with three
interest rate cuts in the fall and winter of 1998. Normally, lower interest
rates benefit fixed-income investments. However, to many investors, the rate
cuts signaled a Federal Reserve commitment to keep the U.S. economy on track
amid global uncertainty, providing a springboard for an equity market rally.
U.S. Treasuries lost much of their "safe haven" appeal during the first
quarter of 1999 as a strong U.S. economy, tame inflation and growing evidence of
improvement in foreign economies supported advances in the equity markets. Key
equity indexes like the Dow Jones Industrial Average and the Standard and Poor's
500 Index, while somewhat volatile, posted impressive gains during the period.
Municipal bond prices held up better than Treasuries due in part to a
significant drop in supply.
As summer approached, investors' focus turned to the Federal Reserve Board
and a host of government reports on consumer

ANNUAL TOTAL RETURNS AT NET ASSET VALUE
- --------------------------------------------------------------------------------
12 Months Ended
August 31, 1999
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Fund A Class -2.90%
Lehman Brothers Municipal Bond Index +0.50%
Lipper General Municipal Debt Fund Average (262 funds) -1.63%
- --------------------------------------------------------------------------------
Delaware Tax-Free Insured Fund A Class -1.48%
Lehman Brothers Insured Bond Index -0.29%
Lipper Insured Municipal Debt Fund Average (47 funds) -1.72%
- --------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund A Class +0.29%
Merrill Lynch Three-to-Seven Year Municipal Bond Index +2.38%
Lipper Intermediate Municipal Debt Fund Average (133 funds) +0.25%
- --------------------------------------------------------------------------------
Delaware National High-Yield Municipal Bond Fund A Class +1.08%
Lehman Brothers Municipal Bond Index +0.50%
Lipper High-Yield Municipal Debt Fund Average (54 funds) -0.49%
- --------------------------------------------------------------------------------
All performance shown above is at net asset value and assumes reinvestment of
distributions. Past performance does not guarantee future results. Performance
of other Fund classes varies due to different charges and expenses. The
unmanaged Lehman Brothers and Merrill Lynch indexes are composed of bonds with a
variety of quality ratings from many states. You cannot invest directly in an
index. Complete performance information for all funds can be found on pages 10
through 12.

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for tax-exempt
income
2

prices, producer prices and wage increases that suggested the possibility of
higher inflation. The threat of rising interest rates, which reduce the value of
bonds, further dampened the 1999 performance of fixed-income investments,
especially municipal bonds. As expected, the Federal Reserve raised short-term
interest rates by 0.25% in June and again in August.
The returns of Delaware Tax-Free Insured Fund, Delaware Tax-Free USA
Intermediate Fund and Delaware National High-Yield Municipal Bond Fund reflect a
difficult market environment for fixed-income investments. However, all three
Funds provided 12-month returns that exceeded their respective peer group funds
as tracked by Lipper Analytical Services.
The disappointing performance of Delaware Tax-Free USA Fund was largely
the result of credit quality problems with industrial development bonds. On a
positive note, we have completely eliminated our holdings of these bonds and
look forward to more competitive results in the coming months.
We maintain a cautious outlook for municipal bonds due to continued
strength in the stock market and the Federal Reserve's vigilant position on
inflation. Over the last 12 months, economic conditions proved to be less than
ideal for municipal bonds. However, we believe municipal bond funds have an
important place in balanced portfolios. In our view, municipal bond funds offer
investors substantial value by providing:

o The potential to earn income that is exempt from federal and, in some
cases, state taxes;
o A cushion from the volatility of more growth-oriented investments; and
o Portfolio diversification.

In the pages that follow, your Funds' portfolio managers, Patrick P. Coyne
and Mitchell L. Conery, provide an overview of the municipal bond market,
discuss the performance of Delaware's national tax-free municipal bond funds and
offer an outlook for the coming months. We value your ongoing commitment to
Delaware Investments and look forward to updating you on your Fund's performance
next March.

Sincerely,

/s/ WAYNE A. STORK
- ------------------
WAYNE A. STORK
Chairman,
Delaware Investments Family of Funds

/s/ DAVID K. DOWNES
- -------------------
DAVID K. DOWNES
President and Chief Executive Officer,
Delaware Investments Family of Funds

discipline

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Portfolio Managers' Review

BY PATRICK P. COYNE AND
MITCHELL L. CONERY
Vice Presidents/Senior Portfolio Managers
August 4, 1999

MUNICIPAL BONDS OFFERED ATTRACTIVE VALUE COMPARED TO U.S. TREASURIES THROUGHOUT
MUCH OF FISCAL 1999

At the outset of our fiscal year, global demand for higher quality investments
increased the appeal of U.S. Treasury bonds. Prices rose sharply, driving yields
to historic lows. Municipal bond prices held relatively steady, however,
because:

o Issuances of new municipal bonds were unusually high;
o Municipal bonds do not carry the full backing of the U.S. Government and so
were not considered a safe haven; and
o Municipal bonds offered no tax advantages to foreign investors.

As a result, in October 1998, tax-free municipal bonds appeared to offer
remarkable value relative to comparable U.S. Treasury bonds. Long-term municipal
bond yields soared to 98% of what Treasury bonds of similar maturities offered,
well above the historical average of 84% (Source: Bloomberg Business News).
This attracted some non-traditional

market
overview

(Line Graph)
MUNICIPAL BONDS OFFER GOOD VALUE
COMPARED TO TREASURIES
- --------------------------------------------------------------------------------
Date Yield Ratio
- -------- -----------
Feb. '89 0.81%
Mar. '89 0.83%
Apr. '89 0.81%
May '89 0.81%
Jun. '89 0.85%
Jul. '89 0.86%
Aug. '89 0.85%
Sep. '89 0.87%
Oct. '89 0.90%
Nov. '89 0.87%
Dec. '89 0.86%
Jan. '90 0.83%
Feb. '90 0.82%
Mar. '90 0.83%
Apr. '90 0.82%
May '90 0.82%
Jun. '90 0.85%
Jul. '90 0.83%
Aug. '90 0.81%
Sep. '90 0.81%
Oct. '90 0.81%
Nov. '90 0.82%
Dec. '90 0.85%
Jan. '91 0.84%
Feb. '91 0.84%
Mar. '91 0.84%
Apr. '91 0.83%
May '91 0.82%
Jun. '91 0.83%
Jul. '91 0.82%
Aug. '91 0.83%
Sep. '91 0.85%
Oct. '91 0.83%
Nov. '91 0.83%
Dec. '91 0.87%
Jan. '92 0.84%
Feb. '92 0.83%
Mar. '92 0.83%
Apr. '92 0.81%
May '92 0.82%
Jun. '92 0.80%
Jul. '92 0.79%
Aug. '92 0.82%
Sep. '92 0.84%
Oct. '92 0.85%
Nov. '92 0.82%
Dec. '92 0.83%
Jan. '93 0.83%
Feb. '93 0.80%
Mar. '93 0.84%
Apr. '93 0.82%
May '93 0.82%
Jun. '93 0.82%
Jul. '93 0.84%
Aug. '93 0.87%
Sep. '93 0.86%
Oct. '93 0.87%
Nov. '93 0.86%
Dec. '93 0.82%
Jan. '94 0.83%
Feb. '94 0.84%
Mar. '94 0.87%
Apr. '94 0.84%
May '94 0.81%
Jun. '94 0.83%
Jul. '94 0.82%
Aug. '94 0.82%
Sep. '94 0.81%
Oct. '94 0.82%
Nov. '94 0.84%
Dec. '94 0.84%
Jan. '95 0.81%
Feb. '95 0.80%
Mar. '95 0.80%
Apr. '95 0.82%
May '95 0.85%
Jun. '95 0.89%
Jul. '95 0.86%
Aug. '95 0.88%
Sep. '95 0.90%
Oct. '95 0.88%
Nov. '95 0.87%
Dec. '95 0.88%
Jan. '96 0.87%
Feb. '96 0.84%
Mar. '96 0.86%
Apr. '96 0.84%
May '96 0.84%
Jun. '96 0.83%
Jul. '96 0.82%
Aug. '96 0.81%
Sep. '96 0.80%
Oct. '96 0.83%
Nov. '96 0.84%
Dec. '96 0.82%
Jan. '97 0.82%
Feb. '97 0.81%
Mar. '97 0.81%
Apr. '97 0.81%
May '97 0.80%
Jun. '97 0.80%
Jul. '97 0.82%
Aug. '97 0.81%
Sep. '97 0.82%
Oct. '97 0.85%
Nov. '97 0.86%
Dec. '97 0.85%
Jan. '98 0.86%
Feb. '98 0.86%
Mar. '98 0.87%
Apr. '98 0.87%
May '98 0.87%
Jun. '98 0.90%
Jul. '98 0.89%
Aug. '98 0.94%
Sep. '98 0.97%
Oct. '98 0.96%
Nov. '98 0.96%
Dec. '98 0.97%
Jan. '99 0.95%
Feb. '99 0.89%
Mar. '99 0.88%
Apr. '99 0.87%
May '99 0.86%
Jun. '99 0.87%
Jul. '99 0.86%
Aug. '99 0.89%

- --------------------------------------------------------------------------------
Municipal bonds typically offer about 84% of the income that is offered by
comparable Treasury Securities. When yields exceed 84% of Treasuries, municipal
bonds are considered to be undervalued.

The above chart represents the percentage of income that the average 30-year
AAA-rated general obligation municipal bond provided compared to a 30-year U.S.
Treasury bond. Principal and interest of municipal bonds, unlike Treasuries, are
not guaranteed by the U.S. government. Source: Bloomberg Business News

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for tax-exempt
income
4

buyers, such as foreign investors and corporations, into the municipal bond
market during the fourth quarter of 1998. Rather than investing in municipal
bonds for their tax advantages, these buyers viewed the market as undervalued
and ripe with potential for price appreciation.
However, as higher interest rates became more likely, municipal bond
yields rose during the second quarter of 1999 and throughout the summer. Many of
the non-traditional investors who had purchased municipal bonds at the end of
1998 attempted to lock in profits and sold their holdings.
By August 31, 1999, municipal bond yields had risen to 5.78%.* Treasury
yields also increased, but unlike what we saw during the first quarter, less
dramatically than municipal bonds. As a result, long-term municipal bond yields
again reached what seemed to be very compelling levels, offering 89% of the
income of comparable U.S, Treasury bonds (Source: Bloomberg Business News).
Toward the end of the fiscal period, these attractive municipal bond yields
appeared to be drawing investors back into the market.

ROBUST MUNICIPAL BOND SUPPLY SLOWS IN 1999
After the market absorbed a near-record $285 billion of new supply during 1998,
municipal bond issues slowed substantially in 1999. During the first seven
months of 1999, new municipal bond issues stood at $133 billion, down nearly 24%
from same period in the previous year (Source: The Bond Buyer).
This was due in part to a drop in refunding activity from municipalities
who had already taken advantage of lower interest rates to refinance their debt
in 1998. In addition, higher borrowing costs in 1999 reduced the incentive for
municipalities to issue bonds to fund capital projects. While reduced supply
limited our selection, it also helped keep municipal bond prices from falling as
steeply as Treasuries during the equity market rally in the first quarter of
1999.

CREDIT QUALITY LEVELS OUT
Over the last three years, the municipal bond market has enjoyed steadily
improving credit quality. In 1999, however, that trend appeared to wind down. So
far

CREDIT QUALITY
AUGUST 31, 1999
- --------------------------------------------------------------------------------
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA National High-Yield
USA Insured Intermediate Municipal
Fund Fund Fund Bond Fund
- --------------------------------------------------------------------------------
AAA 34.3% 83.6% 51.2% 0.6%
AA 11.3% 4.9% 14.5% 2.7%
A 16.9% 4.1% 4.7% 6.0%
BBB 23.5% 6.4% 24.9% 37.6%
BB & B 6.3% 1.0% 4.7% 8.5%
Unrated 7.7% 0% 0% 44.6%

* For A-rated, 30-year General Obligation municipal bonds. Source: Bloomberg
Business News.

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(photo of globes)

this year, credit upgrades are only slightly ahead of downgrades.
As a result, bond issuers are beginning to offer higher yields to investors
willing to take on the risk of lower rated or unrated bonds. In many cases,
these higher yielding, higher risk municipal bonds are being issued by
not-for-profit health care providers. We avoided these bonds because in our
view, increased competition combined with state and local funding cuts will
challenge the profitability of these organizations.

STRATEGIC POSITIONING
Delaware Tax-Free USA Fund
Credit problems with two industrial development bonds reduced Delaware Tax-Free
USA Fund's 12-month total return. We are pleased to report that they are no
longer in the portfolio and that we plan to use the losses to offset any
potential capital gains.
We continue to focus our recent purchases on higher quality bonds. During
fiscal 1999, eight Delaware Tax-Free USA Fund bonds, representing 17% of the
Fund's holdings, received credit upgrades. Credit upgrades lower the risk
associated with a bond, which generally increases the bond's value. As of August
31, 1999, over 86 percent of the Fund was invested in investment grade bonds
rated BBB or higher by Standard and Poor's.
Largely due to our problems with the two industrial development bonds,
Delaware Tax-Free USA Fund had a total return of -2.90% (Class A shares with
distributions reinvested at net asset value) for the 12-month period ended
August 31, 1999. This was less than the Fund's unmanaged benchmark, the Lehman
Brothers Municipal Bond Index and the average return provided by a peer group of
municipal bond funds with similar investment objectives.
Consistent with our conservative approach to investing, we strive to keep
Delaware Tax-Free USA Fund's duration (a measure of a fund's sensitivity to
interest rate fluctuations) slightly shorter than our Lehman Brothers benchmark.
This reduced the Fund's performance during the third and fourth quarters of
1998, when interest rates were falling, but helped preserve capital when
interest rates rose this summer.
As municipal bond yields rose during the second and third quarter of 1999,
we

tax-free
usa

<TABLE>
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
AUGUST 31, 1999
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA National High-Yield
USA Insured Intermediate Municipal Bond
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
Average Maturity 13.0 years 12.6 years 9.7 years 17.1 years
Average Duration 7.5 years 7.7 years 6.7 years 9.0 years
AMT Income* 13.29% 6.34% 10.38% 5.43%
Current 30-Day
SEC Yield**
(A Class) 4.36% 4.09% 3.93% 4.76%
(B and C Classes) 3.73% 3.44% 3.19% 4.17%
</TABLE>
- --------------------------------------------------------------------------------
* Percentage of income generated for the 12 months ended August 31, 1999
that was subject to the federal alternative minimum tax.
** Calculated according to Securities and Exchange Commission Guidelines.

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for tax-exempt
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extended our duration by selling some of our high coupon bonds and reinvesting
the proceeds in longer term bonds offering significantly higher yields. As of
August 31, 1999, Delaware Tax-Free USA Fund's average effective duration was 7.5
years, an increase of nearly one year from the previous year. In our view, the
additional yield available at the longer end of the maturity spectrum outweighed
the risk of price volatility due to rising interest rates.

Delaware Tax-Free Insured Fund
Delaware Tax-Free Insured Fund had a total return of -1.48% (Class A shares with
dividends reinvested at net asset value) for the 12 months ended August 31,
1999. This was less than our benchmark, the Lehman Brothers Insured Municipal
Bond Index. However, we did a better job of preserving capital than the average
insured municipal bond fund tracked by Lipper Analytical Services.
As of August 31, 1999, Delaware Tax-Free Insured Fund's duration was 7.8
years, an increase of 1.7 years during fiscal 1999, but still shorter than the
Lehman Brothers Insured Municipal Bond Index. A shorter duration helped the Fund
weather inflation and interest rate concerns this summer. Nevertheless, given
our outlook for relatively tame inflation, we steadily increased our duration as
municipal bond yields rose to increase the Fund's income potential.
Delaware Tax-Free Insured Fund invests primarily in municipal bonds backed
by private insurance. In fiscal 1998, nearly 51% of all new municipal bond
issues carried insurance, according to Securities Data Corporation. Bond
insurance reduces the risk of loss due to financial difficulties of an issuer.
As defaults began to increase during 1999, however, bond insurers became
more cautious, particularly in the health care sector. As a result, the
percentage of municipal bond issues that carried insurance declined in 1999,
limiting the Fund's opportunities to select bond's with attractive yields and
solid credit protection.

AS MUNICIPAL BOND YIELDS ROSE DURING THE SECOND AND THIRD QUARTER OF 1999,
WE EXTENDED OUR DURATION BY SELLING SOME OF OUR HIGH COUPON BONDS AND
REINVESTING THE PROCEEDS IN LONGER-TERM BONDS OFFERING SIGNIFICANTLY HIGHER
YIELDS.

tax-free
insured

<TABLE>
TOP FIVE ALLOCATIONS BY STATE
- --------------------------------------------------------------------------------
AUGUST 31, 1999

Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA National High-Yield
USA Insured Intermediate Municipal
Fund Fund Fund Bond Fund
<S> <C> <S> <C> <S> <C> <S> <C>
Texas 9.5% Illinois 24.6% Pennsylvania 10.7% Illinois 7.9%
Pennsylvania 8.9% California 12.3% California 9.7% Alabama 5.8%
Florida 8.2% Washington 9.6% Michigan 6.7% New Hampshire 5.7%
Massachusetts 6.8% Ohio 6.8% Virginia 5.5% Missouri 5.6%
New York 6.7% Texas 6.1% Illinois 5.0% Massachusetts 5.2%
</TABLE>

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for tax-exempt
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(photo of people)

When selecting bonds, we focused on bonds from states with strong local demand
due to:

o High personal state income tax rates;
o Strong wealth and income figures; and
o Favorable tax treatment of bonds.

This strategy led us to continue investing the largest percentage of the
Fund's assets in Illinois, which accounted for three of the Fund's Top 10
holdings.

Delaware Tax-Free USA Intermediate Fund
Delaware Tax-Free Intermediate Fund provided a total return of +0.29% (Class A
Shares with distributions reinvested at net asset value). This exceeded the
average return of the 133 funds in the Lipper Intermediate Municipal Debt Fund
category, but fell short of our benchmark, the Merrill Lynch Three-to-Seven Year
Municipal Bond Index.
The Fund focuses on securities with maturities of five to 10 years.
Historically, Delaware Tax-Free USA Intermediate Fund has used a barbell
strategy to position our duration in the intermediate range. This meant that
instead of investing in intermediate-length bonds, we invested in a mix of
short- and long-term bonds to produce an intermediate-length average duration.
Over the last six months, yields on 10-year municipal bonds rose
substantially, making this sector of the market considerably more attractive. We
modestly repositioned the portfolio accordingly, by shifting from our barbell
strategy and investing more heavily in true intermediate-length bonds to take
advantage of their rising yields.
In the process, as of August 31, 1999, we extended the average duration of
the Fund by more than a year since the

OVER THE LAST SIX MONTHS YIELDS ON 10-YEAR MUNICIPAL BONDS ROSE SUBSTANTIALLY,
MAKING THIS SECTOR OF THE MARKET CONSIDERABLY MORE ATTRACTIVE.

tax-free
usa intermediate

(column graph)

TREASURIES VS. MUNICIPAL BONDS
WHAT AN INVESTOR REALLY EARNS AFTER TAXES
- --------------------------------------------------------------------------------
YIELDS AS OF AUGUST 31, 1999

30-Year 30-Year 30-Year
Treasury Bond Treasury Bond AAA General
Yield Yield Obligation Bond
Before Taxes After Taxes Yield
- --------------------------------------------------------------------------------
6.21% 3.75% 5.20%

The Difference 1.45%

Principal and interest of municipal bonds, unlike Treasuries, are not guaranteed
by the US government. The above illustration is not intended to represent the
yield of any mutual fund from Delaware Investments.
Source: Bloomberg Business News

The chart to the left shows 30-year Treasury bond yields vs. AAA rated municipal
bond yields for an investor in the 39.6% income tax bracket.

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beginning of the fiscal year. This strategy seemed appropriate as longer term
bonds began to offer substantially higher yields in return for increased
sensitivity to fluctuating interest rates.
Counterbalancing our slightly more aggressive duration strategy was a
conservative approach to bond quality. We focused the majority of our new
purchases on higher quality bonds. The table on page 4 shows that as of August
31,1999, more than 51% of the Fund's holdings were invested in bonds rated AAA
by Standard and Poor's, the highest rating possible. In our opinion, with the
exception of some health care issues which we considered too risky, municipal
bonds offered investors minimal additional yield in return for higher credit
risk.

Delaware National High-Yield Municipal Bond Fund
We normally position the duration of Delaware National High-Yield Municipal Bond
Fund slightly shorter than the average duration of our benchmark, the Lehman
Brothers Municipal Bond Index. Since the Fund invests in higher yielding, higher
risk bonds, we generally believe it makes sense to limit our sensitivity to the
additional risk of interest rate changes.
We gradually extended Delaware National High-Yield Municipal Bond Fund's
duration throughout fiscal 1999 as the yield gap between short-term bonds and
long-term bonds widened. As of August 31, 1999, this strategy helped us outpace
both the Lehman Brothers Municipal Bond Index and the average return of our
peers in the Lipper High-Yield Municipal Debt Fund Average with a 12-month total
return of +1.08% (Class A shares with distributions reinvested at net asset
value).
Over the last 12 months, more than 13% of Delaware National High-Yield
Municipal Bond Fund's holdings were pre-refunded. Issuers often pre-refund their
bonds when interest rates are low in order to reduce their interest costs.
Pre-refunded bonds can help the Fund because they become backed by U.S.
government bonds, which improves their credit quality. The price of a
pre-refunded bond can also rise because pre-refunding reduces the bond's
sensitivity to fluctuating interest rates.
Throughout fiscal 1999, bond issuers offered little incentive for
investing in bonds with lower credit ratings. We found the most attractive
opportunities to increase the Fund's income in non-rated securities, which as of
August 31, 1999, made up 45% of the Fund's portfolio. In most cases, these bonds
were issued by small, rural municipalities looking to avoid the expense of
obtaining a Standard and Poor's or Moody's Investors Service rating. We
carefully research non-rated bond issues before we purchase them and continue to
monitor their credit quality on a regular basis.

high-yield

WE GRADUALLY EXTENDED DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND'S
DURATION THROUGHOUT FISCAL 1999 AS THE GAP BETWEEN YIELDS OF SHORT-TERM BONDS
AND LONG-TERM BONDS WIDENED.

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for tax-exempt
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9

OUTLOOK
As the U.S. economy continued its record peacetime expansion, we began to see
signs of overheating in the late spring of 1999. A primary concern for the
Federal Reserve Board has been rising labor costs. As economic expansion
continues to create new jobs, competition between employers looking to fill
those positions is leading to higher wages. While this scenario certainly
benefits employees, the Fed is concerned that higher labor costs will eventually
translate to higher consumer prices.
Another potential source of inflation is vigorous U.S. consumer spending.
Confident about their jobs, their income prospects and the economy, consumers
opened their wallets to retailers at a brisk pace throughout fiscal 1999. In
August, retail sales increased by 1.2%, more than twice what analysts had
predicted, and the largest gain in six months (Source: Bloomberg Business News).
Despite rising wages and steady consumer spending, we believe that with
two short-term interest rate hikes this summer, the Federal Reserve has gone a
long way toward stifling inflation. In August, consumer prices (excluding food
and energy) rose at the smaller than expected rate of just 0.1%. Wage increases
in August, according to a government employment report, were also below
expectations.
At their October 5 meeting, the Federal Reserve Board adopted a
"tightening" bias, increasing the likelihood that they will raise rates again in
November. However, unless labor costs or consumer prices begin to accelerate
rapidly, we think substantial interest rate hikes in 1999 will not be necessary.
If inflation remains relatively tame and interest rates stabilize, this could
promote stronger price performance for tax-free municipal bonds in the coming
months.
We also expect refunding activity to remain light during the next several
months, which should continue to limit the supply of available municipal bonds.
Reduced municipal bond supply may contribute to higher municipal bond prices.
While the short-term outlook for municipal bonds is somewhat uncertain, we
continue to believe they offer an important long-term benefit to investors
seeking to increase their income potential but not their tax burden. In addition
to their tax advantages, municipal bonds also offer investors another option to
help diversify their portfolio and reduce volatility.

outlook

(photo of family sitting on beach)

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10

Performance Summary

(line graph)
DELAWARE TAX-FREE USA FUND A CLASS
DELAWARE TAX-FREE INSURED FUND A CLASS
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 1, 1989 TO AUGUST 31, 1999

Delaware Delaware Lehman U.S.
Tax-Free Tax-Free Brothers Consumer
USA Fund Insure Fund Municipal Price Index
Class A Class A Bond Index (Inflation)
- --------------------------------------------------------------------------------
Aug. '89 $ 9,627 $ 9,622 $10,000 $10,000
Aug. '90 9,868 10,068 10,643 10,562
Aug. '91 11,040 11,196 11,898 10,963
Aug. '92 12,356 12,342 13,197 11,308
Aug. '93 13,796 13,511 14,840 11,621
Aug. '94 14,001 13,584 14,861 11,958
Aug. '95 14,945 14,444 16,179 12,271
Aug. '96 15,231 15,004 17,026 12,622
Aug. '97 16,418 16,214 18,600 12,905
Aug. '98 17,710 17,422 20,208 13,114
Aug. '99 $17,194 $17,162 $20,319 $13,419

Chart assumes a $10,000 investment on September 1, 1989, a 3.75% front-end sales
charge and reinvestment of all distributions. Performance for other Fund classes
will vary due to differing charges and expenses. Past performance does not
guarantee future results.

DELAWARE TAX-FREE USA FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1999

Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 1/11/84)
Excluding Sales Charge +8.44% +5.99% +4.22% -2.90%
Including Sales Charge +8.18% +5.58% +3.43% -6.53%
- --------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +3.46% +3.39% -3.67%
Including Sales Charge +3.31% +3.07% -7.35%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +2.26% -3.67%
Including Sales Charge +2.26% -4.59%

DELAWARE TAX-FREE INSURED FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1999

Lifetime Ten Years Five Years One Year
- --------------------------------------------------------------------------------
Class A (Est. 3/25/85)
Excluding Sales Charge +7.27% +5.97% +4.81% -1.48%
Including Sales Charge +6.98% +5.56% +4.01% -5.14%
- --------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.09% +3.98% -2.27%
Including Sales Charge +3.94% +3.65% -5.98%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +3.02% -2.27%
Including Sales Charge +3.02% -3.20%

Performance for all Funds includes reinvestment of distributions and applicable
sales charge as described on page 12. Return and share value will fluctuate so
that shares, when redeemed, may be worth more or less than the original cost.
Past performance is not a guarantee of future results. Performance for Class B
and C shares, excluding sales charge, assumes either contingent deferred sales
charge did not apply or the investment was not redeemed.

<PAGE>

for tax-exempt
income
11

(line graph)
DELAWARE TAX-FREE USA INTERMEDIATE FUND
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
JANUARY 7, 1993 TO AUGUST 31, 1999

U.S. Delaware Merrill Lynch
Consumer Tax-Free USA Three-To-Seven Year
Price Index Intermediate Municipal
(Inflation) Fund Class A Bond Index
- --------------------------------------------------------------------------------
Jan. '93 $10,000 $ 9,729 $10,000
Aug. '93 10,154 10,596 10,498
Aug. '94 10,449 10,817 10,687
Aug. '95 10,722 11,513 11,413
Aug. '96 11,029 12,032 11,834
Aug. '97 11,276 12,823 12,580
Aug. '98 11,459 13,749 13,459
Aug. '99 $11,725 $13,789 $13,780

Chart assumes a $10,000 investment on January 7, 1993, a 2.75% front-end sales
charge and reinvestment of all distributions. Performance for other Fund classes
will vary due to differing charges and expenses. Past performance does not
guarantee future results.

DELAWARE TAX-FREE USA INTERMEDIATE FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1999

Lifetime Five Years One year
- --------------------------------------------------------------------------------
Class A (Est. 1/7/93)
Excluding Sales Charge +5.52% +5.00% +0.29%
Including Sales Charge +5.09% +4.42% -2.44%
- --------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.29% +4.11% -0.56%
Including Sales Charge +4.29% +4.11% -2.48%
- --------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +3.53% -0.56%
Including Sales Charge +3.53% -1.52%

Performance for all classes includes reinvestment of distributions and
applicable sales charge as described on page 12. Return and share value will
fluctuate so that shares, when redeemed, may be worth more or less than the
original cost. Past performance is not a guarantee of future results.
Performance for Class B and C shares, excluding sales charge, assumes either
contingent deferred sales charge did not apply or the investment was not
redeemed. Returns reflect a voluntary expense limitation in effect at the time.
Returns would have been lower without the limitation.

<PAGE>

for tax-exempt
income
12

(line graph)
DELAWARE NATIONAL HIGH YIELD MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
SEPTEMBER 1, 1989 TO AUGUST 31, 1999

Lehman U.S. Consumer Delaware National
Brothers Price High Yield
Municipal Index Municipal Bond
Bond Index (Inflation) Fund Class A
- --------------------------------------------------------------------------------
Aug. '89 $10,000 $10,000 $ 9,628
Aug. '90 10,643 10,562 10,200
Aug. '91 11,898 10,963 11,276
Aug. '92 13,197 11,308 12,611
Aug. '93 14,840 11,621 14,065
Aug. '94 14,861 11,958 14,312
Aug. '95 16,179 12,271 15,423
Aug. '96 17,026 12,622 16,535
Aug. '97 18,600 12,905 18,225
Aug. '98 20,208 13,114 19,892
Aug. '99 $20,319 $13,419 $20,106

Chart assumes a $10,000 investment on September 1, 1989, a 3.75% front-end sales
charge and reinvestment of all distributions. High-Yield securities involve
greater risks than bonds with investment grade credit ratings. Performance of
other Fund classes differs because of different charges and expenses. Past
performance does not guarantee future results.

DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1999

Lifetime Ten Years Five Years One year
- --------------------------------------------------------------------------------
Class A (Est. 9/22/86)
Excluding Sales Charge +7.61% +7.67% +7.09% +1.08%
Including Sales Charge +7.30% +7.26% +6.26% -2.70%
- --------------------------------------------------------------------------------
Class B (Est. 12/18/96)
Excluding Sales Charge +5.44% +0.42%
Including Sales Charge +4.42% -3.41%
- --------------------------------------------------------------------------------
Class C (Est. 5/26/97)
Excluding Sales Charge +5.12% +0.32%
Including Sales Charge +5.12% -0.64%

Performance for all classes includes reinvestment of distributions and
applicable sales charge as described below. Return and share value will
fluctuate so that shares, when redeemed, may be worth more or less than the
original cost. Past performance is not a guarantee of future results.
Performance for Class B and C shares, excluding sales charge, assumes either
contingent deferred sales charge did not apply or the investment was not
redeemed. Returns reflect a voluntary expense limitation in effect at the time.
Returns would have been lower without the limitation.

Voluntary expense limitations were in effect for Delaware USA Intermediate Fund
and Delaware National High-Yield Municipal Bond Fund for the periods shown.
Returns would have been lower without the limitations.

Class A returns for all Funds except Delaware Tax-Free USA Intermediate Fund
reflect the effect of a 3.75% front-end sales charge and a 12b-1 fee (in effect
after 6/1/92 for Delaware Tax-Free USA and Delaware Tax-Free Insured Funds).
Class A returns for Delaware Tax-Free USA Intermediate Fund reflect the effect
of a 2.75% front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. All Funds are subject to a deferred sales
charge of up to 4% if redeemed before the end of the sixth year except Delaware
Tax-Free USA Intermediate Fund, which has up to a 2% deferred sales charge if
redeemed before the end of the third year.
Class C shares have a 1% annual distribution and service fee. If shares are
redeemed within 12 months, a 1% contingent deferred sales charge applies.

<PAGE>

for tax-exempt income 13

Financial Statements

DELAWARE GROUP TAX-FREE FUND, INC. - DELAWARE TAX-FREE USA FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1999

Principal Market
Amount Value
MUNICIPAL BONDS - 98.37%
Continuing Care/Retirement Revenue
Bonds - 1.39%
Clark County, Nevada Assisted Living Homestead
(Boulder City Project / Volunteers of America)
6.50% 12/01/27...................................... $ 500,000 $ 498,650
Delaware County, Pennsylvania Authority Revenue
Main Line & Haverford Nursing Home
9.00% 08/01/22...................................... 1,950,000 2,176,512
Delaware State Economic Development Authority
First Mortgage Peninsula United Methodist
Series A 6.20% 05/01/15............................. 4,000,000 4,116,680
Delaware State Economic Development Authority
Unrefunded Balance First Mortgage Peninsula
United Methodist Series A 8.50% 05/01/22............ 455,000 498,325
------------
7,290,167
------------
Convention Center/Stadium Revenue
Bonds - 0.65%
Metropolitan Pier & Exposition Authority Illinois
Hospitality Facilities (McCormick PL Convention)
6.25% 07/01/17...................................... 3,300,000 3,398,835
------------
3,398,835
------------
General Obligation Bonds - 6.32%
Albuquerque, New Mexico Gross Receipts Tax
Revenue 5.00% 07/01/25.............................. 4,000,000 3,573,960
Florida State Board of Education Capital Outlay
Public Education Series A 4.75% 06/01/28............ 5,000,000 4,214,250
Florida State Board of Education Capital Outlay
Unrefunded Balance Series A 7.25% 06/01/23.......... 2,445,000 2,557,030
New York City, New York Unrefunded Balance
Series E 6.00% 08/01/26............................. 9,220,000 9,327,136
New York City, New York Series H
6.125% 08/01/25..................................... 10,000,000 10,226,600
Texas State General Obligation (Veteran's Land Bank)
7.40% 12/01/20...................................... 3,000,000 3,158,730
------------
33,057,706
------------
Higher Education Revenue Bonds - 5.88%
Colorado Springs, Colorado Revenue
(Colorado College Project) 5.25% 06/01/24........... 2,000,000 1,871,180
District of Columbia Revenue
(Gonzaga College High School)
5.375% 07/01/29..................................... 5,000,000 4,679,650
Missouri State Health and
Educational Facilities Authority
(Washington University) 4.75% 11/15/37.............. 15,000,000 12,392,248
New Hampshire Higher Education & Health
Facilities Authority Revenue (New Hampton
School Issue) 5.375% 10/01/28....................... 2,000,000 1,707,360
New York State Dorm Authority Revenue Drivers
6.39% 05/15/15...................................... 10,500,000 10,107,930
------------
30,758,368
------------

Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Hospital Revenue Bonds - 4.64%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue
7.00% 08/01/15...................................... $ 375,000 $ 373,579
Allegheny County, Pennsylvania Hospital
Development Authority Revenue
(Allegheny Valley Hospital) 7.75% 08/01/20.......... 1,000,000 996,000
Connecticut State Development Authority Revenue
5.25% 08/01/19...................................... 1,000,000 942,240
Monroeville, Pennsylvania Hospital Authority
(Forbes Health System)
6.25% 10/01/15...................................... 2,000,000 1,972,180
7.00% 10/01/03...................................... 2,435,000 2,431,664
7.00% 10/01/13...................................... 3,000,000 2,989,950
Philadelphia Hospital & Higher Education
Facilities Authority Hospital Revenue
(Jeanes Health System Project)
5.875% 07/01/17..................................... 4,575,000 4,401,150
6.85% 07/01/22...................................... 7,000,000 7,298,690
Westmoreland County, Pennsylvania Industrial
Development Authority Revenue
5.25% 07/01/15...................................... 3,185,000 2,841,020
------------
24,246,473
------------
Housing Revenue Bonds - 5.16%
Alaska State Housing Finance Corporation
Collateralized Mortgage Obligation Series A
7.05% 06/01/25 (GNMA/FNMA).......................... 80,000 82,404
Dade County Housing Finance Authority Single
Family Mortgage 6.70% 04/01/28
(GNMA/FNMA) AMT..................................... 4,500,000 4,656,105
Massachusetts State Housing Finance Agency
Revenue Family Mortgage 6.95% 06/01/16.............. 2,470,000 2,577,741
Montgomery County, Pennsylvania Redevelopment
Authority Multi-Family Housing Revenue
(KBF Associates L.P.) 7.25% 07/01/25................ 4,935,000 5,118,779
Tennessee Housing Development Agency
Series B 6.60% 07/01/25............................. 1,885,000 1,960,325
Utah State Housing Finance Agency,
Single Family Mortgage
Series A 7.20% 01/01/27 (FHA/VA) AMT................ 905,000 935,815
Virginia State Housing Development Authority
Series A 7.10% 01/01/25............................. 7,500,000 7,751,925
Wisconsin Housing & Economic Development
Authority Home Ownership Series B
6.75% 09/01/25 AMT.................................. 3,775,000 3,900,858
------------
26,983,952
------------

<PAGE>

14 for tax-exempt income

DELAWARE TAX-FREE USA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Industrial Development Revenue
Bonds - 1.19%
Matagorda County, Texas Naval District Revenue
(Reliant Energy Inc) Series A
5.25% 06/01/26...................................... $1,500,000 $ 1,392,285
Pennsylvania Economic Development Finance
Authority Solid Waste Disposal Revenue
(USG Corp Project) 6.00% 06/01/31................... 5,000,000 4,827,750
------------
6,220,035
------------
Pollution Control Revenue
Bonds - 16.07%
Burke County, Georgia Development Authority
Pollution Control Revenue 5.40% 05/01/34............ 2,750,000 2,536,408
Claiborne County, Mississippi System Energy
Resources Inc. 7.30% 05/01/25....................... 3,000,000 3,095,520
Clark County, Nevada Industrial Development Revenue
(Nevada Power Co. Project) Series C
7.20% 10/01/22...................................... 8,000,000 8,592,960
Illinois Development Finance Authority
(Central Illinois Public Service Co.)
Series A 7.60% 03/01/14............................. 6,000,000 6,212,100
Michigan State Strategic Fund Limited
Obligation Revenue Refunding Detroit Edison
Series A 5.55% 09/01/29 AMT......................... 6,000,000 5,698,200
Mississippi Business Finance Corp, Mississippi
Pollution Control Revenue 5.90% 05/01/22............ 4,520,000 4,240,890
New Hampshire State Business Finance Authority
Pollution Control Revenue Refunding Public
Service Company Series D
6.00% 05/01/21 AMT.................................. 3,000,000 2,880,420
Nez Perce County, Idaho Refunding
(Potlatch Corp Project) 6.00% 10/01/24.............. 7,000,000 6,990,550
Parish of West Feliciana, Louisiana
(Gulf States Utilities Co. Project) Series A
7.50% 05/01/15...................................... 22,700,000 24,373,217
Petersburg, Indiana (Indianapolis Power & Light
Co. Project) 6.625% 12/01/24........................ 9,350,000 10,191,313
Sabine River Authority Texas (Southwestern Electric
Power) 6.10% 04/01/18 (MBIA)........................ 4,000,000 4,173,280
Sweetwater County, Wyoming Pollution
Control Revenue (Idaho Power Company)
Series A 6.05% 07/15/26............................ 5,000,000 5,047,350
------------
84,032,208
------------
Power Authority Revenue Bonds - 9.66%
**Georgia Municipal Electric Authority Series L
8.25% 01/01/09...................................... 5,000,000 2,904,200
Guam Power Authority Series A
5.125% 10/01/29..................................... 6,675,000 5,941,818
**Intermountain Power Agency, Utah Series 87D
Power Supply Revenue 9.25% 07/01/20................. 95,575,000 17,320,102
Lower Colorado River Authority, Texas Series B
6.00% 01/01/15...................................... 5,000,000 5,067,550
Northern Municipal Power Agency, Minnesota
Electric System Revenue Series A
5.00% 01/01/21...................................... 8,500,000 7,692,500

Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Power Authority Revenue Bonds (Continued)
Puerto Rico Electric Power Authority Series EE
4.75% 07/01/24...................................... $5,500,000 $ 4,731,760
Tallahassee Florida Energy Systems Revenue
Series A 4.75% 10/01/26............................. 8,000,000 6,839,920
------------
50,497,850
------------
* Pre-Refunded Bonds - 18.13%
City of Chicago, Illinois Skyway Toll Bridge
Revenue 6.75% 01/01/17-04........................... 3,300,000 3,645,972
Delaware State Economic Development Authority
Peninsula United Methodist First Mortgage
Series A 8.50% 05/01/22-02.......................... 3,045,000 3,415,790
Florida State Board of Education Series A
Prerefunded Balance 7.25% 06/01/23-00............... 2,555,000 2,672,070
Kentucky State Turnpike Authority
7.25% 05/15/10-00................................... 6,855,000 7,125,224
Louisiana Public Facilities Authority Hospital
Revenue (Southern Baptist Hospital, Inc.)
(Escrowed to Maturity) 8.00% 05/15/12............... 8,490,000 9,851,117
Massachusetts State General Obligation
7.50% 12/01/07-00................................... 6,615,000 7,033,730
Massachusetts State Water Resource Authority Series A
7.50% 04/01/09-00................................... 1,080,000 1,125,176
7.50% 04/01/16-00................................... 7,300,000 7,605,359
Michigan State Hospital Finance Authority
Revenue (Genesys Health Systems) Series A
7.50% 10/01/27-05................................... 8,130,000 9,358,037
8.125% 10/01/21-05.................................. 4,000,000 4,795,960
New Hampshire State Turnpike System Revenue
7.375% 04/01/12-00.................................. 3,000,000 3,122,490
7.40% 04/01/20-00................................... 11,675,000 12,153,325
New York City, New York Prerefunded Series E
6.00% 08/01/26-06................................... 780,000 847,696
Tampa, Florida (Florida Aquarium Project)
7.75% 05/01/27-02................................... 20,000,000 22,035,600
------------
94,787,546
------------
Sales Tax Revenue Bonds - 0.57%
Southeast Wisconsin Professional Baseball Park
District Sales Tax Revenue Series A
5.50% 12/15/26...................................... 3,000,000 2,953,890
------------
2,953,890
------------
School District General Obligation Bonds - 0.91%
Fort Bend Texas Independent School District
5.375% 02/15/24..................................... 5,000,000 4,774,200
------------
4,774,200
------------
Solid Waste Disposal Revenue Bonds - 3.98%
Ashland, Kentucky Waste Water Treatment Sewer
& Solid Waste Revenue (Ashland, Inc. Project)
7.125% 02/01/22 AMT................................. 13,200,000 14,220,756
Pennsylvania Economic Development Financing
Authority Wastewater Treatment (Sun Co. R & M
Project) Series A 7.60% 12/01/24 AMT................ 6,000,000 6,610,620
------------
20,831,376
------------

<PAGE>

for tax-exempt income 15

DELAWARE TAX-FREE USA FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Transportation Revenue Bonds - 17.97%
Alliance, Texas Special Facilities Revenue (Federal
Express Corp. Project) 6.375% 04/01/21 AMT.......... $ 6,000,000 $ 6,064,680
Atlanta, Georgia Special Purpose Facilities Revenue
(Delta Airlines Project) 7.50% 12/01/19............. 1,500,000 1,538,160
Chesapeake, Virginia Toll Road Revenue Expressway
Series A 5.625% 07/15/32............................ 2,260,000 2,138,796
Connector 2000 Association Inc. South Carolina Toll
Road Revenue Senior (Southern Connector
Project) Series A 5.375% 01/01/38................... 4,000,000 3,441,400
Dallas-Fort Worth, Texas Intl. Airport Facilities
Improvement (American Airlines Inc.)
7.50% 11/01/25 AMT.................................. 8,250,000 8,648,228
Foothill/Eastern Transportation Corridor Agency
California Toll Road Revenue Senior Lien
Series A 5.75% 01/15/40............................. 6,500,000 6,206,200
Indianapolis, Indiana Airport Authority Special
Facilities (Federal Express Corp. Project)
7.10% 01/15/17 AMT.................................. 7,800,000 8,463,078
Kenton County, Kentucky Airport Board Special
Facilities (Delta Airlines Project) Series A
Series A 7.25% 02/01/22............................. 4,250,000 4,501,005
Series B 7.50% 02/01/12............................. 2,000,000 2,132,560
Massachusetts State Turnpike Authority
Metropolitan Highway System Revenue Series A
5.00% 01/01/39...................................... 20,000,000 17,366,000
Oklahoma State Turnpike Authority 1st Senior
6.00% 01/01/22...................................... 13,535,000 14,379,719
6.00% 01/01/22 (Escrowed to Maturity)............... 7,465,000 7,504,191
Puerto Rico Commonwealth Highway & Transportation
Authority (Highway Improvements) Series Y
4.75% 07/01/23...................................... 2,000,000 1,728,180
5.00% 07/01/28...................................... 2,000,000 1,792,440
5.00% 07/01/36...................................... 3,000,000 2,661,120
Tulsa, Oklahoma Municipal Airport (American Airlines)
7.35% 12/01/11...................................... 5,000,000 5,382,550
------------
93,948,307
------------
Water & Sewer Revenue Bonds - 2.55%
Atlanta, Georgia Water & Wastewater Revenue
Series A 5.00% 11/01/38............................. 9,000,000 7,840,620
Highlands Ranch Metropolitan District Number 3
5.25% 12/01/14...................................... 1,750,000 1,685,863
Houston, Texas Water and Sewer Systems Revenue
Series A 4.75% 12/01/24............................. 4,500,000 3,819,375
------------
13,345,858
------------
Other Revenue Bonds - 3.30%
Austin Texas Revenue Refunded Sub Lien
5.25% 05/15/25...................................... 13,500,000 12,841,875
Luzerne County Industrial Development Authority
(Pennsylvania Gas & Water Co. Project) Series A
7.00% 12/01/17 AMT.................................. 4,000,000 4,416,640
------------
17,258,515
------------
Total Municipal Bonds (cost $496,509,544).............. 514,385,286
------------

Principal Market
Amount Value
- --------------------------------------------------------------------------------
+VARIABLE RATE NOTES - 0.86%
New York Dorm Authority Putters Float
3.32% 05/15/15...................................... $4,500,000 $ 4,500,000
------------
Total Variable Rate Notes (cost $4,500,000)............ 4,500,000
------------

TOTAL MARKET VALUE OF SECURITIES - 99.23%
(cost $501,009,544)............................................. $518,885,286
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 0.77%............................................. 4,017,575
------------
NET ASSETS APPLICABLE TO 48,032,223
SHARES ($0.01 PAR VALUE)
OUTSTANDING - 100.00%........................................... $522,902,861
============

NET ASSET VALUE - TAX-FREE USA FUND A CLASS
($485,239,621 / 44,572,598 SHARES).............................. $10.89
======
NET ASSET VALUE - TAX-FREE USA FUND B CLASS
($34,248,581 / 3,145,964 SHARES)................................ $10.89
======
NET ASSET VALUE - TAX-FREE USA FUND C CLASS
($3,414,659 / 313,661 SHARES)................................... $10.89
======
- ---------------------
* 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.
+ Variable Rate Notes - The interest rate shown is the rate as of August 31,
1999.

Summary of Abbreviations:
AMT - Subject to Federal Alternative Minimum Tax
FHA/VA - Insured by the Federal Housing Association/Veterans Association
FNMA - Insured by the Federal National Mortgage Association
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association

COMPONENTS OF NET ASSETS AT AUGUST 31, 1999:
Common stock, $0.01 par value, 500,000,000 shares
authorized to the Tax-Free USA Fund............................ $531,527,950
Accumulated net realized loss on investments...................... (26,500,831)
Net unrealized appreciation of investments........................ 17,875,742
.......................................................... ------------
Total net assets.................................................. $522,902,861
============

NET ASSET VALUE AND OFFERING PRICE PER SHARE - TAX-FREE USA FUND
Net asset value A Class (A)....................................... $10.89
Sales charge (3.75% of offering price or 3.86% of amount
invested per share) (B)........................................ 0.42
------
Offering price.................................................... $11.31
======
- ----------------------
(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>

16 for tax-exempt income

DELAWARE GROUP TAX-FREE FUND, INC. -
DELAWARE TAX-FREE INSURED FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 100.12%
General Obligation Bonds - 0.76%
Columbus, Ohio Tax Increment Financing Revenue
4.875% 12/01/24 (AMBAC)............................. $500,000 $ 434,285
Oak Hills, Ohio Local School District
5.125% 12/01/25 (MBIA).............................. 150,000 137,555
------------
571,840
------------
Higher Education Revenue Bonds - 3.55%
District of Columbia - Revenue (Gonzaga College
High School) 5.375% 07/01/29 (FSA).................. 590,000 552,199
Massachusetts State Health & Education Facilities
Authority (Boston College) Series J
6.625% 07/01/21 (FGIC).............................. 80,000 84,130
Massachusetts State Industrial Finance Agency
Revenue Higher Education (Clark University Project)
6.10% 07/01/16...................................... 1,250,000 1,279,838
Missouri State Health & Educational Facilities
Authority (Central Institute for the Deaf)
5.85% 01/01/22 (ASSET GTY).......................... 750,000 743,940
------------
2,660,107
------------
Hospital Revenue Bonds - 11.03%
Connecticut Development Authority Revenue
5.25% 08/01/19 (ASSET GTY).......................... 1,000,000 942,240
Fort Wayne, Indiana Hospital Authority
6.40% 11/15/22 (MBIA)............................... 2,250,000 2,427,548
Monroeville, Pennsylvania Hospital Authority
Hospital Revenue (Forbes Health System)
7.00% 10/01/03...................................... 745,000 743,979
Wisconsin State Health & Education Facilities
(Sisters Sorrowful Mother) Series A
5.70% 08/15/26 (MBIA)............................... 4,200,000 4,154,220
------------
8,267,987
------------
Housing Revenue Bonds - 13.34%
California Housing Finance Agency Series B
6.85% 08/01/23 (MBIA)............................... 3,860,000 4,026,212
Illinois Development Finance Authority Revenue
Reference Mortgage Federal Housing Authority
(Section 8) Series A 5.80% 07/01/28 (MBIA).......... 2,790,000 2,762,742
Massachusetts State Housing Agency Revenue
Family Mortgage 5.65% 06/01/17 (FSA)................ 475,000 471,276
New Mexico Mortgage Finance Authority
(Single Family Mortgage Program) Series C
6.20% 07/01/26 (GNMA/FNMA).......................... 1,000,000 1,019,750
Palm Desert, California Finance Housing Authority
Tax Allocation Revenue (Housing Set Aside)
5.10% 10/01/27 (MBIA)............................... 1,875,000 1,720,725
------------
10,000,705
------------
Industrial Development Revenue Bonds - 2.79%
Luzerne County, Pennsylvania Industrial Development
Authority (Pennsylvania Gas & Water Co. Project)
7.00% 12/01/17 (AMBAC).............................. 1,000,000 1,104,160

Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Industrial Development Revenue Bonds (Continued)
Michigan State Strategic Funding Limited Obligation
Revenue (Detroit Edison) Series A
5.55% 09/01/29 (MBIA)............................... $1,000,000 $ 949,700
Ohio State Air Quality Development Authority
Revenue JMG Funding LTD Partnership Project.
5.625% 10/01/22 (AMBAC)............................. 35,000 34,224
------------
2,088,084
------------
Leases/Certificates of Participation - 1.88%
Missouri State Certificates of Participation
(Bonne Terre Prison Project) - Series A
5.15% 06/01/19 (AMBAC).............................. 1,500,000 1,407,915
------------
1,407,915
------------
Pollution Control Revenue Bonds - 14.85%
Matagora County, Texas Naval District No1.
Revenue (Reliant Energy Inc.) Series A
5.25% 06/01/26 (AMBAC).............................. 500,000 464,095
Mississippi Business Finance, Mississippi Pollution
Control Revenue (Systems Energy Resource Inc.
Project) 5.90% 05/01/22............................. 1,500,000 1,407,375
Northampton County, Pennsylvania Industrial
Development Authority (Citizens Utilities Co.)
6.95% 08/01/15...................................... 1,000,000 1,043,440
Ohio State Air Quality Development Authority (Ohio
Edison) Series A 7.45% 03/01/16 (FGIC).............. 2,000,000 2,066,540
Salem County, New Jersey Industrial Pollution Control
Financing Authority (Public Service Electric &
Gas Co.) Series D 6.55% 10/01/29 (MBIA)............. 4,000,000 4,337,080
Trinity River, Texas Pollution Control Revenue
Bonds (Texas Instruments Inc. Project)
6.20% 03/01/20 (AMT)................................ 1,750,000 1,805,895
------------
11,124,425
------------
Power Authority Revenue Bonds - 2.49%
Central Valley Financing Authority California
Cogeneration Project Revenue Refunding
(Carson Ice-General Project)
5.00% 07/01/18 (MBIA)............................... 2,000,000 1,867,920
------------
1,867,920
------------
* Pre-Refunded Bonds - 26.05%
Austin, Texas Revenue Series A
6.00% 05/15/15-00 (FGIC)............................ 1,090,000 1,107,702
Massachusetts State Health & Education Facilities
Authority Revenue Series J
6.625% 07/01/21-01 (FGIC)........................... 2,420,000 2,572,629
Michigan State Hospital Finance Authority Revenue
Series A (Genesys Health Systems)
7.50% 10/01/27-05................................... 1,500,000 1,726,575
Regional Transit Authority Illinois Revenue Series D
6.75% 06/01/25-04 (FGIC)............................ 7,970,000 8,864,075

<PAGE>

for tax-exempt income 17

DELAWARE TAX-FREE INSURED FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Pre-Refunded Bonds (Continued)

Seattle,Washington Municipality Metropolitan
Seattle Sewer Revenue Series U
6.60% 01/01/32-01 (FGIC)............................ $ 5,000,000 $ 5,256,300
------------
19,527,281
------------
Transportation Revenue Bonds - 12.96%
** Alameda, California Corridor Transportation
Authority Series A (Capital Appreciation Bonds)
5.25% 10/01/30 (MBIA)............................... 10,000,000 1,636,400
Alliance,Texas Special Facility Revenue (Federal
Express Corp. Project ) 6.375% 04/01/21............. 1,000,000 1,010,780
Chicago, Illinois O'Hare International Airport Senior
Lien - Series A 5.00% 01/01/16 (MBIA)............... 5,000,000 4,650,950
Dayton, Ohio Special Facilities Revenue (Air Freight)
Series F 6.05% 10/01/09 (MBIA)...................... 2,320,000 2,412,127
------------
9,710,257
------------
Water & Sewer Revenue Bonds - 7.53%
Atlanta, Georgia Water & Wastewater Revenue
Series A 5.00% 11/01/38 (FGIC)...................... 1,000,000 871,180
Atlanta, Georgia Water & Wastewater Revenue
Series A 5.50% 11/01/15 (FGIC)...................... 1,250,000 1,264,613
Melrose Park Illinois Water Revenue
Series A 5.00% 07/01/20 (MBIA)...................... 2,400,000 2,174,784
North Springs Import District Florida
Water Revenue 4.75% 10/01/23 (MBIA)................. 1,550,000 1,332,985
------------
5,643,562
------------
Other Revenue Bonds - 2.89%
Austin Texas Utility System Revenue
6.00% 05/15/15 (FGIC)............................... 185,000 186,330
Washington State Housing Finance Commission Nonprofit
(VA Mason Research Center Project) Series A
5.70% 01/01/24 (LOC US Bank Trust N.A.)............. 2,000,000 1,979,060
------------
2,165,390
------------
Total Municipal Bonds (cost $72,849,943)............... 75,035,473
------------

TOTAL MARKET VALUE OF SECURITIES - 100.12%
(cost $72,849,943).............................................. $75,035,473
LIABILITIES NET OF RECEIVABLES AND OTHER ASSETS - (0.12%).......... (89,605)
-----------
NET ASSETS APPLICABLE TO 7,230,941 SHARES
($0.01 PAR VALUE) OUTSTANDING - 100.00%......................... $74,945,868
===========

NET ASSET VALUE - TAX-FREE INSURED FUND
A CLASS ($68,421,924 / 6,601,495 SHARES)......................... $10.36
======
NET ASSET VALUE - TAX-FREE INSURED FUND
B CLASS ($5,021,500 / 484,486 SHARES)............................ $10.36
======
NET ASSET VALUE - TAX-FREE INSURED FUND
C CLASS ($1,502,444 / 144,960 SHARES)............................ $10.36
======
- ----------------------
* 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.

Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Federal Alternative Minimum Tax
ASSET GTY - Insured by the Asset Guaranty Insurance Corporation
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 August 31, 1999:
Common stock, $0.01 par value, 500,000,000
shares authorized to the Tax-Free Insured Fund.................. $75,489,232
Accumulated net realized loss on investments....................... (2,728,894)
Net unrealized appreciation of investments......................... 2,185,530
------------
Total net assets................................................... $74,945,868
============

Net asset value and offering price per share -
Tax-Free Insured Fund
Net asset value A Class (A)........................................ $10.36
Sales charge (3.75% of offering price or 3.86%
of amount invested per share) (B)............................... 0.40
------
Offering price..................................................... $10.76
======
- ----------------------
(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>

18 for tax-exempt income

DELAWARE GROUP TAX-FREE FUND, INC. -
DELAWARE TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 98.57%
Convention Center/Stadium Revenue
Bonds - 1.67%
Metropolitan Pier & Exposition Authority Illinois
Hospitality Facilities (McCormick PL Convention)
5.75% 07/01/06...................................... $ 500,000 $ 513,890
------------
513,890
------------
General Obligation Bonds - 1.42%
Columbus, Ohio Tax Increment Financing Revenue
(Easton Project) 4.875% 12/01/24.................... 500,000 434,285
------------
434,285
------------
Higher Education Bonds - 11.44%
Colorado Springs, Colorado Revenue (Colorado College
Project) 5.25% 06/01/24............................. 1,200,000 1,122,708
Greenville County, South Carolina
University Center Project
Series A 5.25% 04/01/19............................. 745,000 709,940
Norfolk, Virginia Redevelopment & Housing Authority
(Tidewater Community College)
5.50% 11/01/19...................................... 675,000 665,246
Virginia College Building Authority
(University of Richmond
Project) 6.40% 11/01/22............................. 1,000,000 1,013,440
------------
3,511,334
------------
Highway Revenue Bonds - 9.97%
Dunes, Florida Community Development District-
Intracoastal Waterway Bridge (ITT Industries
Corporation) 5.50% 10/01/07......................... 825,000 831,311
New Mexico Finance Authority Revenue Federal Highway
Grant Anticipation Series A 4.75% 09/01/08.......... 1,250,000 1,234,700
San Francisco Bay Area Transportation Financing
Authority (California Bridge Toll Notes)
5.00% 02/01/07...................................... 1,000,000 992,630
------------
3,058,641
------------
Hospital Revenue Bonds - 3.50%
New Jersey Health Care Facilities Financing Authority
Revenue (Palisades Medical Center Obligation Group)
5.25% 07/01/28...................................... 500,000 456,465
Palm Beach County, Florida Health Facilities Authority
Revenue Hospital Improvement Branch Corporation
Obligation A 5.00% 12/01/23......................... 700,000 618,415
------------
1,074,880
------------
Housing Revenue Bonds - 15.71%
Iowa Finance Authority Multi-Family Housing
(Forest Glen Apartments Project)
Series A 5.60% 11/01/22 (FNMA)..................... 755,000 733,014
Maryland State Community Development Administration
Department Of Housing & Community Development
(Single Family Program) 6th Series
5.90% 04/01/01...................................... 1,000,000 1,021,820
Montgomery County, Pennsylvania Redevelopment
Authority Multi-Family Housing Revenue
(KBF Associates) 6.00% 07/01/04..................... 2,000,000 2,044,260

- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Housing Revenue Bonds (Continued)
Palatine, Illinois Multi-Family Housing (Prairiebrook
Project) Series A 5.50% 12/01/06 (FNMA)............. $1,000,000 $ 1,022,920
------------
4,822,014
------------
Industrial Development Revenue
Bonds - 7.84%
Mississippi Business Finance Corporation Mississippi
Pollution Control Revenue 5.875% 04/01/22........... 1,000,000 935,430
New York City, New York Industrial Development
Agency Civil Facility Revenue (YMCA Greater
NY Project) 5.40% 08/01/04.......................... 1,440,000 1,471,018
------------
2,406,448
------------
Power Authority Revenue Bonds - 5.57%
Guam Power Authority Series A
5.125% 10/01/29..................................... 750,000 667,620
New Madrid, Missouri Power Plant
5.65% 06/01/03 (AMBAC).............................. 1,000,000 1,040,540
------------
1,708,160
------------
* Pre-Refunded Bonds - 3.79%
** Foothill/ Eastern Transportation Corridor Agency
California Toll Road Revenue Senior Lien Series A
6.80% 01/01/05...................................... 1,500,000 1,165,650
------------
1,165,650
------------
School District General Obligation
Bonds - 3.37%
Philadelphia, Pennsylvania School District Series A
6.25% 05/15/01 (AMBAC).............................. 1,000,000 1,035,050
------------
1,035,050
------------
State Agency Bonds - 8.37%
Indiana Bond Bank (State Revolving Fund Program)
Series A 6.00% 02/01/01............................. 500,000 512,320
Michigan Municipal Bond Bank Authority Revenue
(Local Government Loan Program) Series G
5.85% 05/01/01 (AMBAC).............................. 2,000,000 2,056,180
------------
2,568,500
------------
Transportation Revenue Bonds - 11.00%
** Alameda, California Corridor Transportation
Authority California Series 1999 A Capital
Appreciation Bonds 5.25% 10/01/30 (MBIA)............ 5,000,000 818,200
Harris County, Texas Industrial Development
Corporation Airport Facilities, Refunding
(Continental Airlines Project)
5.00% 07/01/07 AMT.................................. 1,510,000 1,460,517
Rhode Island Port Authority and Economic
5.80% 07/01/02 (FSA)................................ 565,000 583,956
5.90% 07/01/03 (FSA)................................ 490,000 512,089
------------
3,374,762
------------

<PAGE>

for tax-exempt income 19

DELAWARE TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Turnpike/Toll Roads Revenue Bonds - 4.94%
Oklahoma State Turnpike Authority Turnpike Revenue
Second Senior Series A
5.50% 01/01/06...................................... $1,450,000 $ 1,515,990
------------
1,515,990
------------
Water & Sewer Revenue Bonds - 6.61%
Atlanta, Georgia Water & Wastewater Revenue
Series A 5.50% 11/01/15............................. 1,000,000 1,011,690
Easton, Pennsylvania Joint Sewer Authority
5.60% 04/01/03 (ASSET GTY).......................... 200,000 207,322
Marysville, Washington Water & Sewer Revenue
5.50% 12/01/02 (MBIA)............................... 200,000 206,752
**North Slope Boro, Alaska Series A
4.70% 06/30/09 (MBIA)............................... 1,000,000 602,150
------------
2,027,914
------------
Other Revenue Bonds - 3.37%
West Virginia School Building Authority Revenue
Capital Improvement
5.625% 07/01/02 (MBIA).............................. 1,000,000 1,034,320
------------
1,034,320
------------
Total Municipal Bonds (cost $30,445,243)............... 30,251,838
------------

TOTAL MARKET VALUE OF SECURITIES - 98.57%
(cost $30,445,243).............................................. $ 30,251,838
RECEIVABLES AND OTHER ASSETS NET OF
LIABILITIES - 1.43%............................................. 439,104
------------
NET ASSETS APPLICABLE TO 2,987,041 SHARES
($0.01 PAR VALUE)
OUTSTANDING - 100.00%........................................... $ 30,690,942
============

NET ASSET VALUE - TAX-FREE USA
INTERMEDIATE FUND A CLASS
($25,186,099 / 2,451,274 SHARES)................................ $10.27
======
NET ASSET VALUE - TAX-FREE USA
INTERMEDIATE FUND B CLASS
($2,194,785 / 213,611 SHARES)................................... $10.27
======
NET ASSET VALUE - TAX-FREE USA
INTERMEDIATE FUND C CLASS
($3,310,058 / 322,156 SHARES)................................... $10.27
======

- ----------------------
* 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.

Summary of Abbreviations:
ASSET GTY - Insured by the Asset Guaranty Insurance Corporation
AMT - Subject to Federal Alternative Minimum Tax
AMBAC - Insured by the AMBAC Indemnity Corporation
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 AUGUST 31, 1999:
Common stock, $0.01 par value, 500,000,000
shares authorized to the Tax-Free USA
Intermediate Fund................................... $31,509,676
Accumulated net realized loss on investments........... (625,329)
Net unrealized depreciation of investments............. (193,405)
-----------
Total net assets $30,690,942
===========

Net Asset Value And Offering Price Per
Share - Tax-Free USA Intermediate Fund
Net asset value A Class (A)......................................... $10.27
Sales charge (2.75% of offering price or 2.82%
of amount invested per share) (B)................................ 0.29
------
Offering price...................................................... $10.56
======
- ----------------------
(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

VOYAGEUR MUTUAL FUNDS, INC. -
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS
AUGUST 31, 1999
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS - 99.81%
Continuing Care/Retirement Revenue
Bonds - 10.01%
Clark County, Nevada Assisted Living Homestead
(Boulder City) 6.50% 12/1/27........................ $2,575,000 $2,568,048
Connecticut State Development Authority Revenue
5.25% 8/1/19........................................ 1,000,000 942,240
Indianapolis, Indiana Economic Development
Revenue (National Benevolent Association)
7.25% 10/01/10...................................... 700,000 745,031
Manhattan, Kansas Health Care Facilities
Meadowlark Hills Retirement-A
6.375% 5/15/20...................................... 650,000 634,972
Marion County, Missouri Nursing Home Revenue
7.00% 08/01/13...................................... 1,050,000 1,082,603
Philadelphia, Pennsylvania Hospitals & Higher
Education Facilities Authority Revenue
(The Philadelphia Protestant Home Project)
Series A 6.50% 7/01/27.............................. 1,100,000 1,114,663
South Dakota Health and Education Facilities
Revenue (Westhills Retirement Village)
7.25% 09/01/13...................................... 1,125,000 1,173,690
State Tammany, Louisiana Public Transportation
Financing Authority Revenue
(Christwood Project)
5.70% 11/15/28...................................... 1,500,000 1,352,745
Spring Park, Minnesota Twin Birch Health Care
Center (Guarantor: Presbyterian Homes
of Minnesota) 8.25% 08/01/11........................ 500,000 529,945
Vermont Education and Health Building Revenue
Health Care Facility (Copely Manor PJ)
6.15% 4/1/19........................................ 1,730,000 1,641,562
------------
11,785,499
------------
General Obligation Bonds - 3.25%
Illinois State Development Finance Authority East
St. Louis Debt Restructure Revenue
7.375% 11/15/11..................................... 1,100,000 1,195,612
Orange Beach, Alabama Refunding and Capital
Improvement Unlimited Tax 6.25% 10/1/13............. 1,500,000 1,565,385
Romeoville, Illinois Recreational Facilities
Unlimited Tax 7.80% 1/1/11.......................... 1,000,000 1,064,590
------------
3,825,587
------------
Higher Education Revenue Bonds - 14.28%
Maryland State Collegiate Housing
(Towson) Series A 5.75% 6/1/29...................... 2,500,000 2,420,250
Maryland State Collegiate Housing
(Courtyard) Series A 5.75% 6/1/24................... 1,250,000 1,164,250
Maryland State Collegiate Housing
(Salisbury) Series A 6.00% 6/1/30................... 1,000,000 948,960
Massachusetts State Health & Education Facilities
(Nichols College) Series C 6.00% 10/1/17............ 1,000,000 961,590

- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Higher Education Revenue Bonds (Continued)
Massachusetts State Health & Education Facilities
(Nichols College) Series C 6.125% 10/1/29........... $4,400,000 $4,191,309
New Hampshire Higher Education & Health
(New England College) 6.125% 3/1/19................. 2,000,000 1,898,740
New Hampshire Education and Health Authority
(Brewster Academy) 6.75% 6/1/25..................... 1,000,000 1,019,680
New Hampshire Higher Education & Health Facilities
Authority Revenue (New Hampton School Issue)
5.375% 10/1/28...................................... 1,070,000 913,438
New Jersey State Educational Facilities Revenue
(Fairleigh Dickinson University)
Series G 5.70% 07/01/28............................. 2,000,000 1,891,860
Scranton-Lackawana, PA Health & Welfare Revenue
5.75% 11/01/20...................................... 1,510,000 1,401,869
------------
16,811,946
------------
Hospitals Revenue Bonds - 11.84%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue
(Allegheny Valley Hospital) 7.75% 8/1/20............ 1,000,000 996,000
Boston Biomedical Research 5.75% 2/01/29............... 1,000,000 924,210
Cuyahoga County, Ohio Health Care Facilities
Revenue ( Benjamin Rose Institute Project)
5.50% 12/1/28....................................... 1,100,000 989,703
Illinois Health Facilities Authority Revenue
(Midwest Physician Group Limited)
5.50% 11/15/19...................................... 1,685,000 1,503,745
Illinois State Development Finance Authority
(Harrisburg Medical Center Project)
7.00% 03/01/06...................................... 400,000 427,396
7.20% 03/01/07...................................... 400,000 430,536
7.20% 03/01/08...................................... 400,000 430,536
Monroeville, Pennsylvania Hospital Authority
Hospital Revenue (Forbes Health System)
6.25% 10/1/15....................................... 1,000,000 986,090
Monroeville, Pennsylvania Hospital Authority
Hospital Revenue (Forbes Health System)
7.00% 10/1/03....................................... 2,000,000 1,997,260
New Jersey Health Care Facilities Revenue
(Palisades Medical Center) 5.25% 7/1/28............. 500,000 456,465
Saint Joseph County Industrial Economic
Development (Madison Center Project)
5.50% 2/15/21....................................... 1,150,000 1,056,436
South Dakota Health and Education Facilities
Revenue (Huron Regional Medical Center)
7.00% 4/1/10........................................ 1,000,000 1,054,180
Westmorland County, Pennsylvania Industrial
Development 5.25% 7/1/15............................ 2,000,000 1,784,000
Wisconsin State Health & Educational Facilities
(Divine Savior Hospital Income Project)
5.70% 6/1/28........................................ 1,000,000 894,010
------------
13,930,567
------------

<PAGE>

for tax-exempt income 21

DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Housing Revenue Bonds - 2.33%
Arlington County, Virginia Development Authority
Multi-Family Revenue
(Housing Mortgage Woodbury Park Apts)
Series B 6.50% 7/1/24............................... $1,000,000 $ 951,640
Washington State Housing Finance Commission
(State School Directors' Association-Private
Placement) 8.25% 07/01/02........................... 110,000 114,941
8.25% 07/01/12...................................... 625,000 690,894
Washington State Housing Finance Commonwealth
(Nonprofit Virginia Mason Research Center
Project) Series A 5.70% 01/01/24.................... 1,000,000 989,530
------------
2,747,005
------------
Industrial Development Revenue
Bonds - 7.04%
Moundville, Alabama Industrial Development Board
Revenue (Lawter International, Inc. Project)
Series LI 6.75% 12/1/11............................. 1,500,000 1,594,950
Newbern, Tennessee Industrial Development Board
Newbern Rubber, Inc. (Dana Corporation)
7.90% 3/1/00........................................ 1,000,000 1,017,320
New Jersey Economic Development Authority
(Kapkowski Road Landfill) Series A
6.375% 4/1/18....................................... 1,150,000 1,156,509
New York City Industrial Development Agency
Revenue (Field Hotel Association LP JFK)
6.00% 11/1/28....................................... 1,500,000 1,424,820
Pennsylvania Economic Development Authority
Solid Waste Disposal Revenue 6.00% 6/1/31........... 3,200,000 3,089,760
------------
8,283,359
------------
Leases/Certificates of
Participation - 2.62%
Dauphin County, Pennsylvania General Authority
Series A 5.75% 01/01/10............................. 2,125,000 2,046,375
Dauphin County, Pennsylvania General Authority
(Office and Packaging Forum)
Series A 6.00% 01/15/25............................. 1,100,000 1,033,285
------------
3,079,660
------------
Pollution Control Revenue
Bonds - 11.33%
California Pollution Control Authority
(Pollution Control Revenue -
Laidlaw Environmental) 6.70% 7/1/07................. 1,000,000 1,033,650
Connecticut State Development Authority Pollution
Control Revenue 5.850% 09/01/28..................... 2,000,000 1,906,320
Mississippi Business Finance, Mississippi
Pollution Control 5.90% 5/1/22...................... 4,000,000 3,753,000
Mississippi Pollution Control Revenue
(Mississippi Business Finance Corp)
5.875% 04/01/22..................................... 3,000,000 2,806,290
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 2,880,420

- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Pollution Control Revenue Bonds (Continued)
Ohio State Air Quality Development Authority
Revenue (Pollution Control) Series B
6.00% 08/01/20...................................... $975,000 $ 952,253
------------
13,331,933
------------
Power Revenue Bonds - 0.40%
Ohio State Water Development Authority Solid
Waste Disposal (Bay Shore Power Project)
Series A 5.875% 09/01/20............................ 500,000 475,995
------------
475,995
------------
* Pre-Refunded Bonds - 13.04%
Alexandria Health Care Facility Revenue
(Board of Social Ministry)
8.75% 08/01/21-01................................... 500,000 550,370
Bedford Park, Illinois Tax Increment Revenue
8.00% 12/01/10-04................................... 1,200,000 1,366,512
Easton, Pennsylvania Area Joint Sewer Authority
6.20% 04/01/09-03................................... 1,000,000 1,056,230
Elizabeth Borough, Pennsylvania Municipal Authority
Guaranteed Sewer 7.15% 01/01/21-02.................. 500,000 539,450
Etowah County, Alabama Refunding Warrants
8.50% 11/01/10-00................................... 800,000 847,352
Hopewell Township, Pennsylvania Guaranteed
Sewer 6.00% 11/1/13................................. 1,215,000 1,286,685
Illinois Health Facility Authority Revenue
(Midwest Physician Group Project)
8.10% 11/15/14-04................................... 960,000 1,114,570
Lehigh County General Purpose Authority
(Wiley House) 8.75% 11/01/14-99..................... 750,000 770,970
New Kensington, Pennsylvania Municipal Sanitation
Authority Revenue 7.50% 10/01/11.................... 1,000,000 1,064,550
Oklahoma City Public Property Authority
(City Golf System) 8.30% 10/01/16................... 1,000,000 1,098,640
Panorama, Colorado Metropolitan District Unlimited
Tax 9.00% 12/01/09-99............................... 750,000 767,003
Pennsylvania Higher Education Facility Authority
(Drexel University) 6.750% 05/01/12-03.............. 1,300,000 1,422,941
Chelsea, Oklahoma Gas Authority
7.30% 07/01/19...................................... 700,000 792,820
7.25% 07/01/13...................................... 600,000 678,276
Volusia, Florida Industrial Development Authority
(Bishops Glen Project Retirement Health
Facilities) 7.50% 11/1/16........................... 1,065,000 1,195,292
West Chicago, Illinois Tax Increment
7.375% 12/01/12-02.................................. 720,000 803,491
------------
15,355,152
------------
Recreational Area Bonds - 2.45%
Quinault Indian Nation, Washington
Quinault Beach-A 5.80% 12/1/15...................... 2,000,000 1,972,920
North Charleston Golf Centers Revenue
5.50% 05/01/24...................................... 1,000,000 912,050
------------
2,884,970
------------

<PAGE>

22 for tax-exempt income

DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
Principal Market
Amount Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS (Continued)
Transportation Revenue Bonds - 3.58%
Cleveland, Ohio Airport Special Revenue
(Continental Airlines Project)
5.375% 9/15/27...................................... $470,000 $ 408,684
Connector 2000 Association South Carolina
Toll Road Revenue Senior
(Southern Connector Project)
Series A 5.375% 01/01/38............................ 2,000,000 1,720,700
Houston, Texas Airport
Special Facilities (Continental Airline)
Series B 6.125% 07/15/27............................ 900,000 870,192
Toledo Lucas County, Ohio Port Authority Airport
Revenue (Improvement Series 1)
5.50% 05/15/20...................................... 1,325,000 1,211,779
------------
4,211,355
------------
Waste Disposal Revenue Bonds - 0.77%
Gulf Coast Waste Disposal Revenue
5.70% 4/01/32....................................... 1,000,000 904,610
------------
904,610
------------
Water & Sewer Revenue Bonds - 4.38%
Franklin County, Missouri Public Water Supply
(District Waterworks and Sewer System)
7.375% 12/01/18..................................... 1,255,000 1,331,392
Northern Palm Beach County, Florida
Water Control & Improvement Unit
Development No. 9B 5.90% 8/1/19..................... 1,000,000 998,780
Upper Bear Creek, Alabama Water, Sewer, and Fire
Revenue District 6.250% 08/01/15.................... 1,250,000 1,259,100
Vance Alabama Governmental Utility Services
Corporate Sewer Services Revenue
7.50% 10/01/18...................................... 1,550,000 1,567,035
------------
5,156,307
------------
Other Revenue Bonds - 12.49%
Arbor Greene Community Development District
Special Assessment Revenue
7.00% 05/01/03...................................... 115,000 117,169
Cleveland,Ohio Public Power Systems Revenue
5.00% 11/15/24...................................... 50,000 45,283
Colorado Postsecondary Education Facilities
Authority (Colorado Ocean Journey Project)
8.00% 12/01/06...................................... 1,000,000 1,131,650
Guam Power Authority Series A
5.125% 10/1/29...................................... 1,000,000 890,160
Lowry Economic Redevelopment Authority Colorado
Revenue Series A 7.00% 12/01/10..................... 1,000,000 1,100,130
Mashantucket Western Pequot Tribe Connecticut
Special Revenue Series B 5.75% 09/01/27............. 1,000,000 948,160
Niles, Illinois Park District Unlimited Tax
6.65% 12/1/14....................................... 860,000 909,648
Orlando Special Assessment Series B
5.25% 05/01/05...................................... 1,350,000 1,318,302

Number
of Shares
---------
Short Term Investments - 0.96%
Norwest Advantage Municipal Money Market Fund.......... 1,131,358 1,131,358
------------
Total Short Term Investments (cost $1,131,358)......... 1,131,358
------------

TOTAL MARKET VALUE OF SECURITIES - 100.77%
(cost $119,059,734).............................................$118,613,376
LIABILITIES NET OF RECEIVABLES AND OTHER
ASSETS - (0.77%)................................................ (909,956)
------------
NET ASSETS APPLICABLE TO 11,373,639 SHARES
($0.01 PAR VALUE)
OUTSTANDING - 100.00%...........................................$117,703,420
============

NET ASSET VALUE - NATIONAL HIGH-YIELD
MUNICIPAL BOND FUND A CLASS
($86,013,496 / 8,317,005 SHARES)................................ $10.34
======
NET ASSET VALUE - NATIONAL HIGH-YIELD
MUNICIPAL BOND FUND B CLASS
($21,423,028 / 2,066,945 SHARES)................................ $10.36
======
NET ASSET VALUE - NATIONAL HIGH-YIELD
MUNICIPAL BOND FUND C CLASS
($10,266,896 / 989,689 SHARES).................................. $10.37
======

* For Pre-Refunded Bonds, the stated maturity is followed by the year in
which each bond is pre-refunded.

<PAGE>

for tax-exempt income 23

DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
STATEMENT OF NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AT AUGUST 31, 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-Yield
Municipal Bond Fund C Class.................................... $118,267,749
Accumulated net realized loss on investments...................... (117,971)
Net unrealized depreciation of investments........................ (446,358)
------------
Total net assets.................................................. $117,703,420
============

NET ASSET VALUE AND OFFERING PRICE PER SHARE -
NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
Net asset value per share (A)....................................... $10.34
Sales charge (3.75% of offering price or 3.87% of
amount invested per share) (B)................................... 0.40
------
Offering price...................................................... $10.74
======
- ----------------------
(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

DELAWARE GROUP TAX-FREE FUND, INC. -
TAX-FREE USA INTERMEDIATE FUND
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments at market (cost $30,445,243).............. $30,251,838
Cash .............................................. 1,861,311
Interest receivable................................... 380,515
Subscriptions receivable.............................. 42,943
Receivables for securities sold....................... 952,390
-----------
Total assets....................................... $33,488,997
-----------

LIABILITIES:
Liquidations payable.................................. 114,955
Payables for securities purchased..................... 2,598,967
Distributions payable................................. 31,201
Other accounts payable and accrued expenses........... 52,932
-----------
Total liabilities.................................. 2,798,055
-----------

TOTAL NET ASSETS...................................... $30,690,942
===========

See accompanying notes

<PAGE>

24 for tax-exempt income

STATEMENTS OF OPERATIONS
YEAR ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
<TABLE>

Tax-Free National
Tax-Free Tax-Free USA High-Yield
USA Insured Intermediate Municipal
Fund Fund Fund Bond Fund
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest....................... $36,069,994 $4,491,115 $1,495,778 $6,368,388

EXPENSES:
Management fees................ 3,380,637 437,947 142,282 622,425
Distribution expense........... 1,499,136 205,585 85,188 434,547
Dividend disbursing and
transfer agent fees and
expenses....................... 529,748 58,123 26,780 78,608
Accounting and administration.. 231,610 30,951 11,329 40,700
Reports and statements to
shareholders................... 176,940 22,500 6,530 49,900
Professional fees.............. 64,400 5,075 3,175 46,150
Taxes (other than taxes
on income)..................... 63,930 7,838 2,575 8,200
Registration fees.............. 46,300 23,000 21,100 90,200
Custodian fees................. 100,118 14,407 12,621 7,035
Directors' fees................ 12,825 3,189 2,464 1,800
Other ....................... 180,608 7,870 3,185 59,407
------------ ----------- ------------ ------------
6,286,252 816,485 317,229 1,438,972
Less expenses absorbed
or waived................... -- -- (47,506) (228,891)
Less expenses paid indirectly.. (84,455) (7,416) (16,332) (2,374)
------------ ----------- ------------ ------------
Total operating expenses
(before interest expense)... 6,201,797 809,069 253,391 1,207,707
------------ ----------- ------------ ------------
Interest expense............... -- -- -- 563
------------ ----------- ------------ ------------
Total expenses................. 6,201,797 809,069 253,391 1,208,270
------------ ----------- ------------ ------------

NET INVESTMENT INCOME.......... 29,868,197 3,682,046 1,242,387 5,160,118
------------ ----------- ------------ ------------

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investment transactions..... (24,575,865) (2,602,291) 95,919 (17,370)
Net change in unrealized
appreciation/depreciation
of investments.............. (21,125,314) (2,249,127) (1,314,384) (4,678,686)
------------ ----------- ------------ ------------

NET REALIZED AND UNREALIZED
(LOSS) ON INVESTMENTS....... (45,701,179) (4,851,418) (1,218,465) (4,696,056)
------------ ----------- ------------ ------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS............. $(15,832,982) $(1,169,372) $ 23,922 $ 464,062
============ =========== ============ ============
</TABLE>

See accompanying notes

<PAGE>

for tax-exempt income 25

STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
Tax-Free USA Fund Tax-Free Insured Fund Tax-Free USA Intermediate Fund
------------------------------ ------------------------------ ------------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/99 8/31/98 8/31/99 8/31/98 8/31/99 8/31/98
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income.......... $ 29,868,197 $ 32,032,797 $ 3,682,046 $ 3,692,531 $ 1,242,387 $ 1,180,406
Net realized gain (loss) on
investments................. (24,575,865) 1,046,343 (2,602,291) 1,157,316 95,919 274,027
Net change in unrealized
appreciation/depreciation
of investments.............. (21,125,314) 15,815,410 (2,249,127) 1,050,199 (1,314,384) 322,706
------------- ------------- ------------ ------------ ------------ ------------
Net increase (decrease) in
net assets resulting
from operations............. (15,832,982) 48,894,550 (1,169,372) 5,900,046 23,922 1,777,139
------------- ------------- ------------ ------------ ------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class..................... (28,129,928) (30,412,332) (3,443,584) (3,545,965) (1,062,227) (1,042,578)
B Class..................... (1,601,887) (1,548,295) (189,965) (138,959) (77,729) (72,412)
C Class..................... (136,382) (72,170) (48,497) (7,607) (102,431) (65,416)

Net realized gain on investments:
A Class..................... (1,166,868) (9,769,741) (816,386) (1,342,436) -- --
B Class..................... (77,263) (576,564) (50,900) (61,524) -- --
C Class..................... (5,129) (23,804) (7,792) (1,755) -- --
------------- ------------- ------------ ------------ ------------ ------------
(31,117,457) (42,402,906) (4,557,124) (5,098,246) (1,242,387) (1,180,406)
------------- ------------- ------------ ------------ ------------ ------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class..................... 220,161,358 144,108,439 5,625,443 6,530,589 8,813,200 7,382,578
B Class..................... 8,302,891 5,979,720 1,616,545 1,369,816 885,556 373,870
C Class..................... 1,827,537 1,308,160 1,494,459 348,248 2,099,945 953,661
Netasset value of shares issued
upon reinvestment of
distributions from net
investment income and net
realized gain on investments:
A Class..................... 15,818,679 22,556,978 2,385,022 2,762,483 679,292 639,979
B Class..................... 950,535 1,254,576 142,623 114,231 55,947 49,194
C Class..................... 96,912 69,729 51,066 7,917 72,684 58,692
------------- ------------- ------------ ------------ ------------ ------------
247,157,912 175,277,602 11,315,158 11,133,284 12,606,624 9,457,974
------------- ------------- ------------ ------------ ------------ ------------
Cost of shares repurchased:
A Class..................... (293,951,791) (201,784,187) (8,586,906) (14,181,256) (5,872,741) (7,609,474)
B Class..................... (8,893,214) (5,728,548) (643,535) (877,799) (586,492) (366,489)
C Class..................... (569,079) (559,386) (247,116) (126,525) (729,497) (480,482)
------------- ------------- ------------ ------------ ------------ ------------
(303,414,084) (208,072,121) (9,477,557) (15,185,580) (7,188,730) (8,456,445)
------------- ------------- ------------ ------------ ------------ ------------
Increase (decrease) in net
assets derived from capital
share transactions.......... (56,256,172) (32,794,519) 1,837,601 (4,052,296) 5,417,894 1,001,529
------------- ------------- ------------ ------------ ------------ ------------

NET INCREASE (DECREASE) IN
NET ASSETS.................. (103,206,611) (26,302,875) (3,888,895) (3,250,496) 4,199,429 1,598,262

NET ASSETS:
Beginning of year.............. 626,109,472 652,412,347 78,834,763 82,085,259 26,491,513 24,893,251
------------- ------------- ------------ ------------ ------------ ------------
End of year.................... $ 522,902,861 $ 626,109,472 $ 74,945,868 $ 78,834,763 $ 30,690,942 $ 26,491,513
============= ============= ============ ============ ============ ============
</TABLE>

See accompanying notes

<PAGE>

26 for tax-exempt income

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------
National High-Yield Municipal Bond Fund
---------------------------------------
Year Eight Months Year
Ended Ended Ended
8/31/99 8/31/98 12/31/97
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income.......... $5,160,118 $2,627,253 $3,409,883
Net realized gain (loss)
on investments.............. (17,370) 116,864 782,775
Net change in unrealized
appreciation/depreciation
of investments.............. (4,678,686) 680,352 1,305,512
------------ ----------- -----------
Net increase in net assets
resulting from operations... 464,062 3,424,469 5,498,170
------------ ----------- -----------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
A Class..................... (4,111,560) (2,315,936) (3,329,293)
B Class..................... (694,101) (228,487) (69,276)
C Class..................... (353,757) (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)
------------ ----------- -----------
(5,376,668) (2,900,190) (3,803,706)
------------ ----------- -----------

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold:
A Class..................... 27,884,866 16,001,177 5,556,071
B Class..................... 12,690,424 7,552,082 3,486,119
C Class..................... 7,358,160 3,689,595 1,199,065
Net asset value of shares
issued upon reinvestment
of distributions from net
investment income and net
realized gain on
investments:
A Class..................... 2,406,407 1,441,346 2,223,087
B Class..................... 429,601 149,917 42,767
C Class..................... 255,629 55,914 9,665
------------ ----------- -----------
51,025,087 28,890,031 12,516,774
------------ ----------- -----------
Cost of shares repurchased:
A Class..................... (10,228,202) (3,739,701) (13,058,929)
B Class..................... (1,470,819) (711,513) (92,987)
C Class..................... (1,625,869) (298,771) (794)
------------ ----------- -----------
(13,324,890) (4,749,985) (13,152,710)
------------ ----------- -----------
Increase (decrease) in net
assets derived from capital
share transactions.......... 37,700,197 24,140,046 (635,936)
------------ ----------- -----------

NET INCREASE IN NET ASSETS..... 32,787,591 24,664,325 1,058,528

NET ASSETS:
Beginning of period............ 84,915,829 60,251,504 59,192,976
------------ ----------- -----------
End of period.................. $117,703,420 $84,915,829 $60,251,504
============ =========== ===========

See accompanying notes

<PAGE>

for tax-exempt income 27

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>

Tax-Free USA Fund A Class
Year Ended August 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................................... $11.830 $11.710 $11.550 $12.070 $12.040

Income (loss) from investment operations:
Net investment income........................................ 0.593 0.597 0.666 0.696 0.746
Net realized and unrealized
gain (loss) on investments................................ (0.916) 0.310 0.210 (0.460) 0.030
------- ------- ------- ------- -------
Total from investment
operations................................................ (0.323) 0.907 0.876 0.236 0.776
------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income......................................... (0.593) (0.597) (0.666) (0.696) (0.746)
Distributions from net
realized gain on
investments............................................... (0.024) (0.190) (0.050) (0.060) none
------- ------- ------- ------- -------
Total dividends and
distributions............................................. (0.617) (0.787) (0.716) (0.756) (0.746)
------- ------- ------- ------- -------
Net asset value, end of period.................................. $10.890 $11.830 $11.710 $11.550 $12.070
======= ======= ======= ======= =======

Total return(1)................................................. (2.90%) 8.00% 7.79% 1.91% 6.74%

Ratios and supplemental data:
Net assets, end of
period (000 omitted)...................................... $485,240 $586,848 $615,852 $700,853 $758,470
Ratio of expenses to
average net assets........................................ 1.00% 0.97% 0.94% 0.94% 0.92%
Ratio of net investment
income to average
net assets................................................ 5.13% 5.08% 5.73% 5.82% 6.29%
Portfolio turnover........................................... 59% 81% 44% 42% 27%
</TABLE>

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>
Tax-Free USA Fund B Class
Year Ended August 31,
--------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................................... $11.830 $11.710 $11.550 $12.070 $12.040

Income (loss) from investment operations:
Net investment income........................................ 0.500 0.503 0.573 0.600 0.649
Net realized and unrealized
gain (loss) on
investments............................................... (0.916) 0.310 0.210 (0.460) 0.030
------- ------- ------- ------- -------
Total from investment
operations................................................ (0.416) 0.813 0.783 0.140 0.679
------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income......................................... (0.500) (0.503) (0.573) (0.600) (0.649)
Distributions from net
realized gain on
investments............................................... (0.024) (0.190) (0.050) (0.060) none
------- ------- ------- ------- -------
Total dividends and
distributions............................................. (0.524) (0.693) (0.623) (0.660) (0.649)
------- ------- ------- ------- -------
Net asset value,
end of period................................................ $10.890 $11.830 $11.710 $11.550 $12.070
======= ======= ======= ======= =======

Total return(1)................................................. (3.67%) 7.15% 6.94% 1.11% 5.88%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............................................. $34,249 $36,919 $35,055 $29,773 $17,779
Ratio of expenses to
average net assets........................................ 1.80% 1.77% 1.74% 1.74% 1.74%
Ratio of net investment
income to average
net assets................................................ 4.33% 4.28% 4.93% 5.03% 5.47%
Portfolio turnover........................................... 59% 81% 44% 42% 27%
</TABLE>

See accompanying notes

<PAGE>

for tax-exempt income 29

Tax-Free USA Fund C Class
--------------------------------------------------
Year Ended August 31, 11/29/95(2) to
1999 1998 1997 8/31/96
<S> <C> <C> <C> <C>
Net asset value, beginning
of period.................................................... $11.830 $11.710 $11.550 $12.230

Income (loss) from investment operations:
Net investment income........................................ 0.500 0.504 0.573 0.450
Net realized and unrealized
gain (loss) on
investments............................................... (0.916) 0.310 0.210 (0.620)
------- ------- ------- -------
Total from investment
operations................................................ (0.416) 0.814 0.783 (0.170)
------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income......................................... (0.500) (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............................................. (0.524) (0.694) (0.623) (0.510)
------- ------- ------- -------
Net asset value, end
of period.................................................... $10.890 $11.830 $11.710 $11.550
======= ======= ======= =======

Total return(1)................................................. (3.67%) 7.15% 6.94% (1.44%)

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............................................. $3,415 $2,343 $1,505 $805
Ratio of expenses to
average net assets........................................ 1.80% 1.77% 1.74% 1.74%
Ratio of net investment
income to average net
assets.................................................... 4.33% 4.28% 4.93% 5.03%
Portfolio turnover........................................... 59% 81% 44% 42%
</TABLE>

- ----------------------
1 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
2 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

Tax-Free Insured Fund A Class
-------------------------------------------------------------
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................................... $11.150 $11.050 $10.860 $11.050 $11.020

Income (loss) from investment operations:
Net investment income........................................ 0.510 0.517 0.573 0.588 0.639
Net realized and unrealized
gain (loss) on
investments............................................... (0.667) 0.295 0.281 (0.160) 0.030
------- ------- ------- ------- -------
Total from investment
operations................................................ (0.157) 0.812 0.854 0.428 0.669
------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income......................................... (0.510) (0.517) (0.573) (0.588) (0.639)
Distributions from net
realized gain on
investments............................................... (0.123) (0.195) (0.091) (0.030) none
------- ------- ------- ------- -------
Total dividends and
distributions............................................. (0.633) (0.712) (0.664) (0.618) (0.639)
------- ------- ------- ------- -------
Net asset value, end
of period.................................................... $10.360 $11.150 $11.050 $10.860 $11.050
======= ======= ======= ======= =======

Total return(1)................................................. (1.48%) 7.57% 8.07% 3.88% 6.33%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............................................. $68,422 $74,246 $78,377 $81,149 $86,756
Ratio of expenses to
average net assets........................................ 0.97% 1.10% 1.05% 0.98% 0.98%
Ratio of net investment
income to average
net assets................................................ 4.74% 4.65% 5.23% 5.29% 5.89%
Portfolio turnover........................................... 48% 63% 42% 45% 68%
</TABLE>

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>

Tax-Free Insured Fund B Class
-------------------------------------------------------------
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................................... $11.150 $11.050 $10.860 $11.050 $11.020

Income (loss) from investment operations:
Net investment income........................................ 0.430 0.427 0.485 0.499 0.550
Net realized and unrealized
gain (loss) from
investments............................................... (0.667) 0.295 0.281 (0.160) 0.030
------- ------- ------- ------- -------
Total from investment
operations................................................ (0.237) 0.722 0.766 0.339 0.580
------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income......................................... (0.430) (0.427) (0.485) (0.499) (0.550)
Distributions from net
realized gain on
investments............................................... (0.123) (0.195) (0.091) (0.030) none
------- ------- ------- ------- -------
Total dividends and
distributions............................................. (0.553) (0.622) (0.576) (0.529) (0.550)
------- ------- ------- ------- -------
Net asset value,
end of period................................................ $10.360 $11.150 $11.050 $10.860 $11.050
======= ======= ======= ======= =======

Total return(1)................................................. (2.27%) 6.72% 7.21% 3.05% 5.47%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............................................. $5,022 $4,268 $3,619 $3,375 $2,448
Ratio of expenses to
average net assets........................................ 1.77% 1.90% 1.85% 1.78% 1.80%
Ratio of net investment
income to average
net assets................................................ 3.94% 3.85% 4.43% 4.48% 5.07%
Portfolio turnover........................................... 48% 63% 42% 45% 68%
</TABLE>

See accompanying notes

<PAGE>

32 for tax-exempt income

Tax-Free Insured Fund C Class
----------------------------------------------------
Year Ended August 31, 11/29/95(2) to
1999 1998 1997 8/31/96
<S> <C> <C> <C> <C>
Net asset value,
beginning of period....................................... $11.150 $11.050 $10.860 $11.260

Income (loss) from investment operations:
Net investment income..................................... 0.430 0.425 0.485 0.375
Net realized and unrealized
gain (loss) from
investments............................................ (0.667) 0.295 0.281 (0.370)
------- ------- ------- -------
Total from investment
operations............................................. (0.237) 0.720 0.766 0.005
------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income...................................... (0.430) (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.......................................... (0.553) (0.620) (0.576) (0.405)
------- ------- ------- -------
Net asset value,
end of period............................................. $10.360 $11.150 $11.050 $10.860
======= ======= ======= =======

Total return(1).............................................. (2.27%) 6.72% 7.21% 0.01%

Ratios and supplemental data:
Net assets, end of period
(000 omitted).......................................... $1,502 $321 $89 $120
Ratio of expenses to
average net assets..................................... 1.77% 1.90% 1.85% 1.78%
Ratio of net investment
income to average
net assets............................................. 3.94% 3.85% 4.43% 4.48%
Portfolio turnover........................................ 48% 63% 42% 45%
</TABLE>

- ----------------------
1 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
2 Date of commencement of trading; ratios have been annualized and total
return has not been annualized.

See accompanying notes

<PAGE>

for tax-exempt income 33

Tax-Free USA Intermediate Fund A Class
--------------------------------------------------------------
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.......................................... $10.710 $10.460 $10.320 $10.410 $10.320

Income (loss) from investment operations:
Net investment income........................................ 0.478 0.501 0.524 0.550 0.550
Net realized and unrealized
gain (loss) on
investments............................................... (0.440) 0.250 0.140 (0.090) 0.090
------- ------- ------- ------- -------
Total from investment
operations................................................ 0.038 0.751 0.664 0.460 0.640
------- ------- ------- ------- -------

Less dividends:
Dividends from net
investment income......................................... (0.478) (0.501) (0.524) (0.550) (0.550)
------- ------- ------- ------- -------
Total dividends.............................................. (0.478) (0.501) (0.524) (0.550) (0.550)
------- ------- ------- ------- -------
Net asset value,
end of period................................................ $10.270 $10.710 $10.460 $10.320 $10.410
======= ======= ======= ======= =======

Total return(1)................................................. 0.29% 7.34% 6.57% 4.52% 6.43%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............................................. $25,186 $22,562 $21,635 $22,617 $20,492
Ratio of expenses to
average net assets........................................ 0.79% 0.67% 0.43% 0.25% 0.25%
Ratio of expenses to
average net assets prior to
expense limitation and
expenses paid indirectly.................................. 0.96% 1.33% 1.02% 0.95% 1.07%
Ratio of net investment
income to average
net assets................................................ 4.47% 4.73% 5.03% 5.29% 5.37%
Ratio of net investment
income to average net
assets prior to expense
limitation and expenses
paid indirectly........................................... 4.25% 4.07% 4.44% 4.59% 4.55%
Portfolio turnover........................................... 109% 104% 34% 15% 63%
</TABLE>

See accompanying notes

<PAGE>

34 for tax-exempt income

Tax-Free USA Intermediate Fund B Class
-------------------------------------------------------------
Year Ended August 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.................................................... $10.710 $10.460 $10.320 $10.410 $10.320

Income (loss) from investment operations:
Net investment income........................................ 0.387 0.411 0.436 0.460 0.460
Net realized and unrealized
gain (loss) on investments................................ (0.440) 0.250 0.140 (0.090) 0.090
------- ------- ------- ------- -------
Total from investment
operations................................................... (0.053) 0.661 0.576 0.370 0.550
------- ------- ------- ------- -------

Less dividends:
Dividends from net
investment income......................................... (0.387) (0.411) (0.436) (0.460) (0.460)
------- ------- ------- ------- -------
Total dividends.............................................. (0.387) (0.411) (0.436) (0.460) (0.460)
------- ------- ------- ------- -------
Net asset value,
end of period................................................ $10.270 $10.710 $10.460 $10.320 $10.410
======= ======= ======= ======= =======

Total return(1)................................................. (0.56%) 6.43% 5.67% 3.63% 5.53%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............................................. $2,195 $1,933 $1,832 $1,490 $949
Ratio of expenses to
average net assets........................................ 1.64% 1.52% 1.28% 1.10% 1.10%
Ratio of expenses to
average net assets prior
to expense limitation and
expenses paid indirectly.................................. 1.81% 2.18% 1.87% 1.80% 1.92%
Ratio of net investment
income to average
net assets................................................ 3.62% 3.88% 4.18% 4.44% 4.52%
Ratio of net investment
income to average net
assets prior to expense
limitation and expenses
paid indirectly........................................... 3.40% 3.22% 3.59% 3.74% 3.70%
Portfolio turnover........................................... 109% 104% 34% 15% 63%
</TABLE>

See accompanying notes

<PAGE>

for tax-exempt income 35

Tax-Free USA Intermediate Fund C Class
--------------------------------------------------
11/29/95(2)
Year Ended August 31, to
1999 1998 1997 8/31/96
<S> <C> <C> <C> <C>
Net asset value,
beginning of period....................................... $10.710 $10.460 $10.320 $10.480

Income (loss) from investment operations:
Net investment income..................................... 0.387 0.411 0.436 0.350
Net realized and unrealized gain (loss) on investments.... (0.440) 0.250 0.140 (0.160)
------- ------- ------- -------
Total from investment operations.......................... (0.053) 0.661 0.576 0.190
------- ------- ------- -------

Less dividends:
Dividends from net
investment income...................................... (0.387) (0.411) (0.436) (0.350)
------- ------- ------- -------
Total dividends........................................... (0.387) (0.411) (0.436) (0.350)
------- ------- ------- -------
Net asset value, end
of period................................................. $10.270 $10.710 $10.460 $10.320
======= ======= ======= =======

Total return(1).............................................. (0.56%) 6.43% 5.67% 1.84%

Ratios and supplemental data:
Net assets, end of period
(000 omitted).......................................... $3,310 $1,996 $1,426 $193
Ratio of expenses to
average net assets..................................... 1.64% 1.52% 1.28% 1.10%
Ratio of expenses to
average net assets prior
to expense limitation and
expenses paid
indirectly............................................. 1.81% 2.18% 1.87% 1.80%
Ratio of net investment
income to average
net assets............................................. 3.62% 3.88% 4.18% 4.44%
Ratio of net investment
income to average net
assets prior to expense
limitation and expenses
paid indirectly........................................ 3.40% 3.22% 3.59% 3.74%
Portfolio turnover........................................ 109% 104% 34% 15%
</TABLE>

- ----------------------
1 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
2 Date of commencement of trading; ratios have been annualized and total
return has not been annualized.

See accompanying notes

<PAGE>

36 for tax-exempt income

National High-Yield Municipal Bond Fund A Class
---------------------------------------------------------------------------
Period
Eight From
Year Months Year 8/1/96 Year Year
Ended Ended Ended to Ended Ended
8/31/99 8/31/98 12/31/97(3) 12/31/96(4) 7/31/96 7/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.......................................... $10.800 $10.720 $10.400 $10.190 $10.170 $10.170

Income (loss) from investment operations:
Net investment income.............................. 0.557 0.398 0.648 0.260 0.630 0.650
Net realized and unrealized
gain (loss) on
investments..................................... (0.435) 0.115 0.390 0.210 0.140 0.040
------- ------- ------- ------- ------- -------
Total from investment
operations...................................... 0.122 0.513 1.038 0.470 0.770 0.690
------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income............................... (0.557) (0.398) (0.647) (0.260) (0.630) (0.650)
Distributions from net
realized gain on
investments..................................... (0.025) (0.035) (0.071) none (0.120) (0.040)
------- ------- ------- ------- ------- -------
Total dividends and
distributions................................... (0.582) (0.433) (0.718) (0.260) (0.750) (0.690)
------- ------- ------- ------- ------- -------
Net asset value,
end of period...................................... $10.340 $10.800 $10.720 $10.400 $10.190 $10.170
======= ======= ======= ======= ======= =======

Total return(1)....................................... 1.08% 4.87% 10.32% 4.52% 7.78% 7.16%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)................................... $86,013 $69,606 $55,458 $59,105 $63,460 $66,357
Ratio of expenses to
average net assets.............................. 1.00% 0.92%(2) 0.84% 0.87%(2) 0.85% 0.79%
Ratio of expenses to
average net assets prior
to expense limitation and
expenses paid
indirectly...................................... 1.22% 1.12%(2) 1.12% 1.07%(2) 0.96% 0.90%
Ratio of net investment
income to average
net assets...................................... 5.18% 5.52%(2) 6.15% 6.06%(2) 6.10% 6.45%
Ratio of net investment
income to average net
assets prior to expense
limitation and expenses
paid indirectly................................. 4.96% 5.32%(2) 5.87% 5.86%(2) 5.99% 6.34%
Portfolio turnover................................. 33% 43%(2) 45% 7% 0% 8%
</TABLE>

- ----------------------
1 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
2 Annualized.
3 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
4 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>

for tax-exempt income 37

FINANCIAL HIGHLIGHTS (CONTINUED)

Selected data for each share of the Fund outstanding throughout each period were
as follows:
<TABLE>
National High-Yield National High-Yield
Municipal Bond Fund B Class Municipal Bond Fund C Class
------------------------------------------- -----------------------------------
Eight Period From Eight Period
Year Months Year 12/18/96(4) Year Months From
Ended Ended Ended to Ended Ended 5/26/97(4) to
8/31/99 8/31/98 12/31/97(3) 12/31/96 8/31/99 8/31/98 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............ $10.820 $10.730 $10.400 $10.370 $10.830 $10.740 $10.440

Income (loss) from investment
operations:
Net investment income.......... 0.476 0.348 0.534 0.010 0.476 0.348 0.315
Net realized and unrealized
gain (loss) on
investments................. (0.435) 0.122 0.433 0.030 (0.435) 0.122 0.391
------- ------- ------- ------- ------- ------- -------
Total from investment
operations.................. 0.041 0.470 0.967 0.040 0.041 0.470 0.706
------- ------- ------- ------- ------- ------- -------

Less dividends and distributions:
Dividends from net
investment income........... (0.476) (0.345) (0.566) (0.010) (0.476) (0.345) (0.335)
Distributions from net
realized gain on
investments................. (0.025) (0.035) (0.071) -- (0.025) (0.035) (0.071)
------- ------- ------- ------- ------- ------- -------
Total dividends and
distributions............... (0.501) (0.380) (0.637) (0.010) (0.501) (0.380) (0.406)
------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period.................. $10.360 $10.820 $10.730 $10.400 $10.370 $10.830 $10.740
======= ======= ======= ======= ======= ======= =======

Total return(1)................... 0.42% 4.44% 9.57% 0.43% 0.32% 4.44% 6.88%

Ratios and supplemental data:
Net assets, end of period
(000 omitted)............... $21,423 $10,620 $3,573 $88 $10,267 $4,690 $1,220
Ratio of expenses to
average net assets.......... 1.75% 1.67%(2) 1.56% 1.45%(2) 1.75% 1.67%(2) 1.62%(2)
Ratio of expenses to
average net assets prior
to expense limitation
and expenses paid
indirectly............... 1.97% 1.87%(2) 1.84% 1.66%(2) 1.97% 1.87%(2) 1.90%(2)
Ratio of net investment...
income to average
net assets.................. 4.43% 4.77%(2) 5.43% 4.65%(2) 4.43% 4.77%(2) 5.37%(2)
Ratio of net investment
income to average net
assets prior to expense
limitation and expenses
paid indirectly............. 4.21% 4.57%(2) 5.15% 4.44%(2) 4.21% 4.57%(2) 5.09%(2)
Portfolio turnover............. 33% 43%(2) 45% 7% 33% 43%(2) 45%
</TABLE>

- ----------------------
1 Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
2 Annualized
3 Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
4 Commencement of operations.

See accompanying notes

<PAGE>

38 for tax-exempt income

DELAWARE GROUP TAX-FREE FUND, INC.
VOYAGEUR MUTUAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1999
- --------------------------------------------------------------------------------
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
Delaware Tax-Free USA Fund ("Tax-Free USA Fund"), the Delaware Tax-Free Insured
Fund ("Tax-Free Insured Fund"), and the Delaware Tax-Free USA Intermediate Fund
("Tax-Free USA Intermediate Fund"). Delaware National High-Yield Municipal Bond
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. These financial
statements and related notes pertain to 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"). 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. 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.

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 premium are amortized to interest income over the lives of the respective
securities. The Funds declare dividends from net investment income daily and pay
them monthly. Capital gains, if any, are distributed annually.

Certain expenses of the Funds are paid through "soft dollar" arrangements with
brokers. These transactions are done subject to best price and execution. In
addition, the Funds may receive earnings credits from its custodian which are
used to offset custody fees when positive balances are maintained. The expenses
paid under the above arrangements are included in their respective expense
captions in the Statement of Operations with the corresponding offset shown as
"expenses paid indirectly". The amount of these expenses for the year ended
August 31, 1999 were approximately:

"Soft Dollar" Earnings
Expenses Credits
------------- ------------
Tax-Free USA Fund................................. $13,537 $70,918
Tax-Free Insured Fund............................. 1,810 5,606
Tax-Free USA Intermediate Fund.................... 661 15,671
National High-Yield Municipal Bond Fund........... 2,374 --

2. Investment Management and Other Transactions With Affiliates
Commencing April 1, 1999, and in accordance with the terms of the Investment
Management Agreement, the Funds pay Delaware Management Company ("DMC"), the
Investment Manager of the Fund, an annual fee which is calculated daily at the
rate of 0.55% on the first $500 million of average daily net assets of the Fund,
0.50% on the next $500 million, 0.45% on the next $1,500 million and 0.425% on
the average daily net assets in excess of $2,500 million for the Tax-Free USA
Fund and National High-Yield Municipal Bond Fund, 0.50% on the first $500
million of average daily net assets of the Fund, 0.475% on the next $500
million, 0.45% on the next $1,500 million and 0.425% on the average daily net
assets in excess of $2,500 million for the Tax-Free Insured Fund and Tax-Free
USA Intermediate Fund. Prior to April 1, 1999, the Funds paid DMC an annual fee
which was calculated 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 July 21, 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, taxes, brokerage
commissions and extraordinary expenses, exceed 0.65% of average daily net assets
through December 31, 1999. From the period February 1, 1999, through July 20,
1999, DMC absorbed expenses in the Tax-Free USA Intermediate Fund to the extent
that annual operating expenses, exclusive of distribution expenses, taxes,
brokerage commissions and extraordinary expenses, exceeded 0.60% of average
daily net assets. Prior to February 1, 1999, DMC absorbed expenses in the
Tax-Free USA Intermediate Fund to the extent that annual operating expenses,
taxes, brokerage commissions and extraordinary expenses, exceeded 0.55% of
average daily net assets. 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, brokerage commissions and
extraordinary expenses, exceed 0.75% of average daily net assets through
December 31, 1999.

<PAGE>

for tax-exempt income 39

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates (Continued)
The Funds have engaged Delaware Service Company, Inc. ("DSC"), an affiliate of
DMC, to provide dividend disbursing, transfer agent and accounting services.
Each Fund pays DSC a monthly fee based on the number of shareholder accounts,
shareholder transactions and average net assets, subject to certain minimums.

On August 31, 1999, the Funds had payables to affiliates as follows:

<TABLE>
Tax-Free National
USA High-Yield
Tax-Free Tax-Free Intermediate Municipal Bond
USA Fund Insured Fund Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Investment management fees
and other expenses payable
to DMC...................... $61,046 $25,286 $12,377 $100,956
Dividend disbursing, transfer
agent fees accounting fees
and other expenses payable
to DSC...................... $23,564 $13,262 $4,939 $11,577
</TABLE>

Pursuant to the Distribution Agreement, the Funds pay Delaware Distributors,
L.P. ("DDLP"), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.30% of the average daily net assets of the A Class for the 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 Funds.

For the year ended August 31, 1999, DDLP earned commissions on sales of the
Class A shares were as follows:

Tax-Free National
USA High-Yield
Tax-Free Tax-Free Intermediate Municipal Bond
USA Fund Insured Fund Fund Fund
- ---------------- ---------------- ---------------- ----------------
$39,200 $13,851 $11,695 $31,532

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.

3. Investments
During the year ended August 31, 1999, the Funds had purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:

<TABLE>
Tax-Free National
USA High-Yield
Tax-Free Tax-Free Intermediate Municipal Bond
USA Fund Insured Fund Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Purchases...................... $348,602,988 $39,325,208 $35,254,204 $70,963,944
Sales ....................... 435,627,669 37,679,887 31,043,557 35,577,664
</TABLE>

At August 31, 1999, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
<TABLE>
Tax-Free National
USA High-Yield
Tax-Free Tax-Free Intermediate Municipal Bond
USA Fund Insured Fund Fund Fund
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cost of investments............ $501,073,377 $72,849,943 $30,445,243 $119,059,734
============ =========== =========== ============
Unrealized appreciation........ $ 30,893,766 $ 3,559,711 $ 511,937 $ 2,962,100
Unrealized depreciation........ (13,081,857) (1,374,181) (705,342) (3,408,458)
------------ ----------- ----------- ------------
Net unrealized appreciation
(depreciation).............. $ 17,811,909 $ 2,185,530 $ (193,405) $ (446,358)
============ =========== =========== ============
</TABLE>

For federal income tax purposes, the Tax-Free USA Intermediate Fund had
accumulated capital losses at August 31, 1999 of $606,585 which may be carried
forward and applied against future capital gains. The capital loss carryforward
expires in 2003.

<PAGE>

40 for tax-exempt income

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

4. Capital Stock
Transactions in capital stock shares were as follows:

<TABLE>
Tax-Free USA Fund
-----------------------
Year Ended Year Ended
8/31/99 8/31/98
<S> <C> <C>
Shares sold:
A Class............................................. 18,931,632 12,260,232
B Class............................................. 719,424 508,224
C Class............................................. 156,302 111,168

Shares issued upon reinvestment of dividends from
net investment income and net
realized gain on investments:
A Class............................................. 1,367,786 1,922,998
B Class............................................. 82,291 106,985
C Class............................................. 8,411 5,944
----------- -----------
21,265,846 14,915,551
----------- -----------

Shares repurchased:
A Class............................................. (25,331,800) (17,159,307)
B Class............................................. (776,396) (487,504)
C Class............................................. (49,118) (47,557)
----------- -----------
(26,157,314) (17,694,368)

Net decrease........................................... (4,891,468) (2,778,817)
=========== ===========
</TABLE>

<TABLE>
Tax-Free Insured Fund
------------------------
Year Ended Year Ended
8/31/99 8/31/98
<S> <C> <C>
Shares sold:
A Class 517,882 589,585
B Class............................................. 148,242 123,658
C Class............................................. 134,955 31,430

Shares issued upon reinvestment of dividends from
net investment income and net realized gain
on investments:
A Class............................................. 218,421 249,570
B Class............................................. 13,084 10,322
C Class............................................. 4,718 715
--------- ----------
1,037,302 1,005,280
--------- ----------

Shares repurchased:....................................
A Class............................................. (791,126) (1,277,871)
B Class............................................. (59,433) (79,031)
C Class............................................. (23,455) (11,448)
--------- ----------
(874,014) (1,368,350)

Net increase (decrease)................................ 163,288 (363,070)
========= ==========

</TABLE>

<TABLE>
Tax-Free USA Intermediate Fund
------------------------------
Year Ended Year Ended
8/31/99 8/31/98
<S> <C> <C>
Shares sold:
A Class............................................. 832,658 696,975
B Class............................................. 83,273 35,185
C Class............................................. 197,336 89,880

Shares issued upon reinvestment of dividends
from net investment income and net
realized gain on investments:
A Class............................................. 63,937 60,354
B Class............................................. 5,264 4,640
C Class............................................. 6,845 5,534
--------- --------
1,189,313 892,568
--------- --------

Shares repurchased:
A Class............................................. (552,340) (718,872)
B Class............................................. (55,453) (34,488)
C Class............................................. (68,440) (45,293)
--------- --------
(676,233) (798,653)

Net increase........................................... 513,080 93,915
========= ========
</TABLE>

<TABLE>
National High-Yield Municipal Bond Fund
---------------------------------------------
Eight Months
Year Ended Ended Year Ended
8/31/99 8/31/98 12/31/97
<S> <C> <C> <C>
Shares sold:
A Class............................ 2,603,990 1,486,196 514,279
B Class............................ 1,182,472 700,850 329,079
C Class(1)......................... 683,365 342,031 112,800

Shares issued upon reinvestment of
dividends from net investment
income and net realized gain
on investments:
A Class............................ 224,884 133,856 211,092
B Class............................ 40,109 13,876 4,026
C Class............................ 23,840 5,179 908
--------- --------- ---------
4,758,660 2,681,988 1,172,184
--------- --------- ---------

Shares repurchased:
A Class............................ (957,179) (347,504) (1,237,478)
B Class............................ (137,289) (65,936) (8,739)
C Class............................ (150,648) (27,712) (74)
--------- --------- ---------
(1,245,116) (441,152) (1,246,291)

Net increase (decrease)............. 3,513,544 2,240,836 (74,107)
========= ========= =========
</TABLE>

1 Commenced operations May 26, 1997.

<PAGE>

for tax-exempt income 41

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. LINES OF CREDIT
The Funds have committed lines of credit for the following amounts:

Tax-Free USA Fund...................................... $19,500,000
Tax-Free Insured Fund.................................. 2,400,000
Tax-Free USA Intermediate Fund......................... 800,000
National High-Yield Municipal Bond Fund................ 3,000,000

No amounts were outstanding at August 31, 1999, or at any time during the
period.

6. Market and Credit Risk
The Funds concentrate their investments in securities issued by municipalities.
The value of these investments may be adversely affected by new legislation
within the states, regional or local economic conditions, and differing levels
of supply and demand for municipal bonds. Many municipalities insure repayment
for their obligations. Although bond insurance reduces the risk of loss due to
default by an issuer, such bonds remain subject to the risk that markets 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.

7. Tax Information (unaudited)
The information set forth below is for each Fund's fiscal year as required by
federal laws. Shareholders, however, must report distributions on a calendar
year basis for income tax purposes, which may include distributions for portions
of two fiscal years of a fund. Accordingly, the information needed by
shareholders for income tax purposes will be sent to them in early 2000. Please
consult your tax advisor for proper treatment of this information.

For the fiscal year ended August 31, 1999, each Fund designates as long term
capital gains, ordinary income, and tax-exempt income distributions paid during
the year as follows:

<TABLE>
Long Term Ordinary Tax Total
Capital Gains Income Exempt Distributions
Distributions Distributions Interest (Tax Basis)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Free USA Fund............. 1% 3% 96% 100%
Tax-Free Insured Fund......... 2% 17% 81% 100%
Tax-Free USA
Intermediate Fund............ -- -- 100% 100%
National High-Yield
Municipal Bond Fund.......... 2% 2% 96% 100%
</TABLE>

<PAGE>

42 for tax-exempt income

DELAWARE GROUP TAX-FREE FUND, INC.
VOYAGEUR MUTUAL FUNDS, INC.
REPORTS OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors
Delaware Group Tax-Free Fund, Inc.

We have audited the accompanying statements of net assets of Delaware Group
Tax-Free Fund, Inc. (comprised of the Delaware Tax-Free USA Fund, the Delaware
Tax-Free Insured Fund, and the Delaware Tax-Free USA Intermediate Fund) and the
statement of assets and liabilities for the Delaware Tax-Free USA Intermediate
Fund as of August 31, 1999, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the periods then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1999, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Delaware Group Tax-Free Fund, Inc. at
August 31, 1999, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP

Philadelphia, Pennsylvania
October 1, 1999

- --------------------------------------------------------------------------------

To the Shareholders and Board of Directors
Voyageur Mutual Funds, Inc. - Delaware National High-Yield Municipal Bond Fund

We have audited the accompanying statement of net assets of Delaware National
High-Yield Municipal Bond Fund (the "Fund") as of August 31, 1999, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the periods indicated therein, and the
financial highlights for each of the periods presented from January 1, 1997
through August 31, 1999. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the periods presented through December 31,
1996 were audited by other auditors whose report thereon dated February 14, 1997
expressed an unqualified opinion on such financial highlights.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Delaware National High-Yield Municipal Bond Fund at August 31, 1999, the results
of its operations for the year then ended, the changes in its net assets for
each of the periods presented therein, and its financial highlights for each of
the periods presented from January 1, 1997 through August 31, 1999, in
conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP
----------------------
ERNST & YOUNG LLP

Philadelphia, Pennsylvania
October 1, 1999

<PAGE>

for tax-exempt income 43

PROXY RESULTS (UNAUDITED)

For the year ended August 31, 1999, The Delaware Group Tax-Free Funds, Inc. and
Voyageur Mutual Funds, Inc. shareholders voted on the following proposals at the
annual meeting of shareholders on March 17, 1999 or as adjourned. The
description of each proposal and number of shares voted are as follows:

1. To elect the Delaware Group Tax-Free Fund, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority
--------------------------
Jeffrey J. Nick*................. 45,090,514 3,511,755
Walter P. Babich................. 45,135,729 3,466,540
John H. Durham................... 45,158,041 3,444,228
Anthony D. Knerr................. 45,094,431 3,507,838
Ann R. Leven..................... 45,188,614 3,413,655
Thomas F. Madison................ 45,182,136 3,420,133
Charles E. Peck.................. 45,188,331 3,413,938
Wayne A. Stork................... 45,195,022 3,407,247
Jan L. Yeomans................... 45,201,395 3,400,874

To elect the Voyageur Mutual Funds, Inc. Board of Directors.

Shares Shares Voted
Voted Withheld
For Authority
--------------------------
Jeffrey J. Nick*................. 23,375,980 933,942
Walter P. Babich................. 23,375,739 934,183
Anthony D. Knerr................. 23,481,657 828,265
Ann R. Leven..................... 23,479,947 829,975
Thomas F. Madison................ 23,485,349 824,573
Charles E. Peck.................. 23,485,349 824,573
Wayne A. Stork................... 23,485,349 824,573
Jan L. Yeomans................... 23,485,349 824,573

* Mr. Nick resigned from the Board of Directors on June 4, 1999.

2. To approve the redesignation of the investment objective from fundamental
to non-fundamental.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,488,308 1,861,909 2,545,908
Tax-Free Insured Fund............... 4,034,122 251,536 554,773
Tax-Free USA Intermediate Fund...... 1,526,230 83,926 95,297
National High-Yield Municipal
Bond Fund........................ 3,445,520 490,390 175,416

3. To approve standardized fundamental investment restrictions (proposal
involves separate votes on seven sub-proposals 3A-3G)

3A. To adopt a new fundamental investment restriction concerning concentration
of the investments in the same industry.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 31,057,829 1,183,925 2,654,371
Tax-Free Insured Fund............... 4,215,909 122,774 501,748
Tax-Free USA Intermediate Fund...... 1,623,837 20,038 61,578
National High-Yield Municipal
Bond Fund........................ 3,451,379 509,230 150,716

3B. To adopt a new fundamental investment restriction concerning borrowing
money and issuing senior securities.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,639,221 1,566,687 2,690,217
Tax-Free Insured Fund............... 4,145,847 160,526 534,058
Tax-Free USA Intermediate Fund...... 1,593,647 30,004 81,803
National High-Yield Municipal
Bond Fund........................ 3,423,029 535,859 152,438

3C. To adopt a new fundamental investment restriction concerning underwriting.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,853,182 1,236,685 2,806,258
Tax-Free Insured Fund 4,166,351 132,798 541,281
Tax-Free USA Intermediate Fund...... 1,616,088 25,535 63,831
National High-Yield Municipal
Bond Fund........................ 3,463,004 483,774 164,548

3D. To adopt a new fundamental investment restriction concerning investments in
real estate.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,805,965 1,548,213 2,541,947
Tax-Free Insured Fund............... 4,196,663 137,746 506,021
Tax-Free USA Intermediate Fund...... 1,609,424 25,385 70,646
National High-Yield Municipal
Bond Fund........................ 3,446,379 503,167 161,780

3E. To adopt a new fundamental investment restriction concerning investments in
commodities.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,579,844 1,619,937 2,696,344
Tax-Free Insured Fund............... 4,176,083 150,871 513,476
Tax-Free USA Intermediate Fund...... 1,570,975 43,345 91,134
National High-Yield Municipal
Bond Fund........................ 3,421,042 499,995 190,289

<PAGE>

44 for tax-exempt income

PROXY RESULTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
3F. To adopt a new fundamental investment restriction concerning lending by the
Fund.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,840,537 1,386,026 2,669,561
Tax-Free Insured Fund............... 4,194,950 154,861 490,619
Tax-Free USA Intermediate Fund...... 1,578,701 40,365 86,388
National High-Yield Municipal
Bond Fund........................ 3,420,422 508,619 182,285

3G. To reclassify all current fundamental investment restrictions as
non-fundamental.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,455,158 1,645,993 2,794,975
Tax-Free Insured Fund............... 4,112,767 140,536 587,127
Tax-Free USA Intermediate Fund...... 1,500,209 112,538 92,706
National High-Yield Municipal
Bond Fund........................ 3,420,226 513,552 177,547

4. To approve a new investment management agreement with Delaware Management
Company for the Funds.

For Against Abstain
------------------------------------------
Tax-Free USA Fund................... 30,667,429 1,553,575 2,675,121
Tax-Free Insured Fund............... 4,144,751 141,266 554,414
Tax-Free USA Intermediate Fund...... 1,580,782 42,789 81,883
National High-Yield Municipal
Bond Fund........................ 5,105,897 601,644 196,204

5. To ratify the selection of Ernst & Young LLP, as the independent auditors
for Delaware Group Tax-Free Fund, Inc.

For Against Abstain
---------------------------------------
46,036,989 309,879 2,255,398

To ratify the selection of Ernst & Young LLP, as the independent auditors
for Voyageur Mutual Funds, Inc.

For Against Abstain
---------------------------------------
23,192,942 243,342 873,624

6. To approve the restructuring of Delaware Group Tax-Free Fund, Inc. from its
current form of organization into a Delaware Business Trust.

For Against Abstain
---------------------------------------
36,780,849 1,451,418 3,209,740

To approve the restructuring of Voyageur Mutual Funds, Inc. from a
Minnesota Corporation into a Delaware Business Trust and the dissolution of
the Minnesota Corporation.

For Against Abstain
---------------------------------------
18,642,505 933,974 1,312,086

<PAGE>

This annual report is for the information of Delaware Tax-Free USA Fund,
Delaware Tax-Free Insured Fund, Delaware Tax-Free USA Intermediate Fund and
Delaware National High-Yield Municipal Bond Fund shareholders, but it may be
used with prospective investors when preceded or accompanied by a current
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 each Fund.
You should read the prospectus carefully before you invest. Summary investment
results are documented in each 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
each Fund will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost.

Board of Trustees

WAYNE A. STORK
Chairman
Delaware Investments Family of Funds
Philadelphia, PA

WALTER P. BABICH
Board Chairman, Citadel Constructors, Inc.
King of Prussia, PA

DAVID K. DOWNES
President and Chief Executive Officer
Delaware Investments Family of Funds
Philadelphia, PA

JOHN H. DURHAM
Partner, Complete Care Services
Horsham, PA

ANTHONY D. KNERR
Consultant, Anthony Knerr & Associates
New York, NY

ANN R. LEVEN
Treasurer, National Gallery of Art
Washington, DC

THOMAS F. MADISON
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN

CHARLES E. PECK
Secretary/Treasurer, Enterprise Homes, Inc.
Fredericksburg, VA

JAN L. YEOMANS
Vice President and Treasurer
3M Corporation
St. Paul, Minnesota

Affiliated Officers

RICHARD J. FLANNERY
Executive Vice President and General Counsel
Delaware Investments Family of Funds
Philadelphia, PA

BRUCE D. BARTON
President and Chief Executive Officer
Delaware Distributors, L.P.
Philadelphia, PA

ERIC E. MILLER
Senior Vice President, Secretary
and Deputy General Counsel
Delaware Investments Family of Funds
Philadelphia, PA

(photo of globe)

directors
& officers

- --------------------------------------------------------------------------------
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

<PAGE>

When used with prospective investors, this report must be preceded or
accompanied by a current Delaware Tax-Free USA Fund, Delaware Tax-Free Insured
Fund, Delaware Tax-Free USA Intermediate Fund and Delaware National High-Yield
Municipal Bond Fund Prospectus and the Delaware Investments Performance Update
for the most recently completed calendar quarter. For a prospectus of any other
mutual fund from Delaware Investments, contact your financial adviser or
Delaware.

(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.delawareinvestments.com

DELAWARE (SM)
INVESTMENTS
- ---------------------
Philadelphia o London

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 Funds 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.

Printed in the USA
on recycled paper

(2199)
AR-011[8/99]PPL10/99