<PAGE>
DELAWARE(SM)
INVESTMENTS
============
Delaware Tax-Free USA Fund
Delaware Tax-Free Insured Fund
Delaware Tax-Free USA Intermediate Fund
Delaware National High-Yield Municipal Bond Fund
Tax-Exempt Income
[GRAPHIC OMITTED ART FROM TAX-EXEMPT INCOME BROCHURE]
2000 ANNUAL REPORT
<PAGE>
TABLE OF CONTENTS
=================
Letter to Shareholders 1
Portfolio Management
Review 4
Performance Summary
Delaware Tax-Free USA Fund 8
Delaware Tax-Free
Insured Fund 9
Delaware Tax-Free USA
Intermediate Fund 10
Delaware National High-Yield
Municipal Bond Fund 11
Financial Statements
Statements of Net Assets 12
Statements of Operations 24
Statements of Changes in
Net Assets 25
Financial Highlights 27
Notes to Financial
Statements 39
Reports of Independent
Auditors 44
A TRADITION OF SOUND INVESTING SINCE 1929
=========================================
A Commitment To Our Investors
Experienced
[ ] Our seasoned investment professionals average more than 15 years'
experience.
[ ] We began managing investments in 1929 and opened our first mutual fund in
1938. Over the past 70 years, we have weathered a full range of economic and
market environments.
Disciplined
[ ] We follow strict investment policies and clear buy/sell guidelines.
[ ] We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
[ ] We clearly articulate our investment policies and follow them consistently.
[ ] Our commitment to style consistency has earned us the confidence of
discriminating institutional and individual investors to manage
more than $44 billion in assets as of September 30, 2000.
Comprehensive
[ ] We offer more than 70 mutual funds in these asset classes.
o Large-cap equity o High-yield bonds
o Mid-cap equity o Investment grade bonds
o Small-cap equity o Municipal bonds (23 single-state funds)
o International equity o International fixed-income
o Balanced
[ ] Our funds are available through financial advisers who can offer you
individualized attention and valuable investment advice.
Funds are not FDIC insured and are not guaranteed. It is possible to lose the
principal amount invested.
(C)Delaware Distributors, L.P.
<PAGE>
Dear Shareholder
October 9, 2000
Recap of Events - Throughout most of the Funds' fiscal year ended August 31,
2000, the Federal Reserve Board focused on tightening the U.S. money supply,
conducting a prolonged series of interest rate hikes. A strong U.S. economy and
threatening inflation prompted the Fed to bump up short-term interest rates four
times during the period, with the last increase coming on May 16, 2000.
During the fall of 1999, many bond buyers seemed to be ignoring municipal bonds
in favor of the higher-yielding corporate bonds that were flooding the market.
That scenario changed later in our fiscal year when interest rate hikes in
February and March, coupled with the U.S. Treasury buyback and turmoil in the
U.S. stock market in April, led to a marked increase in demand for the safety of
U.S. Treasury securities. We believe rising Treasury prices left municipal bonds
in a position of relative value. Retail investors began to recognize this value
as Treasury yields dropped and AAA-rated municipal bond yields exceeded 6% in
March (Source: Bloomberg). Since then, we have generally seen demand for
municipal bonds on the upswing.
Increased tax revenue resulting from the strong economy and higher borrowing
costs resulting from rising interest rates caused many state and local
governments to reduce the number of municipal bonds they issued during our
fiscal year. This caused demand to exceed supply as we ended our year (Source:
Moody's Investors Service, Inc.).
The flip-flop between supply and demand in the municipal markets happened
gradually throughout 2000. The Fed's latest interest rate hike in May supported
that trend. By the end of our fiscal year, demand for municipal bonds remained
high while municipal bond issuance for 2000 declined by about 19%, a reduction
of about $33 billion from the same period one year prior. (Source: Thomson
Financial).
Long-term interest rates began to decline during the summer months, with the
30-year mortgage rate at 7.64% on August 31, 2000, about three quarters of a
percentage point off its spring 2000 high for the year. The average yield on
30-year AAA-rated municipal bonds, which rarely is more than the yield for the
30-year Treasury bond, stood at 5.68% on August 31, 2000. By comparison, the
30-year Treasury bond was yielding 5.66% and two-year Treasury notes were
yielding 6.16% on August 31, 2000 (Source: Bloomberg). Unlike Treasury
securities, municipal bonds are not guaranteed as to payment of principal and
interest. For municipal bond tax-equivalent yields, see the chart on page 5.
"WE BELIEVE RISING
TREASURY PRICES LEFT
MUNICIPAL BONDS IN A
POSITION OF RELATIVE
VALUE."
1
<PAGE>
Delaware National Tax-Free Funds - For the fiscal year ended August 31, 2000,
the Funds generally posted returns similar to or greater than the average of
funds in their relative Lipper classes, with the exception of Delaware Tax-Free
Insured Fund, which trailed its Lipper class by about one tenth of one percent.
On the pages that follow, your Funds' portfolio managers explain the Funds'
performance in greater detail, as well as positioning during the period and
issues currently affecting the municipal markets.
Market Outlook - We are encouraged by the current environment. As of this
writing, the predominant opinion on Wall Street is that the Fed is firmly in a
holding pattern with regard to its actions on interest rates. Evident slowing in
the U.S. economy, which has prompted the Fed to leave rates untouched at its
last three meetings, could eventually lead to lesser revenues for states and
municipalities. In our opinion, this would likely lead to a general increase in
the issuance of municipal bonds.
Total Return
For the Period Ended August 31, 2000 One Year
--------------------------------------------------------------------------------
Delaware Tax-Free USA Fund Class A +5.11%
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +6.77%
Lipper General Municipal Debt Funds Average (279 funds) +5.10%
--------------------------------------------------------------------------------
Delaware Tax-Free Insured Fund Class A +5.50%
--------------------------------------------------------------------------------
Lehman Brothers Insured Municipal Bond Index +6.22%
Lipper Insured Municipal Debt Funds Average (50 funds) +5.61%
--------------------------------------------------------------------------------
Delaware Tax-Free USA Intermediate Fund Class A +5.69%
--------------------------------------------------------------------------------
Merrill Lynch 3-7 Year Municipal Bond Index +5.30%
Lipper Intermediate Municipal Debt Funds Average (126 funds) +4.97%
--------------------------------------------------------------------------------
Delaware National High-Yield Municipal Bond Fund Class A +1.85%
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +6.77%
Lipper High-Yield Municipal Debt Funds Average (81 funds) +0.90%
--------------------------------------------------------------------------------
All performance shown above is at net asset value without the effect of sales
charges and assumes reinvestment of all distributions. Performance information
for all Fund classes can be found on pages 8 through 11. The Lipper categories
represent the average returns of municipal bond funds with similar investment
objectives tracked by Lipper (Source: Lipper Inc.). The unmanaged Lehman
Brothers Municipal Bond Index, Lehman Brothers Insured Municipal Bond Index, and
Merrill Lynch 3-7 Year Municipal Bond Index are composed of bonds with a variety
of quality ratings from many states. You cannot invest directly in an index.
Past performance does not guarantee future results.
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2
<PAGE>
We believe that municipal bonds will continue to play a role in well-diversified
portfolios. In addition, we think that in an environment where interest rates
trend downward, investing in municipal bond funds will be more attractive to
investors than buying individual bonds. In such an environment, municipal bond
funds like Delaware's are holding slightly older bonds - often issued at more
attractive rates than most new issues coming to market.
Thank you for your continued confidence, and your commitment to Delaware
Investments.
Sincerely,
/s/ Wayne A. Stork /s/ David K. Downes
------------------------------------ --------------------------------------
Wayne A. Stork David K. Downes
Chairman, President and Chief Executive Officer,
Delaware Investments Family of Funds Delaware Investments Family of Funds
3
<PAGE>
Mitchell L. Conery
Senior Portfolio Manager
Patrick P. Coyne
Senior Portfolio Manager
October 9, 2000
PORTFOLIO MANAGEMENT REVIEW
===========================
The Funds' Results
During the year ended August 31, 2000, we began to see strong performance in
municipal markets despite changes in interest rates. While municipal bond fund
cash flows are negative year-to-date, July 2000 brought positive numbers, with
investors pouring a net $850 million dollars into municipal bond funds - a trend
that we hope to see continue (Source: Investment Company Institute).
The year was characterized by a continued diminishing of municipal bond supply,
as states, counties, and municipalities issued fewer bonds. This was likely due
to strong local economies and tax bases, as well as the dramatic decline in bond
refunding. Bond issues for public projects such as water and sewer,
transportation, and higher education often exhibited strength, while municipal
issuers often received substantial credit upgrades - especially among bonds
whose principal and interest payments are backed by taxes (Source: Moody's
Investors Service).
We continued to limit our investments in the healthcare sector. The cloudy
outlook for the future of Medicaid/Medicare may have been among the reasons that
municipal bonds in this sector often faced pressures. Of the 37 credit
downgrades that Moody's has made to revenue bonds year-to-date in 2000, 28 have
been to healthcare bonds (Source: Moody's Investors Service). When investing in
healthcare issues, we use careful research and always keep an eye out for
undervalued bond issues.
The uncertainty surrounding interest rates throughout the fiscal year required
us to manage duration, a common measure of a bond or bond fund's sensitivity to
interest rate changes. The shorter a bond fund's duration, the less sensitive
the fund is to interest rate changes. We shortened duration for all of the Funds
except Delaware Tax-Free USA Fund during the first half of the year, when
municipals were weak. As the fiscal year continued, the durations of some of the
portfolios were extended again in an attempt to take advantage of the market
rally, while we continued to monitor interest rate risk.
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4
<PAGE>
Delaware Tax-Free USA Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------
Current 30-Day SEC Yield* 4.99%
---------------------------------------------------------------------
Average Rating A
---------------------------------------------------------------------
Average Effective Duration** 8.14 years
---------------------------------------------------------------------
Average Effective Maturity*** 14.27 years
---------------------------------------------------------------------
Portfolio Turnover Rate 76%
---------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for both Class B and
C shares was +4.39%.
**Average effective duration is a common measure of a bond or bond fund's
sensitivity to interest rate changes.
***Average effective maturity is the average time remaining until scheduled
principal payment by issuers of portfolio securities.
Delaware Tax-Free USA Fund
For this fiscal year, the Fund (Class A shares at net asset value with
distributions reinvested) trailed the Lehman Brothers Municipal Bond Index, but
slightly outperformed the Lipper General Municipal Debt Funds Average. During
the year, we took advantage of our ability to invest in a type of security class
called inverse floaters - bonds that have variable interest payments which move
inversely to interest rates. We believe our use of inverse floaters served to
buoy your Fund's yield during parts of the fiscal year.
At times during the year we concentrated on bonds with intermediate maturities.
Because some of our investments were in non-callable bonds, however, the Fund's
duration figure did not shorten dramatically when interest rates fell in the
second half of the fiscal year. During the year, we found value in
transportation revenue bonds - such as the Indianapolis Airport Authority bond
that we currently hold. The bond was issued to fund a project that benefits the
Federal Express Corporation. We also found electric utility bonds attractive in
the wake of deregulation and made some key purchases. We invested in tax-exempt
pollution-control bonds issued by Mississippi Business Finance Corp. on behalf
of the public utility Entergy Corp. of New Orleans. Entergy, which serves a
four-state region in the South, stands to grow substantially through a pending
merger with Florida Power & Light Group.
During the period, we kept our exposure to hospital bonds limited because of the
credit concerns still existent in that sector.
-------------------------------------------------------------------------------
As of August 31, 2000, the yield on 30-year AAA-rated municipal bonds nationally
was 5.68% (Source: Bloomberg). The chart shows what the equivalent yield would
be on a taxable investment for investors in each tax bracket.*
-------------------------------------------------------------------------------
30-Year AAA-Rated Municipal Bond
Tax-Equivalent Yields
As of August 31, 2000
Tax-Equivalent Yield Income Tax Bracket
-------------------- ------------------
6.68% 15%
7.88% 28%
8.23% 31%
8.88% 36%
9.40% 39.6%
*Principal and interest of municipal bonds, unlike U.S. Treasury securities, are
not guaranteed by the U.S. government. The above illustration is not intended
to represent the yield of any mutual fund from Delaware Investments.
5
<PAGE>
Delaware Tax-Free
Insured Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------
Current 30-Day SEC Yield* 4.30%
---------------------------------------------------------------------
Average Rating AA
---------------------------------------------------------------------
Average Effective Duration** 8.56 years
---------------------------------------------------------------------
Average Effective Maturity*** 14.93 years
---------------------------------------------------------------------
Portfolio Turnover Rate 117%
---------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for both Class B and C
shares was +3.67%.
Delaware Tax-Free Insured Fund
Early in the fiscal year, we decreased the Fund's duration to control interest
rate sensitivity. As municipal bonds began to rally in the spring of 2000, we
allowed that figure to rise again somewhat as we sought to take advantage of the
market. As is consistent with the Fund's objective, 87.45% of the portfolio was
invested in insured, AAA-rated bonds as of August 31, 2000. However, throughout
the period we also held some non-insured bonds. This was done in an effort to
increase your Fund's yield, as non-insured issues are typically smaller and
higher-yielding. This strategy also accommodates for the fact that the universe
of insured bonds, while growing significantly, is nonetheless still limited.
According to the Association of Financial Guaranty Insurers - an industry
association that includes the four largest bond insurers in the U.S. - about 50%
of all new municipal bond issues are insured, compared to just 20% one decade
ago. These insured, AAA-rated issues comprise the top tier of creditworthiness
among municipal bonds.
One of our strategies has been to buy high-quality bonds that we expect may
eventually be included in the Bond Buyer's Yield-to-Maturity Index. This index
is the foundation for the municipal bond futures contract, which is traded on
the Chicago Board of Trade. When a bond is placed in the index, the liquidity
and value of the security are generally enhanced.
Delaware Tax-Free USA Intermediate Fund
At the start of the fiscal year we sold some longer-term bonds in anticipation
of a rising interest rate environment. By the mid-point of our fiscal year, we
had reduced your Fund's duration in an attempt to limit the effect of interest
rate increases. As a result of these cautionary moves, we realized some positive
returns even before the rally in the municipal markets began in the spring.
As the fiscal year progressed and the municipal bond markets started to perform
better, we began to look at select bonds with higher yields and lower credit
qualities. Adding these bonds to the portfolio caused the Fund's duration figure
to rise slightly from its low point around mid-fiscal-year and the average
credit rating dropped from AA to A. The higher-yielding bonds generally
aided performance, and by the end of the fiscal year the Fund (Class A shares at
net asset value with distributions reinvested) had outperformed its benchmark,
the Merrill Lynch 3-7 Year Municipal Bond Index.
The Fund invests in bonds with average weighted maturities between three and 10
years. Typically, we hold a portfolio of securities that is weighted at both
ends of this spectrum, producing a "barbell" effect. This continued to be our
general approach, as we looked for opportunities at both the long and short ends
of the municipal yield curve.
Delaware Tax-Free
USA Intermediate Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------
Current 30-Day SEC Yield* 4.47%
---------------------------------------------------------------------
Average Rating A
---------------------------------------------------------------------
Average Effective Duration** 5.77 years
---------------------------------------------------------------------
Average Effective Maturity*** 8.14 years
---------------------------------------------------------------------
Portfolio Turnover Rate 199%
---------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for both Class B and
C shares was +3.75%.
**Average effective duration is a common measure of a bond or bond fund's
sensitivity to interest rate changes.
***Average effective maturity is the average time remaining until scheduled
principal payment by issuers of portfolio securities.
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6
<PAGE>
Delaware National High-Yield
Municipal Bond Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------
Current 30-Day SEC Yield* +5.21%
---------------------------------------------------------------------
Average Rating CCC
---------------------------------------------------------------------
Average Effective Duration** 7.29 years
---------------------------------------------------------------------
Average Effective Maturity*** 13.04 years
---------------------------------------------------------------------
Portfolio Turnover Rate 61%
---------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for both Class B and
C shares was +4.65%.
**Average effective duration is a common measure of a bond or bond fund's
sensitivity to interest rate changes.
***Average effective maturity is the average time remaining until scheduled
principal payment by issuers of portfolio securities.
Delaware National High-Yield Municipal Bond Fund
Although high yield generally did not fare as well as other sectors of the
municipal bond market, your Fund returned +1.85% for the fiscal year (Class A
shares at net asset value with distributions reinvested), more than the average
return of funds in the Lipper High-Yield Municipal Debt Funds class.
Approaching Year 2000, the Fund's duration was short, hampering our performance.
During the period we sold some of our bonds that had nominal yields below 6% and
reinvested the proceeds in lower-rated, higher-yielding bonds. Often, bonds in
the high-yield municipal universe are unrated by large credit rating agencies,
which requires us to conduct our own extensive due diligence on many bond
issues. A good example of this is an unrated Pennsylvania hospital bond we held
that was refunded in July 2000. We conducted the due diligence on the hospital's
financial condition and were the first investors to buy the bond. The Fund's
outperformance of the relative Lipper class for the year can be partially
attributed to this bond's refunding, which helped boost the price of the bond on
the open market.
Top Five Allocations by State
As of August 31, 2000
<TABLE>
<CAPTION>
Delaware National
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free High-Yield Municipal
USA Fund Insured Fund USA Intermediate Fund Bond Fund
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pennsylvania 9.6% Illinois 18.9% Arizona 13.1% Pennsylvania 13.0%
Texas 7.8% Massachusetts 10.6% Pennsylvania 11.6% Alabama 8.9%
New York 7.6% Texas 10.5% Oregon 8.2% Illinois 8.5%
Louisiana 7.4% New York 8.1% California 8.1% Texas 6.2%
Oklahoma 6.0% New Jersey 6.3% New York 5.8% Massachusetts 5.6%
-------------------------------------------------------------------------------------------------
</TABLE>
Outlook - In the months ahead, we anticipate a positive environment for
municipal bonds. We think it is possible that the strong performance seen in the
first half of 2000 could continue through the fall.
As always with municipal bonds, this depends largely on interest rate trends, as
well as supply and demand in the municipal bond markets. The Federal Reserve
Board has promised to remain vigilant about keeping inflation under control and
could continue with interest rate increases in the future. As of this writing,
however, many analysts and investors seem to believe that the Fed may be
finished with increases - at least for the rest of this year. Long-term interest
rates, meanwhile, are generally trending downward.
We feel that a non-inflationary U.S. economy that has less-robust growth is
likely to boost the demand for capital funding. This would be a positive for
municipal bonds and for the Funds. In our opinion, municipal bond funds will
continue to be an important investment vehicle - which can provide excellent
diversification to an investor's overall portfolio, as well as providing
individual investors the opportunity to preserve their own capital and generate
non-taxable income.*
*A portion of the income from tax-exempt funds may be subject to the alternative
minimum tax.
7
<PAGE>
FUND BASICS
===========
Fund Objectives
The Fund seeks as high a level of current interest income exempt from federal
income tax as is available from municipal obligations as is consistent with
prudent investment management and preservation of capital.
Total Fund Assets
As of August 31, 2000
$449.05 million
Number of Holdings
98
Fund Start Date
January 11, 1984
Your Fund Managers
Mitchell L. Conery received a bachelor's degree from Boston University and an
MBA in Finance from the State University of New York at Albany. Prior to joining
Delaware Investments in 1997, he served as a municipal bond investment officer
with the Travelers Group. Before that, he held positions at CS First Boston
Corporation, MBIA Corporation, Thomson McKinnon Securities, Ovest Financial
Services, and Merrill Lynch.
Patrick P. Coyne received a bachelor's degree from Harvard University and an MBA
in Finance from the University of Pennsylvania's Wharton School. He began his
career with Kidder, Peabody & Co., where he managed the firm's trading desk for
four years. He joined Delaware Investments' fixed-income department in 1990.
Nasdaq Symbols
Class A DMTFX
Class B DTFCX
Class C DUSCX
DELAWARE TAX-FREE USA FUND PERFORMANCE
======================================
Growth of a $10,000 Investment
August 31, 1990 to August 31, 2000
Delaware Tax-Free U.S. Consumer Lehman Brothers Municipal
USA Fund Class A Price Index Bond Index
Aug-90 $ 9,626 $10,000 $10,000
Aug-91 $10,770 $10,380 $11,179
Aug-92 $12,053 $10,707 $12,400
Aug-93 $13,458 $11,003 $13,944
Aug-94 $13,658 $11,332 $13,963
Aug-95 $14,579 $11,609 $15,201
Aug-96 $14,858 $11,953 $15,997
Aug-97 $16,015 $12,219 $17,476
Aug-98 $17,276 $12,416 $18,987
Aug-99 $16,773 $12,698 $19,091
Aug-00 $17,629 $13,123 $20,376
Chart assumes $10,000 invested on August 31, 1990, a 3.75% front-end sales
charge and reinvestment of all distributions. Values were plotted as of month's
end. Performance of other Fund classes will vary due to differing charges and
expenses. Past performance is not a guarantee of future results.
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
Through August 31, 2000 Lifetime 10 Years Five Years One Year
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 1/11/84)
Excluding Sales Charge +8.24% +6.25% +3.90% +5.11%
Including Sales Charge +7.99% +5.85% +3.11% +1.20%
--------------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +3.58% +3.08% +4.27%
Including Sales Charge +3.58% +2.76% +0.29%
--------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +2.68% +4.27%
Including Sales Charge +2.68% +3.28%
--------------------------------------------------------------------------------------------
</TABLE>
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Returns and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Class B and C share
results, excluding sales charge, assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
8
<PAGE>
FUND BASICS
===========
Fund Objectives
The Fund seeks as high a level of current interest income exempt from federal
income tax as is available from municipal obligations as is consistent with
prudent investment management and preservation of capital.
Total Fund Assets
As of August 31, 2000
$67.53 million
Number of Holdings
35
Fund Start Date
March 25, 1985
Your Fund Managers
Mitchell L. Conery
Patrick P. Coyne
Nasdaq Symbols
Class A DMFIX
Class B DTXBX
Class C DTXCX
DELAWARE TAX-FREE INSURED FUND PERFORMANCE
==========================================
Growth of a $10,000 Investment
August 31, 1990 to August 31, 2000
Delaware Tax-Free U.S. Consumer Lehman Brothers Insured
Insured Fund Class A Price Index Municipal Bond Index
Aug-90 $ 9,623 $10,000 $10,000
Aug-91 $10,701 $10,380 $11,245
Aug-92 $11,796 $10,707 $12,541
Aug-93 $12,914 $11,003 $14,191
Aug-94 $12,983 $11,332 $14,122
Aug-95 $13,806 $11,609 $15,409
Aug-96 $14,341 $11,953 $16,245
Aug-97 $15,498 $12,219 $17,773
Aug-98 $16,652 $12,416 $19,409
Aug-99 $16,403 $12,698 $19,352
Aug-00 $17,306 $13,123 $20,787
Chart assumes $10,000 invested on August 31, 1990, a 3.75% front-end sales
charge and reinvestment of all distributions. Values were plotted as of month's
end. Performance of other Fund classes will vary due to differing charges and
expenses. Past performance is not a guarantee of future results.
<TABLE>
<CAPTION>
Average Annual Total Returns
Through August 31, 2000 Lifetime 10 Years Five Years One Year
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 3/25/85)
Excluding Sales Charge +7.15% +6.06% +4.65% +5.50%
Including Sales Charge +6.89% +5.65% +3.85% +1.57%
--------------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.18% +3.82% +4.66%
Including Sales Charge +4.18% +3.49% +0.66%
--------------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +3.36% +4.66%
Including Sales Charge +3.36% +3.66%
--------------------------------------------------------------------------------------------
</TABLE>
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Returns and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Class B and C share
results, excluding sales charge, assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
9
<PAGE>
FUND BASICS
===========
Fund Objectives
The Fund seeks as high a level of current interest income exempt from federal
income tax as is available from municipal obligations as is consistent with
prudent investment management and preservation of capital.
Total Fund Assets
As of August 31, 2000
$24.84 million
Number of Holdings
25
Fund Start Date
January 7, 1993
Your Fund Managers
Mitchell L. Conery
Patrick P. Coyne
Nasdaq Symbols
Class A DMUSX
Class B DUIBX
Class C DUICX
DELAWARE TAX-FREE USA INTERMEDIATE FUND PERFORMANCE
===================================================
Growth of a $10,000 Investment
January 7, 1993 to August 31, 2000
Delaware Tax-Free USA U.S. Consumer Merrill Lynch 3-7 Year
Intermediate Fund Class A Price Index Municipal Bond Index
1/7/93 $ 9,728 $10,000 $10,000
8/31/93 $10,676 $10,154 $10,571
8/31/94 $10,899 $10,449 $10,770
8/31/95 $11,599 $10,722 $11,498
8/31/96 $12,123 $11,031 $11,923
8/31/97 $12,920 $11,276 $12,675
8/31/98 $13,852 $11,459 $13,560
8/31/99 $13,893 $11,718 $13,884
8/31/00 $14,681 $12,106 $14,620
Chart assumes $10,000 invested on January 7, 1993, a 2.75% front-end sales
charge and reinvestment of all distributions. Values were plotted as of month's
end. Performance of other Fund classes will vary due to differing charges and
expenses. Past performance is not a guarantee of future results.
<TABLE>
<CAPTION>
Average Annual Total Returns
Through August 31, 2000 Lifetime Five Years One Year
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (Est. 1/7/93)
Excluding Sales Charge +5.55% +4.85% +5.69%
Including Sales Charge +5.16% +4.28% +2.78%
----------------------------------------------------------------------------------------
Class B (Est. 5/2/94)
Excluding Sales Charge +4.37% +3.97% +4.80%
Including Sales Charge +4.37% +3.97% +2.80%
----------------------------------------------------------------------------------------
Class C (Est. 11/29/95)
Excluding Sales Charge +3.79% +4.80%
Including Sales Charge +3.79% +3.80%
----------------------------------------------------------------------------------------
</TABLE>
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Returns and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Class B and C share
results, excluding sales charge, assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 2.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 2% if redeemed before the end of the third year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free USA
Intermediate Fund during the periods shown. Performance would have been lower if
the expense limitation was not in effect.
10
<PAGE>
FUND BASICS
===========
Fund Objectives
The Fund seeks a high level of current income exempt from federal income tax
primarily through investment in medium and lower-grade municipal obligations.
Total Fund Assets
As of August 31, 2000
$105.35 million
Number of Holdings
89
Fund Start Date
September 22, 1986
Your Fund Managers
Mitchell L. Conery
Patrick P. Coyne
Nasdaq Symbols
Class A CXHYX
Class B DVNYX
Class C DVHCX
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND PERFORMANCE
============================================================
Growth of a $10,000 Investment
August 31, 1990 to August 31, 2000
Delaware National
High-Yield Municipal U.S. Consumer Lehman Brothers
Bond Fund Class A Price Index Municipal Bond Index
Aug-90 $ 9,623 $10,000 $10,000
Aug-91 $10,639 $10,380 $11,179
Aug-92 $11,899 $10,707 $12,400
Aug-93 $13,270 $11,003 $13,944
Aug-94 $13,503 $11,332 $13,963
Aug-95 $14,551 $11,609 $15,201
Aug-96 $15,601 $11,953 $15,997
Aug-97 $17,195 $12,219 $17,476
Aug-98 $18,767 $12,416 $18,987
Aug-99 $18,969 $12,698 $19,091
Aug-00 $19,318 $13,123 $20,376
Chart assumes $10,000 invested on August 31, 1990, a 3.75% front-end sales
charge and reinvestment of all distributions. Values were plotted as of month's
end. Performance of other Fund classes will vary due to differing charges and
expenses. Past performance is not a guarantee of future results.
<TABLE>
<CAPTION>
Average Annual Total Returns
Through August 31, 2000 Lifetime 10 Years Five Years One Year
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (Est. 9/22/86)
Excluding Sales Charge +7.19% +7.24% +5.89% +1.85%
Including Sales Charge +6.90% +6.83% +5.07% -1.95%
------------------------------------------------------------------------------------------------
Class B (Est. 12/18/96)
Excluding Sales Charge +4.25% +1.10%
Including Sales Charge +3.55% -2.75%
------------------------------------------------------------------------------------------------
Class C (Est. 5/26/97)
Excluding Sales Charge +3.87% +1.08%
Including Sales Charge +3.87% +0.12%
------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Returns reflect reinvestment of distributions and any applicable sales charge as
noted below. Returns and share value will fluctuate so that shares, when
redeemed, may be worth more or less than the original cost. Class B and C share
results, excluding sales charge, assume either that contingent deferred sales
charges were not applied or the investment was not redeemed. Past performance is
not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are subject to a contingent deferred
sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware National
High-Yield Municipal Bond Fund during the periods shown. Performance would have
been lower if the expense limitation was not in effect.
11
<PAGE>
Statements of Net Assets
DELAWARE TAX-FREE USA FUND
==========================
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.80%
Airport Revenue Bonds - 6.06%
Atlanta, Georgia Airport Revenue Refunding
Series A 5.50% 1/1/26 (FGIC) ................. $10,500,000 $10,442,250
Dallas-Fort Worth, Texas International
Airport Facilities Improvement Corporation
(American Airlines) Series C
6.15% 5/1/29 (AMT) ........................... 1,000,000 1,011,420
Houston, Texas Airport System Revenue
Special Facilities (Continental Airlines)
Series B 6.125% 7/15/27 ...................... 900,000 803,142
Kenton County, Kentucky Airport Board
Special Facilities (Delta Airlines Project)
Series A 7.25% 2/1/22 ........................ 4,250,000 4,395,435
Series B 7.50% 2/1/12 (AMT) .................. 2,000,000 2,077,800
New Jersey Economic Development
Authority Continental Special Facility
Revenue (Continental Airlines Inc.
Project) 6.25% 9/15/29 (AMT) ................. 3,500,000 3,286,850
Tulsa, Oklahoma Municipal Airport
(American Airlines) 7.35% 12/1/11 ............ 5,000,000 5,211,300
-----------
27,228,197
-----------
Continuing Care/Retirement Revenue Bonds - 2.44%
Clark County, Nevada Assisted Living
Homestead (Boulder City Project/
Volunteers of America)
6.50% 12/1/27 ................................ 3,075,000 2,719,745
Delaware County, Pennsylvania Authority
Revenue (Main Line & Haverford
Nursing and Rehabilitation Center)
9.00% 8/1/22 ................................. 1,925,000 2,066,083
Delaware State Economic Development
Authority First Mortgage (Peninsula
United Methodist Homes) Series A
6.20% 5/1/15 ................................. 4,000,000 3,750,920
8.50% 5/1/22 ................................. 455,000 479,365
Gainesville & Hall County, Georgia
Development Authority Revenue Senior
Living Facility (Lanier Valley) Series C
7.25% 11/15/29 ............................... 2,000,000 1,940,780
-----------
10,956,893
-----------
General Obligation Bonds - 3.29%
Chicago, Illinois Series A
6.75% 1/1/35 (FGIC) .......................... 2,290,000 2,532,877
Mississippi Development Bank Special
Obligation (Madison County Hospital
Project) 6.30% 7/1/22 ........................ 2,070,000 2,097,303
New York City, New York Series H
6.125% 8/1/25 ................................ 5,000,000 5,205,700
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
General Obligation Bonds (continued)
Puerto Rico Commonwealth Public
Improvement 5.00% 7/1/28 ..................... $ 2,000,000 $ 1,869,000
Texas State General Obligation
(Veterans Land Bank) 7.40% 12/1/20 ........... 3,000,000 3,077,190
-----------
14,782,070
-----------
Higher Education Revenue Bonds - 10.46%
California Educational Facilities Authority
Revenue (Pepperdine University)
5.75% 9/15/30 ................................ 2,000,000 2,044,280
Delaware State Economic Development
Authority Revenue Student Housing
(University Courtyard) Series A
6.10% 8/1/31 (Asset Gty) ..................... 4,000,000 4,102,200
Jefferson County, Kentucky Student
Housing Industrial Building Revenue
(University of Louisville)
6.50% 9/1/09 ................................. 2,255,000 2,247,401
Maryland State Economic Development
Corporation Student Housing Revenue
(Collegiate Housing Foundation-University
Courtyard) Series A 5.75% 6/1/31 ............. 3,520,000 3,317,002
Missouri State Health and Educational
Facilities Authority (Washington
University) 4.75% 11/15/37 ................... 12,000,000 10,262,640
New Hampshire Higher Education &
Health Facilities Authority Revenue
(New Hampton School Issue)
5.375% 10/1/28 ............................... 3,070,000 2,589,207
New York State Dormitory Authority
Lease Revenue (State Judicial Institute
at Pace University)
5.50% 7/1/20 (AMBAC) ......................... 1,000,000 999,910
+New York State Dormitory Authority
Revenue (Drivers-107)
4.655% 5/1/15 (MBIA) ......................... 10,500,000 10,859,730
Payne County, Oklahoma Economic
Development Authority Revenue
(Collegiate Housing Foundation-Oklahoma
State University) Series A
6.375% 6/1/30 ................................ 4,000,000 4,060,080
Private Colleges and Universities
Authority Georgia Revenue
(Emory University Project) Series A
5.50% 11/1/33 ................................ 4,000,000 3,963,520
Tompkins County, New York Industrial
Development Agency Revenue
Civic Facility (Cornell University)
5.75% 7/1/30 ................................. 2,500,000 2,542,075
-----------
46,988,045
-----------
12
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free USA Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Hospital Revenue Bonds - 4.36%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue
(Allegheny Valley Hospital)
7.75% 8/1/20 ................................. $ 1,000,000 $ 1,020,440
Allegheny County, Pennsylvania Hospital
Development Authority (West Penn
Allegheny Health Systems) Series B
8.45% 11/15/03 ............................... 1,210,000 1,212,081
8.55% 11/15/04 ............................... 800,000 801,776
9.25% 11/15/30 ............................... 2,500,000 2,355,400
Philadelphia Hospital & Higher Education
Facilities Authority Hospital Revenue
(Jeanes Health System Project)
5.875% 7/1/17 ................................ 4,575,000 4,013,876
6.85% 7/1/22 ................................. 7,000,000 6,890,170
Royston, Georgia Hospital Authority
Revenue Certificates
(Ty Cobb Healthcare Systems Inc.)
6.375% 7/1/14 ................................ 775,000 716,960
Westmoreland County, Pennsylvania
Industrial Development Authority
Hospital Revenue (Citizen General
Hospital) 5.25% 7/1/15 ....................... 3,185,000 2,569,594
-----------
19,580,297
-----------
Housing Revenue Bonds - 4.24%
Massachusetts State Housing Finance
Agency Revenue Single Family
Mortgage 6.95% 6/1/16 ........................ 2,425,000 2,522,631
Montgomery County, Pennsylvania
Redevelopment Authority Multi-Family
Housing Revenue (KBF Associates L.P.
Project)
Series A 6.50% 7/1/25 ........................ 1,000,000 1,000,700
Series B 7.25% 7/1/25 ........................ 4,870,000 4,926,297
Tennessee Housing Development Agency
Mortgage Finance Series B
6.60% 7/1/25 (AMT) ........................... 1,030,000 1,074,743
Utah State Housing Finance Agency,
Single Family Mortgage Series A
7.20% 1/1/27 (FHA/VA) (AMT) .................. 750,000 781,088
Virginia State Housing Development
Authority Mortgage Series A
7.10% 1/1/25 ................................. 7,500,000 7,752,600
Wisconsin Housing & Economic Development
Authority Home Ownership Series B
6.75% 9/1/25 (AMT) ........................... 930,000 965,703
-----------
19,023,762
-----------
Industrial Development Revenue Bonds - 6.22%
Alliance, Texas Special Facility Revenue
Bonds-Series 1996 (Federal Express Corp.
Project) 6.375% 4/1/21 (AMT) ................. 10,240,000 10,254,541
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Industrial Development Revenue Bonds (continued)
Indianapolis, Indiana Airport Authority
Special Facilities (Federal Express Corp.
Project) 7.10% 1/15/17 (AMT) ................. $7,800,000 $ 8,190,312
Luzerne County, Pennsylvania Industrial
Development Authority (Pennsylvania
Gas & Water Co. Project)
7.00% 12/1/17 (AMBAC) (AMT) .................. 4,000,000 4,406,840
Prattville, Alabama Industrial Development
Board (International Paper Co. Project)
Series A 6.70% 3/1/24 (AMT) .................. 3,000,000 3,077,280
Toledo-Lucas County, Ohio Port Authority
Revenue (CSX Transportation Inc. Project)
6.45% 12/15/21 ............................... 2,000,000 2,020,580
-----------
27,949,553
-----------
Lease/Certificates of Participation - 1.77%
Denver, Colorado City & County Certificates
of Participation Series B
5.50% 12/1/25 (AMBAC) ........................ 3,400,000 3,367,632
Lakewood, Colorado Certificates
of Participation
5.375% 12/1/22 (AMBAC) ....................... 1,500,000 1,472,205
Midland County, Michigan Economic
Development Subordinate Limited
Obligation Series A
6.875% 7/23/09 (AMT) ......................... 3,050,000 3,111,000
-----------
7,950,837
-----------
Pollution Control Revenue Bonds - 14.51%
Claiborne County, Mississippi Pollution
Control Revenue (System Energy
Resources Inc. Project) 7.30% 5/1/25 ......... 3,000,000 3,060,360
Clark County, Nevada Industrial
Development Revenue (Nevada Power
Co. Project) Series C 7.20% 10/1/22 .......... 8,000,000 8,283,360
Lower Colorado River Authority Texas
Pollution Control Revenue (SamSung
Austin Semiconductor)
6.95% 4/1/30 (AMT) ........................... 1,000,000 1,015,780
Mississippi Business Finance Corporation
Pollution Control Revenue Refunding
(System Energy Resources Inc. Project)
5.90% 5/1/22 ................................. 3,000,000 2,815,230
New Hampshire State Business Finance
Authority Pollution Control Revenue
(Public Service Company of
New Hampshire) Series D
6.00% 5/1/21 (AMT) ........................... 5,370,000 5,049,196
Nez Perce County, Idaho Pollution Control
Revenue Refunding (Potlatch Corp.
Project) 6.00% 10/1/24 ....................... 7,000,000 6,741,210
13
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free USA Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Pollution Control Revenue Bonds (continued)
Parish of West Feliciana, Louisiana
(Gulf States Utilities Co. Project)
Series A 7.50% 5/1/15 ........................ $22,700,000 $23,747,832
Petersburg, Indiana Pollution Control
Revenue Bonds (Indianapolis Power &
Light Co. Project) 6.625% 12/1/24 ............ 5,000,000 5,220,650
Sabine River Authority, Texas Pollution
Control Revenue (Southwestern Electric
Power) 6.10% 4/1/18 (MBIA) ................... 4,000,000 4,169,400
Sweetwater County, Wyoming Pollution
Control Revenue (Idaho Power Co.
Project) Series A 6.05% 7/15/26 .............. 5,000,000 5,055,550
-----------
65,158,568
-----------
Power Authority Revenue Bonds -2.88%
Chaska, Minnesota Electric Revenue
Series A 6.00% 10/1/25 ....................... 2,000,000 2,040,780
Northern Municipal Power Agency,
Minnesota System Revenue Series A
5.00% 1/1/21 ................................. 6,500,000 5,970,640
Puerto Rico Electric Power Authority
Series EE 4.75% 7/1/24 ....................... 5,500,000 4,908,695
-----------
12,920,115
-----------
*Pre-Refunded/Escrowed to Maturity Bonds - 18.12%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue
7.00% 8/1/15 (Escrowed to Maturity) .......... 375,000 432,101
Delaware State Economic Development
Authority First Mortgage (Peninsula
United Methodist Homes) Series A
8.50% 5/1/22-02 .............................. 3,045,000 3,296,791
**Intermountain Power Agency, Utah
Series 87D Power Supply Revenue
8.569% 7/1/20-02 ............................. 95,575,000 18,107,640
Louisiana Public Facilities Hospital
Revenue (Southern Baptist Hospital,
Inc.) 8.00% 5/15/12 (Escrowed to
Maturity) .................................... 8,090,000 9,487,143
Michigan State Hospital Finance Authority
Revenue Refunding (Genesys Health
Systems) Series A
7.50% 10/1/27-05 ............................. 8,130,000 9,208,445
8.125% 10/1/21-05 ............................ 4,000,000 4,696,440
Oklahoma Turnpike Authority Revenue
1st Senior 6.00% 1/1/22
(Escrowed to Maturity) ....................... 13,535,000 14,699,010
Tampa, Florida Revenue (Florida Aquarium
Inc. Project) 7.75% 5/1/27-02 ................ 20,000,000 21,424,000
-----------
81,351,570
-----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Sales Tax Revenue Bonds - 0.68%
Southeast Wisconsin Professional
Baseball Park District Sales Tax Revenue
Series A 5.50% 12/15/26 (MBIA) ............... $ 3,000,000 $ 3,033,150
-----------
3,033,150
-----------
School District General Obligation Bonds - 1.79%
Conroe, Texas Independent School District
5.00% 2/15/21 ................................ 1,000,000 930,920
Fort Bend, Texas Independent School District
5.375% 2/15/24 ............................... 5,000,000 4,860,300
Lewisville, Texas Independent School District
6.15% 8/15/21 ................................ 2,160,000 2,265,797
-----------
8,057,017
-----------
Solid Waste Disposal Revenue Bonds - 4.59%
Ashland, Kentucky Sewer & Solid Waste
Revenue (Ashland, Inc. Project)
7.125% 2/1/22 (AMT) .......................... 12,000,000 12,623,520
Oregon State Solid Waste Disposal
(USG Corp. Project)
6.40% 12/1/29 (AMT) .......................... 1,500,000 1,504,575
Pennsylvania Economic Development
Financing Authority Wastewater
Treatment (Sun Co. Inc.-R & M Project)
Series A 7.60% 12/1/24 (AMT) ................. 6,000,000 6,477,480
-----------
20,605,575
-----------
Transportation Revenue Bonds - 7.09%
Connector 2000 Association Inc. South
Carolina Toll Road Revenue Senior
(Southern Connector Project) Series A
5.375% 1/1/38 ................................ 2,500,000 1,851,250
Foothill/Eastern Transportation Corridor
Agency California Toll Road Revenue
Senior Lien Series A 5.75% 1/15/40 ........... 3,000,000 2,926,740
Massachusetts Bay Transportation Authority
Revenue Assessment Series A
5.25% 7/1/30 ................................. 6,000,000 5,696,760
Massachusetts State Turnpike Authority
Metropolitan Highway System Revenue
Subordinated Series A
5.00% 1/1/39 (AMBAC) ......................... 6,750,000 6,045,435
Ohio State Turnpike Commission Turnpike
Revenue Series A
5.50% 2/15/24 (FGIC) ......................... 5,000,000 5,126,350
Oklahoma Turnpike Authority Revenue
1st Senior 6.00% 1/1/22 ...................... 3,000,000 3,002,610
Puerto Rico Commonwealth Highway &
Transportation Authority (Highway
Improvements) Series Y
5.00% 7/1/36 ................................. 2,000,000 1,858,780
14
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free USA Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Transportation Revenue Bonds (continued)
Route 3 North Transportation Improvement
Association Massachusetts Lease
Revenue 5.375% 6/15/33 (MBIA) ................ $5,500,000 $ 5,314,650
-----------
31,822,575
-----------
Water & Sewer Revenue Bonds - 3.77%
Atlanta, Georgia Water & Wastewater
Revenue Series A
5.00% 11/1/38 (FGIC) ......................... 7,500,000 6,750,300
Houston, Texas Water & Sewer System
Revenue Series D
6.125% 12/1/25 (MBIA) ........................ 2,775,000 2,845,790
Jefferson County, Alabama Sewer
Revenue Capital Improvement
Warrants Series A
5.375% 2/1/36 (FGIC) ......................... 2,000,000 1,913,140
New York City Municipal Water Finance
Authority Water & Sewer System
Revenue Series A
5.375% 6/15/26 (FSA) ......................... 2,450,000 2,368,562
West Virginia State Water Development
Authority Revenue Loan Program
Series A 6.375% 7/1/39
(AMBAC) (AMT) ................................ 2,890,000 3,038,141
-----------
16,915,933
-----------
Other Revenue Bonds - 6.53%
Alexandria, Virginia Industrial Development
Authority Revenue (Institute for Defense
Analyses) Series A
5.90% 10/1/30 (AMBAC) ........................ 5,000,000 5,161,100
Austin, Texas Revenue Refunded
Subordinate Lien
5.25% 5/15/25 (MBIA) ......................... 5,000,000 4,858,150
Delaware Valley, Pennsylvania Regional
Finance Authority Local Government
Revenue Series A
5.50% 8/1/28 (AMBAC) ......................... 5,000,000 5,006,800
Los Angeles, California Community
Redevelopment Agency Parking
System Revenue (Cinerama Dome
Public Parking) 5.80% 7/1/32 ................. 2,000,000 1,974,060
New York City Transitional Finance
Authority Revenue Future Tax Secured
Series C
5.50% 5/1/25 ................................. 5,000,000 4,946,350
5.50% 11/1/29 ................................ 7,500,000 7,381,650
-----------
29,328,110
-----------
Total Municipal Bonds
(cost $425,368,569) ............................ 443,652,267
-----------
<PAGE>
--------------------------------------------------------------------------------
Total Market Value of Securities - 98.80%
(cost $425,368,569) .......................... $443,652,267
Receivables and Other Assets
Net of Liabilities - 1.20% ................... 5,393,706
------------
Net Assets Applicable to 41,448,939
Shares Outstanding - 100.00% ................. $449,045,973
============
Net Asset Value - Delaware Tax-Free
USA Fund A Class
($421,135,927 / 38,872,720 Shares) ........... $10.83
------
Net Asset Value - Delaware Tax-Free
USA Fund B Class
($26,058,830 / 2,405,344 Shares) ............. $10.83
------
Net Asset Value - Delaware Tax-Free
USA Fund C Class
($1,851,216 / 170,875 Shares) ................ $10.83
------
---------------------------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
**Zero Coupon Bond - The interest rate shown is the effective yield as of
August 31, 2000. Principal amount to be refunded on July 1, 2002 is
approximately 20.62% of par.
+Inverse Floater represents a security that pays interest at a rate that
increases (decreases) with a decrease (increase) in a specific index.
Interest rate disclosed is in effect as of August 31, 2000.
Summary of Abbreviations:
AMBAC - Insured by AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
Asset Gty - Insured by the Asset Guaranty Insurance Company
FGIC - Insured by the Financial Guaranty Insurance Company
FHA/VA - Insured by the Federal Housing Authority/Veterans Administration
FSA - Insured by Financial Security Assurance
MBIA -Insured by the Municipal Bond Insurance Association
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ...................... $461,318,284
Accumulated net realized loss
on investments ............................... (30,556,009)
Net unrealized appreciation of investments ..... 18,283,698
------------
Total net assets ............................... $449,045,973
============
Net Asset Value and Offering Price per Share -
Delaware Tax-Free USA Fund
Net asset value A Class (A) .................... $10.83
Sales charge (3.75% of offering price or
3.88% of amount invested per share) (B) ...... 0.42
------
Offering price ................................. $11.25
======
---------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
15
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE INSURED FUND
==============================
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.13%
Convention Center/Stadium Revenue Bonds - 1.56%
Tampa, Florida Sports Authority Revenue
(Tampa Bay Arena Project) Sales Tax
5.75% 10/1/20 (MBIA) ......................... $1,000,000 $1,051,340
-----------
1,051,340
-----------
General Obligation Bonds - 8.13%
Jackson, Ohio Local School District (Stark &
Summit Counties) School Facilities
Construction & Improvement
5.625% 12/1/25 (FSA) ......................... 1,000,000 1,014,280
Melrose Park, Illinois Tax Increment Amount
Series B 6.00% 12/15/19 (FSA) ................ 1,250,000 1,304,425
Salem-Keizer, Oregon School District No. 24J
5.00% 6/1/16 ................................. 2,000,000 1,936,340
Vancouver, Washington Limited Tax
5.50% 12/1/25 (AMBAC) ........................ 1,250,000 1,231,438
-----------
5,486,483
-----------
Higher Education Revenue Bonds - 9.10%
District of Columbia - Revenue (Gonzaga
College High School)
5.375% 7/1/29 (FSA) .......................... 2,590,000 2,535,921
Maryland State Economic Development Corp.
(Collegiate Housing Foundation-Towson)
Series A 5.75% 6/1/29 ........................ 1,000,000 922,310
Massachusetts State Health & Education
Facilities Authority Revenue
(Boston College) Series J
6.625% 7/1/21 (FGIC) ......................... 80,000 82,455
Massachusetts State Industrial Finance
Agency Revenue Higher Education
(Clark University Project) 6.10% 7/1/16 ...... 1,250,000 1,302,675
Miami-Dade County, Florida Educational
Facilities Authority (University of Miami)
Series A 5.50% 4/1/19 (AMBAC) ................ 300,000 302,286
New York State Dormitory Authority Lease
Revenue Insured (State Judicial Institute
at Pace) 5.50% 7/1/20 (AMBAC) ................ 1,000,000 999,910
-----------
6,145,557
-----------
Housing Revenue Bonds - 11.56%
California Housing Finance Agency Revenue
Series B 6.85% 8/1/23 (MBIA) ................. 3,860,000 3,995,409
Illinois Development Finance Authority
Revenue Refunding Mortgage Federal
Housing Authority (Section 8) Series A
5.80% 7/1/28 (MBIA) .......................... 2,790,000 2,778,282
New Mexico Mortgage Finance Authority
(Single Family Mortgage Program) Series C
6.20% 7/1/26 (GNMA/FNMA) ..................... 1,000,000 1,028,400
-----------
7,802,091
-----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Industrial Development Revenue Bonds - 4.74%
Alexandria, Virginia Industrial
Development Authority Revenue
(Institute for Defense Analyses) Series A
5.90% 10/1/30 (AMBAC) ........................ $1,000,000 $ 1,032,220
Amherst, New York Industrial Agency Civic
Facilities Revenue (UBF Faculty Student
Housing) Series A
5.75% 8/1/30 (AMBAC) ......................... 1,050,000 1,068,050
Luzerne County, Pennsylvania Industrial
Development Authority (Pennsylvania Gas &
Water Co. Project)
7.00% 12/1/17 (AMBAC) (AMT) .................. 1,000,000 1,101,710
-----------
3,201,980
-----------
Lease/Certificates of Participation - 1.45%
Lakewood, Colorado Certificates of
Participation 5.375% 12/1/22 (AMBAC) ......... 1,000,000 981,470
-----------
981,470
-----------
Pollution Control Revenue Bonds - 17.40%
Maricopa County, Arizona Pollution
Control Corporation Pollution Control
Revenue Refunding (El Paso Electric)
Series A Mandatory Put 8/1/05
6.375% 8/1/15 ................................ 1,000,000 1,002,210
Mason County, West Virginia Pollution
Control Revenue (Appalachian Power Co.
Project) Series K
6.05% 12/1/24 (AMBAC) ........................ 3,000,000 3,128,970
Mississippi Business Finance Corporation
Pollution Control Revenue (System Energy
Resources Inc. Project) 5.875% 4/1/22 ........ 1,000,000 935,670
New York State Energy Research &
Development Authority Pollution Control
Revenue Refunding (Central Hudson Gas)
Series A 5.45% 8/1/27 (AMBAC) ................ 2,500,000 2,444,650
Salem County, New Jersey Pollution Control
Financing Authority Revenue Refunding
(Public Service Electric & Gas Co.) Series D
6.55% 10/1/29 (MBIA) ......................... 4,000,000 4,236,280
-----------
11,747,780
-----------
*Pre-Refunded Bonds - 17.63%
Massachusetts State Health & Education
Facilities Authority Revenue (Boston
College) Series J
6.625% 7/1/21-01 (FGIC) ...................... 1,420,000 1,474,556
Michigan State Hospital Finance Authority
Revenue Refunding (Genesys Health
Systems) Series A 7.50% 10/1/27-05 ........... 1,500,000 1,698,975
16
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free Insured Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
*Pre-Refunded Bonds (continued)
Regional Transportation Authority Illinois
Revenue Series D
6.75% 6/1/25-04 (FGIC) ....................... $ 7,970,000 $ 8,732,012
-----------
11,905,543
-----------
Sales Tax Revenue Bonds - 1.69%
Brevard County, Florida Constitutional Fuel Tax
Revenue 6.00% 8/1/14 (FSA) ................... 1,050,000 1,141,896
-----------
1,141,896
-----------
Transportation Revenue Bonds - 13.34%
Alliance Airport Authority Texas Special
Facilities Revenue (Federal Express Corp.
Project) 6.375% 4/1/21 (AMT) ................. 1,000,000 1,001,420
Atlanta, Georgia Airport Revenue Refunding-
General-Series A 5.50% 1/1/26 (FGIC) ......... 2,500,000 2,486,250
Dallas-Fort Worth, Texas International Airport
Facilities Improvement Corporation Revenue
Refunding (American Airlines) Series C
6.15% 5/1/29 (AMT) ........................... 1,200,000 1,213,704
Massachusetts Bay Transportation Authority
Revenue Assessment Series A
5.25% 7/1/30 ................................. 1,000,000 949,460
Massachusetts State Turnpike Authority
Metropolitan Highway Systems Revenue
Series A 5.00% 1/1/39 (AMBAC) ................ 3,750,000 3,358,575
-----------
9,009,409
-----------
Water & Sewer Revenue Bonds - 4.26%
Jefferson County, Alabama Sewer Revenue
Capital Improvement Warrants Series A
5.375% 2/1/36 (FGIC) ......................... 2,000,000 1,913,140
New York City Municipal Water Finance
Authority Water & Sewer Systems Revenue
Series A 5.375% 6/15/36 (FSA) ................ 1,000,000 966,760
-----------
2,879,900
-----------
Other Revenue Bonds - 7.27%
Austin, Texas Revenue Refunding-Subordinate
Lien 5.25% 5/15/20 (MBIA) .................... 5,000,000 4,909,350
-----------
4,909,350
-----------
Total Municipal Bonds
(cost $63,251,181) ........................... 66,262,799
-----------
Total Market Value of Securities - 98.13%
(cost $63,251,181) ........................... $66,262,799
Receivables and Other Assets
Net of Liabilities - 1.87% ................... 1,262,287
-----------
Net Assets Applicable to 6,496,600 Shares
Outstanding - 100.00% ........................ $67,525,086
===========
<PAGE>
--------------------------------------------------------------------------------
Net Asset Value - Delaware Tax-Free Insured Fund
A Class ($61,722,129 / 5,938,296 Shares) .................. $10.39
------
Net Asset Value - Delaware Tax-Free Insured Fund
B Class ($4,989,968 / 480,086 Shares) ..................... $10.39
------
Net Asset Value - Delaware Tax-Free Insured Fund
C Class ($812,989 / 78,218 Shares) ........................ $10.39
------
---------------------------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
Summary of Abbreviations:
AMBAC - Insured by AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ................................... $68,066,576
Accumulated net realized loss on investments ................ (3,553,108)
Net unrealized appreciation of investments .................. 3,011,618
-----------
Total net assets ............................................ $67,525,086
===========
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Insured Fund
Net asset value A Class (A) ................................. $10.39
Sales charge (3.75% of offering price or 3.85% of amount
invested per share) (B) ................................... 0.40
------
Offering price .............................................. $10.79
======
---------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
17
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE USA INTERMEDIATE FUND
=======================================
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 97.26%
Higher Education Bonds - 8.29%
California Educational Facilities Authority
Revenue (Pepperdine University)
5.75% 9/15/30 ................................ $1,000,000 $1,022,140
Forest Grove, Oregon (Pacific University)
Revenue Campus Improvement &
Refunding 6.30% 5/1/25 (Asset Gty) ........... 1,000,000 1,036,470
-----------
2,058,610
-----------
Highway Revenue Bonds - 15.60%
Arizona State Transportation Board Highway
Revenue 6.25% 7/1/16 ......................... 1,850,000 1,996,705
Dunes, Florida Community Development
District-Intracoastal Waterway Bridge
(ITT Industries Corporation)
5.50% 10/1/07 ................................ 825,000 841,022
Puerto Rico Commonwealth Highway &
Transportation Authority Revenue Series B
6.00% 7/1/26 ................................. 1,000,000 1,037,100
-----------
3,874,827
-----------
Housing Revenue Bonds - 10.71%
Maryland State Community Development
Administration Department of Housing &
Community Development (Single Family
Program) 6th Series 5.90% 4/1/01 ............. 1,000,000 1,008,690
Montgomery County, Pennsylvania
Redevelopment Authority Multi-Family
Housing Revenue (KBF Associates)
6.00% 7/1/04 ................................. 1,645,000 1,652,616
-----------
2,661,306
-----------
Industrial Development Revenue Bonds - 9.86%
New York City, New York Industrial
Development Agency Civic Facility Revenue
(YMCA Greater NY Project)
5.40% 8/1/04 ................................. 1,440,000 1,446,451
Toledo Lucas County, Ohio Port Authority
Development Revenue (Northwest Ohia
Bond Fund-Alex Products Inc.)
6.125% 11/15/09 (LOC Fifth Third Bank)
(AMT) ........................................ 1,000,000 1,001,630
-----------
2,448,081
-----------
Pollution Control Revenue Bonds - 9.08%
Maricopa County, Arizona Pollution Control
Corporation Pollution Control Revenue
Refunding (El Paso Electric Company)
Series A Remarketed 6.375% 8/1/15-05 ......... 1,250,000 1,252,763
Oregon State Solid Waste Disposal Facilities
Economic Development Revenue
(USG Corporation Project) Series 192
6.40% 12/1/29 (AMT) .......................... 1,000,000 1,003,050
-----------
2,255,813
-----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
*Pre-Refunded/Escrowed to Maturity Bonds - 7.00%
Easton, Pennsylvania Joint Sewer Authority
5.60% 4/1/03 (Asset Gty)
(Escrowed to Maturity) ....................... $ 200,000 $ 205,324
Metropolitan Pier & Exposition Authority
Illinois Hospitality Facilities (McCormick Place
Convention) 5.75% 7/1/06
(Escrowed to Maturity) ....................... 500,000 519,530
Philadelphia, Pennsylvania School District
Series A 6.25% 5/15/01 (AMBAC)
(Escrowed to Maturity) ....................... 1,000,000 1,013,280
-----------
1,738,134
-----------
State Agency Bonds - 2.03%
Indiana Bond Bank (State Revolving Fund
Program) Series A 6.00% 2/1/01 ............... 500,000 503,360
-----------
503,360
-----------
Transportation Revenue Bonds - 12.93%
Atlanta, Georgia Airport Revenue Refunding
Series A 5.50% 1/1/26 (FGIC) ................. 1,000,000 994,500
Harris County, Texas Industrial Development
Corporation Airport Facilities, Refunding
(Continental Airlines Project)
5.00% 7/1/07 (AMT) ........................... 1,165,000 1,131,506
Rhode Island Port Authority and Economic
Development Corporation Airport
Revenue Series A
5.80% 7/1/02 (FSA) (AMT) ..................... 565,000 578,249
5.90% 7/1/03 (FSA) (AMT) ..................... 490,000 507,150
-----------
3,211,405
-----------
Water & Sewer Revenue Bonds - 10.62%
Kansas State Development Finance Authority
Revenue Public Water Supply Revolving Loan
Series 2 5.50% 4/1/21 (AMBAC) ................ 1,375,000 1,371,576
Marysville, Washington Water & Sewer
Revenue 5.50% 12/1/02 (MBIA) ................. 200,000 205,094
Virginia State Resource Authority Clean Water
Revenue 6.00% 10/1/16 ........................ 1,000,000 1,061,250
-----------
2,637,920
-----------
Other Revenue Bonds - 11.14%
Hartford, Connecticut Parking System Revenue
Series A 6.50% 7/1/25 ........................ 750,000 758,588
Los Angeles, California Community Redevelopment
Agency Parking System Revenue
(Cinerama Dome Public Parking Project)
5.75% 7/1/26 (ACA) ........................... 1,000,000 987,980
West Virginia School Building Authority
Revenue Capital Improvement
5.625% 7/1/02 (MBIA) ......................... 1,000,000 1,022,180
-----------
2,768,748
-----------
Total Municipal Bonds
(cost $23,642,961) ........................... 24,158,204
-----------
18
<PAGE>
Statements of Net Assets (continued)
Delaware Tax-Free USA Intermediate Fund
--------------------------------------------------------------------------------
Total Market Value of Securities - 97.26%
(cost $23,642,961) .................................... $24,158,204
Receivables and Other Assets
Net of Liabilities - 2.74% ............................ 679,965
-----------
Net Assets Applicable to 2,396,983 Shares
Outstanding - 100.00% ................................. $24,838,169
===========
Net Asset Value - Delaware Tax-Free USA Intermediate
Fund A Class ($20,645,688 / 1,992,391 Shares) ......... $10.36
------
Net Asset Value - Delaware Tax-Free USA Intermediate
Fund B Class ($1,751,437 / 169,021 Shares) ............ $10.36
------
Net Asset Value - Delaware Tax-Free USA Intermediate
Fund C Class ($2,441,044 / 235,571 Shares) ............ $10.36
------
---------------------------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax Asset
Gty - Insured by the Asset Guaranty Insurance Company
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
FSA - Insured by Financial Security Assurance
MBIA - Insured by the Municipal Bond Insurance Association
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited authorization -
no par) ............................................... $25,534,550
Accumulated net realized loss on investments ............ (1,211,624)
Net unrealized appreciation of investments .............. 515,243
-----------
Total net assets ........................................ $24,838,169
===========
Net Asset Value and Offering Price per Share -
Delaware Tax-Free USA Intermediate Fund
Net asset value A Class (A) ............................. $10.36
Sales charge (2.75% of offering price or 2.80% of amount
invested per share) (B) ............................... 0.29
------
Offering price .......................................... $10.65
======
---------------------------------
(A) Net Asset value per share, as illustrated, is the estimated amount which
would be paid upon redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
19
<PAGE>
Statements of Net Assets (continued)
DELAWARE NATIONAL HIGH-YIELD MUNICIPAL BOND FUND
================================================
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 99.09%
Airport Revenue Bonds - 3.16%
Dallas-Fort Worth, Texas International Airport
Facility Improvement Corporation (American
Airlines) Series C 6.15% 5/1/29 (AMT) ........ $2,000,000 $2,022,840
Toledo Lucas County, Ohio Port Authority
Airport Revenue (Improvement Series 1)
5.50% 5/15/20 ................................ 1,500,000 1,309,005
----------
3,331,845
----------
Continuing Care/Retirement Revenue Bonds - 9.00%
Gainesville & Hall County, Georgia
Development Authority Revenue Senior
Living Facility (ACTS Retirement-Life
Communities Inc. - Lanier Village)
Series C 7.25% 11/15/29 ...................... 1,500,000 1,455,585
Indianapolis, Indiana Economic Development
Authority Revenue (National Benevolent
Association) 7.25% 10/1/10 ................... 700,000 727,335
Marion County, Missouri Nursing Home
District Revenue 7.00% 8/1/13 ................ 1,050,000 1,035,898
Philadelphia, Pennsylvania Hospitals &
Higher Education Facilities Authority
Revenue (The Philadelphia Protestant
Home Project) Series A 6.50% 7/1/27 .......... 1,100,000 951,016
Saint Tammany, Louisiana Public Trust
Financing Authority Revenue (Christwood
Project) 5.70% 11/15/28 ...................... 1,500,000 1,173,450
South Dakota Health & Education Facilities
Authority Revenue (Westhills Village
Retirement) 7.25% 9/1/13 ..................... 1,125,000 1,124,978
Vermont Education & Health Building
Financing Agency Revenue Health Care
Facility (Copley Manor PJ)
6.15% 4/1/19 ................................. 1,730,000 1,510,324
Virginia Beach, Virginia Development
Authority Residential Care Facilities
Mortgage Revenue (Westminster-
Canterbury) Series A 7.25% 11/1/32 ........... 1,500,000 1,502,070
----------
9,480,656
----------
General Obligation Bonds - 4.41%
Illinois State Development Finance Authority
East St. Louis Debt Restructure Revenue
7.375% 11/15/11 .............................. 1,100,000 1,194,974
Niles, Illinois Park District Unlimited
Tax Series A 6.65% 12/1/14 .................. 860,000 908,117
Orange Beach, Alabama Refunding & Capital
Improvement Warrants Unlimited Tax
6.25% 10/1/13 ................................ 1,500,000 1,549,275
Romeoville, Illinois Unlimited Tax Series A
7.80% 1/1/11 ................................. 945,000 996,455
----------
4,648,821
----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Higher Education Revenue Bonds - 18.63%
Jefferson County, Kentucky Student
Housing Industrial Building Revenue
(Collegiate Housing Foundation -
University of Louisville) Series A
7.00% 9/1/19 ................................. $2,500,000 $ 2,471,550
Maine Finance Authority Education Revenue
(Waynflete School) 6.40% 8/1/19 .............. 1,000,000 1,027,570
Maryland Economic Development Corporation
Student Housing Revenue (Collegiate
Housing Foundation - University Courtyard)
Series A 5.75% 6/1/24 ........................ 1,250,000 1,184,888
Maryland State Economic Development
Corporation Student Housing Revenue
(Collegiate Housing Foundation - Towson)
Series A 5.75% 6/1/29 ........................ 2,500,000 2,305,775
Massachusetts State Health & Education
Facilities Authority (Nichols College)
Series C
6.00% 10/1/17 ................................ 1,000,000 940,000
6.125% 10/1/29 ............................... 4,400,000 4,064,500
Minnesota State Higher Education Facilities
Authority (College of Art & Design)
Series 5-D 6.75% 5/1/26 ...................... 1,000,000 1,018,320
New Hampshire Higher Education & Health
Facilities Authority (Brewster Academy)
6.125% 3/1/19 ................................ 2,000,000 1,855,000
6.75% 6/1/25 ................................. 1,000,000 1,032,650
New Jersey State Educational Facilities
Authority Revenue (Bloomfield College)
Series A 6.85% 7/1/30 ........................ 1,320,000 1,385,749
Savannah, Georgia Economic Development
Authority Revenue (College of Art & Design)
6.50% 10/1/13 ................................ 1,000,000 1,013,750
Scranton-Lackawanna, Pennsylvania Health &
Welfare Authority First Mortgage Revenue
(Lackawanna Junior College)
5.75% 11/1/20 ................................ 1,510,000 1,320,827
----------
19,620,579
----------
Hospital Revenue Bonds - 12.01%
Allegheny County, Pennsylvania Hospital
Development Authority Revenue
(Allegheny Valley Hospital)
7.75% 8/1/20 ................................. 1,000,000 1,020,440
Allegheny County, Pennsylvania Hospital
Development Authority (West Penn
Allegheny Health System) Series B
8.45% 11/15/03 ............................... 1,000,000 1,001,720
8.55% 11/15/04 ............................... 650,000 651,443
Cuyahoga County, Ohio Health Care Facilities
Revenue (Benjamin Rose Institute Project)
5.50% 12/1/28 ................................ 1,250,000 953,487
20
<PAGE>
Statements of Net Assets (continued)
Delaware National Principal Market
High-Yield Municipal Bond Fund Amount Value
-----------------------------------------------------------------------------
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Grand Forks, North Dakota Health
Care System Revenue (Altru Health Systems
Obligated Group) 7.125% 8/15/24 .............. $1,750,000 $ 1,783,828
Illinois Health Facilities Authority Revenue
(Midwest Physician Group Limited)
5.50% 11/15/19 ............................... 1,685,000 1,309,296
Mississippi Development Bank Special
Obligation (Madison County Hospital)
6.40% 7/1/29 ................................. 1,585,000 1,609,536
Puerto Rico Industrial Tourist Educational
Medical & Environmental Control Facilities
(Mennonite General Hospital Project)
Series A 5.625% 7/1/27 ....................... 250,000 205,490
Richland County, Ohio Hospital Facilities
Revenue (Medcentral Health System)
Series B 6.375% 11/15/30 ..................... 1,500,000 1,488,885
South Dakota Health & Education Facilities
Authority Revenue (Huron Regional
Medical Center) 7.00% 4/1/10 ................. 1,000,000 1,019,250
Westmoreland County, Pennsylvania Industrial
Development Authority Hospital
Revenue (Citizens General Hospital)
5.25% 7/1/15 ................................. 2,000,000 1,613,560
----------
12,656,935
----------
Industrial Development Revenue Bonds - 6.22%
Alliance, Texas Special Facilities Revenue
Series 1996 (Federal Express Corp. Project)
6.375% 4/1/21 (AMT) .......................... 1,000,000 1,001,420
Moundville, Alabama Industrial Development
Board Revenue (Lawter International, Inc.)
Project Series LI 6.75% 12/1/11 .............. 1,500,000 1,566,705
New York City Industrial Development
Agency Revenue (Field Hotel
Association LP, JFK) 6.00% 11/1/28 ........... 1,500,000 1,314,780
Selma, Alabama Industrial Development
Board of Environmental Improvement
Revenue (International Paper Co. Project)
Series B 6.70% 3/1/24 (AMT) .................. 2,600,000 2,666,976
----------
6,549,881
----------
Lease/Certificates of Participation - 3.62%
Dauphin County, Pennsylvania General
Authority (Riverfront Office & Parking)
Series A 5.75% 1/1/10 ........................ 1,875,000 1,828,688
Midland County, Michigan Economic
Development Subordinate Limited Obligation
Series A 6.875% 7/23/09 (AMT) ................ 1,950,000 1,989,000
----------
3,817,688
----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Pollution Control Revenue Bonds - 8.34%
**California Pollution Control Financing
Authority Pollution Control Revenue
(Laidlaw Inc.) Series A
6.70% 7/1/07 (AMT) ........................... $1,000,000 $ 100,000
Lower Colorado River Authority Texas
Pollution Control Revenue (SamSung Austin
Semiconductor) 6.95% 4/1/30 (AMT) ............ 1,000,000 1,015,780
Maricopa County, Arizona Pollution Control
Revenue (El Paso Electric) Series A
6.375% 8/1/15 ................................ 1,750,000 1,753,867
Mississippi Business Finance Corporation
Pollution Control Revenue (Systems
Energy Resources) 5.875% 4/1/22 ............. 1,000,000 935,670
New Hampshire State Business Finance
Authority Pollution Control Revenue (Public
Service Company of New Hampshire)
Series D 6.00% 5/1/21 (AMT) .................. 2,630,000 2,472,884
Sabine River Authority Texas Pollution
Control Revenue (TXU Electric) Series A
6.45% 6/1/21 ................................. 2,500,000 2,513,150
----------
8,791,351
----------
*Pre-Refunded/Escrowed to Maturity Bonds - 13.50%
Alexandria, Minnesota Health Care Facilities
Revenue Board of Social Ministry
8.75% 8/1/21-01 .............................. 500,000 528,530
Bedford Park, Illinois Tax Increment Revenue
8.00% 12/1/10-04 ............................. 1,200,000 1,355,784
Chelsea, Oklahoma Gas Authority Revenue
Gas Systems 7.25% 7/1/13-04 .................. 600,000 666,486
7.30% 7/1/19-04 .............................. 700,000 778,785
Easton, Pennsylvania Area Joint Sewer
Authority 6.20% 4/1/09-03 .................... 1,000,000 1,041,020
Elizabeth Borough, Pennsylvania Municipal
Authority Guaranteed Sewer
7.15% 1/1/21-02 .............................. 500,000 526,440
Etowah County, Alabama Refunding Warrants
8.50% 11/1/10-00 ............................. 800,000 819,680
Illinois Health Facilities Authority Revenue
(Midwest Physician Group Project)
8.10% 11/15/14-04 ............................ 935,000 1,062,983
Illinois State Development Finance Authority
(Harrisburg Medical Center Project)
7.00% 3/1/06 (Escrowed to Maturity) .......... 400,000 438,100
7.20% 3/1/07-06 .............................. 400,000 440,652
7.20% 3/1/08-06 .............................. 400,000 440,652
New Kensington, Pennsylvania Municipal
Sanitation Authority Revenue
7.50% 10/1/11-01 ............................. 1,000,000 1,032,310
21
<PAGE>
Statements of Net Assets (continued)
Delaware National Principal Market
High-Yield Municipal Bond Fund Amount Value
-----------------------------------------------------------------------------
Municipal Bonds (continued)
*Pre-Refunded/Escrowed to Maturity Bonds (continued)
Oklahoma City, Oklahoma Public
Property Authority (City Golf System)
8.30% 10/1/16-01 ............................. $1,000,000 $ 1,059,130
Pennsylvania Higher Education Facilities
Authority (Drexel University)
6.75% 5/1/12-03 .............................. 1,300,000 1,397,409
Pocatello, Idaho Development Authority
Allocation Tax Increment Revenue
Series B 7.25% 12/1/08-00 .................... 235,000 236,469
Spring Park, Minnesota Twin Birch
Health Care Center (Presbyterian Homes
of Minnesota) 8.25% 8/1/11-01 ................ 500,000 526,345
Volusia County, Florida Industrial
Development Authority Mortgage Revenue
(Bishops Glen Project Retirement Health
Facilities) 7.50% 11/1/16-06 ................. 975,000 1,080,671
West Chicago, Illinois Tax Increment
7.375% 12/1/12-02 ............................ 720,000 783,698
----------
14,215,144
----------
Recreational Area Bonds - 0.85%
North Charleston, South Carolina Municipal
Golf Course Mortgage Revenue
5.50% 5/1/24 ................................. 1,000,000 899,250
----------
899,250
----------
Waste Disposal Revenue Bonds - 1.58%
Ashland, Kentucky Sewer & Solid Waste
Revenue (Ashland, Inc. Project)
7.125% 2/1/22 (AMT) .......................... 1,200,000 1,262,352
Ohio State Water Development Authority
Solid Waste Disposal (Bay Shore Power
Project) Series A
5.875% 9/1/20 (AMT) .......................... 500,000 401,250
----------
1,663,602
----------
Water & Sewer Revenue Bonds - 3.87%
Franklin County, Missouri Public Water
Supply District #3 (Waterworks & Sewer
System) Series B 7.375% 12/1/18 ............. 1,255,000 1,308,538
Upper Bear Creek, Alabama Water, Sewer,
& Fire Protection District Water Revenue
6.25% 8/1/15 ................................. 1,250,000 1,261,963
Vance, Alabama Governmental Utility
Services Corporation Sewer Services
Revenue 7.50% 10/1/18 ....................... 1,520,000 1,503,599
----------
4,074,100
----------
<PAGE>
Principal Market
Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Other Revenue Bonds - 13.90%
Anne Arundel County, Maryland Special
Obligation (Arundel Mills Project)
7.10% 7/1/29 ................................. $1,500,000 $ 1,505,625
Arbor Greene, Florida Community
Development District Special Assessment
Revenue 7.00% 5/1/03 ......................... 40,000 40,360
Colorado Postsecondary Education Facilities
Authority (Ocean Journey Project)
8.00% 12/1/06 ................................ 1,000,000 1,102,090
Lowry, Colorado Economic Redevelopment
Authority Revenue Series A
(Private Placement) 7.00% 12/1/10 ........... 1,000,000 1,075,930
Massachusetts State Development Finance
Agency Revenue (Boston Biomedical
Research) 5.75% 2/1/29 ...................... 1,000,000 890,410
Orlando, Florida Special Assessment
(Conroy Road Interchange) Series B
5.25% 5/1/05 ................................. 1,140,000 1,109,687
Prescott Valley, Arizona Improvement District
Special Assessment 7.90% 1/1/12 ............. 500,000 543,240
Sacramento, California City Financing
Authority Revenue (Convention Center Hotel)
Series A 6.25% 1/1/30 ....................... 3,000,000 2,932,680
Saint Joseph County, Indiana Industrial
Economic Development (Madison Center
Project) 5.50% 2/15/21 ....................... 1,150,000 989,471
Santa Fe, New Mexico Municipal Recreation
Complex Net Revenue
5.625% 12/1/23 ............................... 1,140,000 1,026,148
Schuylkill County, Pennsylvania Industrial
Development Authority Resource Recovery
(Schuylkill Energy Resource Inc.)
6.50% 1/1/10 (AMT) ........................... 1,315,000 1,319,524
Virginia Beach, Virginia Development Authority
Revenue Reference (Ramada on the Beach)
6.625% 12/1/09 ............................... 1,000,000 1,005,530
Washington State Housing Finance Commission
(State School Directors' Association)
(Private Placement)
8.25% 7/1/02 ................................. 75,000 76,898
8.25% 7/1/12 ................................. 625,000 673,950
Westminster, Colorado Shaw Heights Special
Improvement District Series A
7.50% 12/1/07 ................................ 350,000 351,487
-----------
14,643,030
-----------
Total Municipal Bonds
(cost $105,887,349) .......................... 104,392,882
-----------
22
<PAGE>
Statements of Net Assets (continued)
Delaware National Number of Market
High-Yield Municipal Bond Fund Shares Value
-----------------------------------------------------------------------------
Short-Term Investments - 0.82%
Wells Fargo National Tax-Free Money
Market Fund .................................... 862,459 $ 862,459
------------
Total Short-Term Investments
(cost $862,459) ................................ 862,459
------------
Total Market Value of Securities - 99.91%
(cost $106,749,808) ............................ $105,255,341
Receivables and Other Assets Net of
Liabilities - 0.09% ............................ 95,490
------------
Net Assets Applicable to 10,576,110 Shares
Outstanding - 100.00% .......................... $105,350,831
============
Net Asset Value - Delaware National High-Yield
Municipal Bond Fund A Class
($78,207,116 / 7,856,506 Shares) ............... $9.95
-----
Net Asset Value - Delaware National High-Yield
Municipal Bond Fund B Class
($18,374,176 / 1,841,361 Shares) ............... $9.98
-----
Net Asset Value - Delaware National High-Yield
Municipal Bond Fund C Class
($8,769,539 / 878,243 Shares) .................. $9.99
-----
---------------------------------
*For Pre-Refunded Bonds, the stated maturity is followed by the year in which
each bond is pre-refunded.
**Non-income producing security. Security is in default as of 8/31/00.
Summary of Abbreviations:
AMT - Subject to Alternative Minimum Tax
-----------------------------------------------------------------------------
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization-no par) .......................... $110,525,791
Undistributed net investment income .............. 31,407
Accumulated net realized loss on
investments .................................... (3,711,900)
Net unrealized depreciation
of investments ................................. (1,494,467)
------------
Total net assets ................................. $105,350,831
============
Net Asset Value and Offering Price per Share -
Delaware National High-Yield Municipal Bond Fund
Net asset value A Class (A) ...................... $9.95
Sales charge (3.75% of offering price or 3.92%
of amount invested per share) (B) .............. 0.39
------
Offering price ................................... $10.34
======
---------------------------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
23
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free USA National High-Yield
Year Ended August 31, 2000 USA Fund Insured Fund Intermediate Fund Municipal Bond Fund
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income:
Interest .......................................... $30,961,291 $4,187,366 $1,503,246 $7,359,478
-------------------------------------------------------------
Expenses:
Management fees ................................... 2,613,178 347,340 137,907 603,325
Distribution expense .............................. 1,208,701 186,601 82,901 496,089
Dividend disbursing and transfer agent fees and
expenses ........................................ 415,000 52,025 30,180 122,310
Accounting and administration ..................... 197,682 28,193 11,163 59,431
Reports and statements to shareholders ............ 142,500 15,000 4,633 73,200
Registration fees ................................. 66,500 31,200 25,700 119,235
Professional fees ................................. 62,000 3,850 2,800 40,439
Taxes (other than taxes on income) ................ 40,665 3,421 435 13,743
Custodian fees .................................... 34,112 29,896 982 16,380
Trustees' fees .................................... 16,568 3,196 1,960 4,050
Other ............................................. 79,428 9,326 6,682 2,760
-------------------------------------------------------------
4,876,334 710,048 305,343 1,550,962
Less expenses absorbed or waived .................. -- -- (41,472) (228,894)
Less expenses paid indirectly ..................... (23,256) (3,495) (1,466) (2,522)
-------------------------------------------------------------
Total operating expenses (before interest expense) 4,853,078 706,553 262,405 1,319,546
Interest expense .................................. -- -- -- 640
-------------------------------------------------------------
Total expenses .................................... 4,853,078 706,553 262,405 1,320,186
-------------------------------------------------------------
Net Investment Income ............................. 26,108,213 3,480,813 1,240,841 6,039,292
-------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investments .................. (4,055,178) (824,214) (586,295) (3,598,733)
Net change in unrealized appreciation/depreciation
of investments .................................. 407,956 826,088 708,648 (1,048,109)
-------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on
Investments ..................................... (3,647,222) 1,874 122,353 (4,646,842)
-------------------------------------------------------------
Net Increase in Net Assets Resulting from
Operations ...................................... $22,460,991 $3,482,687 $1,363,194 $1,392,450
=============================================================
</TABLE>
See accompanying notes
24
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free
USA Fund Insured Fund
-----------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
8/31/00 8/31/99 8/31/00 8/31/99
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................. $ 26,108,213 $ 29,868,197 $ 3,480,813 $ 3,682,046
Net realized loss on investments .................. (4,055,178) (24,575,865) (824,214) (2,602,291)
Net change in unrealized appreciation/depreciation
of investments .................................. 407,956 (21,125,314) 826,088 (2,249,127)
------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations ................................. 22,460,991 (15,832,982) 3,482,687 (1,169,372)
------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income:
A Class ......................................... (24,596,193) (28,129,928) (3,231,870) (3,443,584)
B Class ......................................... (1,392,008) (1,601,887) (200,728) (189,965)
C Class ......................................... (120,012) (136,382) (48,215) (48,497)
Net realized gain on investments:
A Class ......................................... -- (1,166,868) -- (816,386)
B Class ......................................... -- (77,263) -- (50,900)
C Class ......................................... -- (5,129) -- (7,792)
------------------------------------------------------------------------
(26,108,213) (31,117,457) (3,480,813) (4,557,124)
------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ......................................... 85,044,977 220,161,358 5,158,146 5,625,443
B Class ......................................... 3,695,183 8,302,891 1,248,758 1,616,545
C Class ......................................... 561,753 1,827,537 322,101 1,494,459
Net asset value of shares issued upon reinvestment
of distributions from net investment income and
net realized gain on investments:
A Class ......................................... 12,975,219 15,818,679 1,689,638 2,385,022
B Class ......................................... 746,888 950,535 119,807 142,623
C Class ......................................... 80,576 96,912 42,325 51,066
------------------------------------------------------------------------
103,104,596 247,157,912 8,580,775 11,315,158
------------------------------------------------------------------------
Cost of shares repurchased:
A Class ......................................... (158,872,737) (293,951,791) (13,565,952) (8,586,906)
B Class ......................................... (12,301,063) (8,893,214) (1,403,868) (643,535)
C Class ......................................... (2,140,462) (569,079) (1,033,611) (247,116)
------------------------------------------------------------------------
(173,314,262) (303,414,084) (16,003,431) (9,477,557)
------------------------------------------------------------------------
Increase (decrease) in net assets derived from
capital share transactions ...................... (70,209,666) (56,256,172) (7,422,656) 1,837,601
------------------------------------------------------------------------
Net Decrease in Net Assets ........................ (73,856,888) (103,206,611) (7,420,782) (3,888,895)
Net Assets:
Beginning of period ............................... 522,902,861 626,109,472 74,945,868 78,834,763
------------------------------------------------------------------------
End of period ..................................... $449,045,973 $522,902,861 $67,525,086 $74,945,868
========================================================================
</TABLE>
See accompanying notes
25
<PAGE>
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware National
USA Intermediate High-Yield Municipal
Fund Bond Fund
-----------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
8/31/00 8/31/99 8/31/00 8/31/99
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................. $ 1,240,841 $ 1,242,387 $ 6,039,292 $ 5,160,118
Net realized gain (loss) on investments ........... (586,295) 95,919 (3,598,733) (17,370)
Net change in unrealized appreciation/depreciation
of investments .................................. 708,648 (1,314,384) (1,048,109) (4,678,686)
------------------------------------------------------------------------
Net increase in net assets resulting
from operations ................................. 1,363,194 23,922 1,392,450 464,062
------------------------------------------------------------------------
Distributions to Shareholders From:
Net investment income:
A Class ......................................... (1,055,335) (1,062,227) (4,552,375) (4,111,560)
B Class ......................................... (79,632) (77,729) (976,897) (694,101)
C Class ......................................... (105,874) (102,431) (473,809) (353,757)
Net realized gain on investments:
A Class ......................................... -- -- -- (172,510)
B Class ......................................... -- -- -- (28,565)
C Class ......................................... -- -- -- (16,175)
------------------------------------------------------------------------
(1,240,841) (1,242,387) (6,003,081) (5,376,668)
------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ......................................... 6,584,664 8,813,200 13,309,389 27,884,866
B Class ......................................... 1,247,962 885,556 6,210,818 12,690,424
C Class ......................................... 315,788 2,099,945 4,417,736 7,358,160
Net asset value of shares issued upon reinvestment
of distributions from net investment income and
net realized gain on investments:
A Class ......................................... 657,833 679,292 2,624,017 2,406,407
B Class ......................................... 50,702 55,947 540,053 429,601
C Class ......................................... 73,335 72,684 306,694 255,629
------------------------------------------------------------------------
8,930,284 12,606,624 27,408,707 51,025,087
------------------------------------------------------------------------
Cost of shares repurchased:
A Class ......................................... (11,882,899) (5,872,741) (20,382,609) (10,228,202)
B Class ......................................... (1,754,606) (586,492) (8,954,377) (1,470,819)
C Class ......................................... (1,267,905) (729,497) (5,813,679) (1,625,869)
------------------------------------------------------------------------
(14,905,410) (7,188,730) (35,150,665) (13,324,890)
------------------------------------------------------------------------
Increase (decrease) in net assets derived from
capital share transactions ...................... (5,975,126) 5,417,894 (7,741,958) 37,700,197
------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets ............. (5,852,773) 4,199,429 (12,352,589) 32,787,591
Net Assets:
Beginning of period ............................... 30,690,942 26,491,513 117,703,420 84,915,829
------------------------------------------------------------------------
End of period ..................................... $24,838,169 $30,690,942 $105,350,831 $117,703,420
========================================================================
</TABLE>
See accompanying notes
26
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free USA Fund A Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.890 $11.830 $11.710 $11.550 $12.070
Income (loss) from investment operations:
Net investment income ................................... 0.587 0.593 0.597 0.666 0.696
Net realized and unrealized gain (loss) on investments .. (0.060) (0.916) 0.310 0.210 (0.460)
---------------------------------------------------------
Total from investment operations ........................ 0.527 (0.323) 0.907 0.876 0.236
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.587) (0.593) (0.597) (0.666) (0.696)
Distributions from net realized gain on investments ..... -- (0.024) (0.190) (0.050) (0.060)
---------------------------------------------------------
Total dividends and distributions ....................... (0.587) (0.617) (0.787) (0.716) (0.756)
---------------------------------------------------------
Net asset value, end of period ............................ $10.830 $10.890 $11.830 $11.710 $11.550
=========================================================
Total return(1) ........................................... 5.11% (2.90%) 8.00% 7.79% 1.91%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $421,136 $485,240 $586,848 $615,852 $700,853
Ratio of expenses to average net assets ................. 0.97% 1.00% 0.97% 0.94% 0.94%
Ratio of net investment income to average net assets .... 5.54% 5.13% 5.08% 5.73% 5.82%
Portfolio turnover ...................................... 76% 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.
See accompanying notes
27
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free USA Fund B Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.890 $11.830 $11.710 $11.550 $12.070
Income (loss) from investment operations:
Net investment income ................................... 0.502 0.500 0.503 0.573 0.600
Net realized and unrealized gain (loss) on investments .. (0.060) (0.916) 0.310 0.210 (0.460)
---------------------------------------------------------
Total from investment operations ........................ 0.442 (0.416) 0.813 0.783 0.140
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.502) (0.500) (0.503) (0.573) (0.600)
Distributions from net realized gain on investments ..... -- (0.024) (0.190) (0.050) (0.060)
---------------------------------------------------------
Total dividends and distributions ....................... (0.502) (0.524) (0.693) (0.623) (0.660)
---------------------------------------------------------
Net asset value, end of period ............................ $10.830 $10.890 $11.830 $11.710 $11.550
=========================================================
Total return(1) ........................................... 4.27% (3.67%) 7.15% 6.94% 1.11%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $26,059 $34,249 $36,919 $35,055 $29,773
Ratio of expenses to average net assets ................. 1.77% 1.80% 1.77% 1.74% 1.74%
Ratio of net investment income to average net assets .... 4.74% 4.33% 4.28% 4.93% 5.03%
Portfolio turnover ...................................... 76% 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.
See accompanying notes
28
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free USA Fund C Class
-------------------------------------------------------------------------------------------------------------------------
Period From
Year Ended 11/29/95(2)
8/31/00 8/31/99 8/31/98 8/31/97 to 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.890 $11.830 $11.710 $11.550 $12.230
Income (loss) from investment operations:
Net investment income ................................... 0.502 0.500 0.504 0.573 0.450
Net realized and unrealized gain (loss) on investments .. (0.060) (0.916) 0.310 0.210 (0.620)
---------------------------------------------------------
Total from investment operations ........................ 0.442 (0.416) 0.814 0.783 (0.170)
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.502) (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 ....................... (0.502) (0.524) (0.694) (0.623) (0.510)
---------------------------------------------------------
Net asset value, end of period ............................ $10.830 $10.890 $11.830 $11.710 $11.550
=========================================================
Total return(1) ........................................... 4.27% (3.67%) 7.15% 6.94% (1.44%)
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $1,851 $3,415 $2,343 $1,505 $805
Ratio of expenses to average net assets ................. 1.77% 1.80% 1.77% 1.74% 1.74%
Ratio of net investment income to average net assets .... 4.74% 4.33% 4.28% 4.93% 5.03%
Portfolio turnover ...................................... 76% 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
29
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Insured Fund A Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.360 $11.150 $11.050 $10.860 $11.050
Income (loss) from investment operations:
Net investment income ................................... 0.513 0.510 0.517 0.573 0.588
Net realized and unrealized gain (loss) on investments .. 0.030 (0.667) 0.295 0.281 (0.160)
---------------------------------------------------------
Total from investment operations ........................ 0.543 (0.157) 0.812 0.854 0.428
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.513) (0.510) (0.517) (0.573) (0.588)
Distributions from net realized gain on investments ..... -- (0.123) (0.195) (0.091) (0.030)
---------------------------------------------------------
Total dividends and distributions ....................... (0.513) (0.633) (0.712) (0.664) (0.618)
---------------------------------------------------------
Net asset value, end of period ............................ $10.390 $10.360 $11.150 $11.050 $10.860
=========================================================
Total return(1) ........................................... 5.50% (1.48%) 7.57% 8.07% 3.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $61,722 $68,422 $74,246 $78,377 $81,149
Ratio of expenses to average net assets ................. 0.95% 0.97% 1.10% 1.05% 0.98%
Ratio of net investment income to average net assets .... 5.07% 4.74% 4.65% 5.23% 5.29%
Portfolio turnover ...................................... 117% 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.
See accompanying notes
30
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Insured Fund B Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $10.360 $11.150 $11.050 $10.860 $11.050
Income (loss) from investment operations:
Net investment income .................................... 0.432 0.430 0.427 0.485 0.499
Net realized and unrealized gain (loss) on investments ... 0.030 (0.667) 0.295 0.281 (0.160)
---------------------------------------------------------
Total from investment operations ......................... 0.462 (0.237) 0.722 0.766 0.339
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.432) (0.430) (0.427) (0.485) (0.499)
Distributions from net realized gain on investments ...... -- (0.123) (0.195) (0.091) (0.030)
---------------------------------------------------------
Total dividends and distributions ........................ (0.432) (0.553) (0.622) (0.576) (0.529)
---------------------------------------------------------
Net asset value, end of period ............................. $10.390 $10.360 $11.150 $11.050 $10.860
=========================================================
Total return(1) ............................................ 4.66% (2.27%) 6.72% 7.21% 3.05%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $ 4,990 $ 5,022 $ 4,268 $ 3,619 $ 3,375
Ratio of expenses to average net assets .................. 1.75% 1.77% 1.90% 1.85% 1.78%
Ratio of net investment income to average net assets ..... 4.27% 3.94% 3.85% 4.43% 4.48%
Portfolio turnover ....................................... 117% 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.
See accompanying notes
31
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Insured Fund C Class
---------------------------------------------------------------------------------------------------------------------------
Period From
Year Ended 11/29/95(2) to
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $10.360 $11.150 $11.050 $10.860 $11.260
Income (loss) from investment operations:
Net investment income .................................... 0.432 0.430 0.425 0.485 0.375
Net realized and unrealized gain (loss) on investments ... 0.030 (0.667) 0.295 0.281 (0.370)
---------------------------------------------------------
Total from investment operations ......................... 0.462 (0.237) 0.720 0.766 0.005
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.432) (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 ........................ (0.432) (0.553) (0.620) (0.576) (0.405)
---------------------------------------------------------
Net asset value, end of period ............................. $10.390 $10.360 $11.150 $11.050 $10.860
=========================================================
Total return(1) ............................................ 4.66% (2.27%) 6.72% 7.21% 0.01%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $ 813 $ 1,502 $ 321 $ 89 $ 120
Ratio of expenses to average net assets .................. 1.75% 1.77% 1.90% 1.85% 1.78%
Ratio of net investment income to average net assets ..... 4.27% 3.94% 3.85% 4.43% 4.48%
Portfolio turnover ....................................... 117% 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
32
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free USA Intermediate Fund A Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $10.270 $10.710 $10.460 $10.320 $10.410
Income (loss) from investment operations:
Net investment income .................................... 0.474 0.478 0.501 0.524 0.550
Net realized and unrealized gain (loss) on investments ... 0.090 (0.440) 0.250 0.140 (0.090)
---------------------------------------------------------
Total from investment operations ......................... 0.564 0.038 0.751 0.664 0.460
---------------------------------------------------------
Less dividends:
Dividends from net investment income ..................... (0.474) (0.478) (0.501) (0.524) (0.550)
---------------------------------------------------------
Total dividends .......................................... (0.474) (0.478) (0.501) (0.524) (0.550)
---------------------------------------------------------
Net asset value, end of period ............................. $10.360 $10.270 $10.710 $10.460 $10.320
=========================================================
Total return(1) ............................................ 5.69% 0.29% 7.34% 6.57% 4.52%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $20,646 $25,186 $22,562 $21,635 $22,617
Ratio of expenses to average net assets .................. 0.80% 0.79% 0.67% 0.43% 0.25%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 0.95% 0.96% 1.33% 1.02% 0.95%
Ratio of net investment income to average net assets ..... 4.65% 4.47% 4.73% 5.03% 5.29%
Ratio of net investment income to average net assets
prior to expense limitation and expenses
paid indirectly ........................................ 4.50% 4.25% 4.07% 4.44% 4.59%
Portfolio turnover ....................................... 199% 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.
See accompanying notes
33
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free USA Intermediate Fund B Class
-----------------------------------------------------------------------------------------------------------------------
Year Ended
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $10.270 $10.710 $10.460 $10.320 $10.410
Income (loss) from investment operations:
Net investment income .................................... 0.388 0.387 0.411 0.436 0.460
Net realized and unrealized gain (loss) on investments ... 0.090 (0.440) 0.250 0.140 (0.090)
---------------------------------------------------------
Total from investment operations ......................... 0.478 (0.053) 0.661 0.576 0.370
---------------------------------------------------------
Less dividends:
Dividends from net investment income ..................... (0.388) (0.387) (0.411) (0.436) (0.460)
---------------------------------------------------------
Total dividends .......................................... (0.388) (0.387) (0.411) (0.436) (0.460)
---------------------------------------------------------
Net asset value, end of period ............................. $10.360 $10.270 $10.710 $10.460 $10.320
=========================================================
Total return(1) ............................................ 4.80% (0.56%) 6.43% 5.67% 3.63%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $ 1,751 $ 2,195 $ 1,933 $ 1,832 $ 1,490
Ratio of expenses to average net assets .................. 1.65% 1.64% 1.52% 1.28% 1.10%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.80% 1.81% 2.18% 1.87% 1.80%
Ratio of net investment income to average net assets ..... 3.80% 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 ........................................ 3.65% 3.40% 3.22% 3.59% 3.74%
Portfolio turnover ....................................... 199% 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.
See accompanying notes
34
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free USA Intermediate Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Period From
Year Ended 11/29/95(2) to
8/31/00 8/31/99 8/31/98 8/31/97 8/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............................... $10.270 $10.710 $10.460 $10.320 $10.480
Income (loss) from investment operations:
Net investment income ............................................ 0.388 0.387 0.411 0.436 0.350
Net realized and unrealized gain (loss) on investments ........... 0.090 (0.440) 0.250 0.140 (0.160)
---------------------------------------------------------
Total from investment operations ................................... 0.478 (0.053) 0.661 0.576 0.190
---------------------------------------------------------
Less dividends:
Dividends from net investment income ............................. (0.388) (0.387) (0.411) (0.436) (0.350)
---------------------------------------------------------
Total dividends .................................................. (0.388) (0.387) (0.411) (0.436) (0.350)
---------------------------------------------------------
Net asset value, end of period ..................................... $10.360 $10.270 $10.710 $10.460 $10.320
=========================================================
Total return(1) .................................................. 4.80% (0.56%) 6.43% 5.67% 1.84%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .......................... $2,441 $3,310 $1,996 $1,426 $193
Ratio of expenses to average net assets .......................... 1.65% 1.64% 1.52% 1.28% 1.10%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ................ 1.80% 1.81% 2.18% 1.87% 1.80%
Ratio of net investment income to average net assets ............. 3.80% 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 ....... 3.65% 3.40% 3.22% 3.59% 3.74%
Portfolio turnover ............................................... 199% 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
35
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware National High-Yield Municipal Bond Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Eight
Months Year Period From Year
Year Ended Ended Ended 8/1/96 to Ended
8/31/00 8/31/99 8/31/98 12/31/97(3) 12/31/96(4) 7/31/96
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $10.340 $10.800 $10.720 $10.400 $10.190 $10.170
Income (loss) from investment operations:
Net investment income .................................... 0.564 0.557 0.398 0.648 0.260 0.630
Net realized and unrealized gain (loss) on investments ... (0.393) (0.435) 0.115 0.390 0.210 0.140
---------------------------------------------------------------------
Total from investment operations ........................... 0.171 0.122 0.513 1.038 0.470 0.770
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.561) (0.557) (0.398) (0.647) (0.260) (0.630)
Distributions from net realized gain on investments ...... -- (0.025) (0.035) (0.071) -- (0.120)
---------------------------------------------------------------------
Total dividends and distributions ........................ (0.561) (0.582) (0.433) (0.718) (0.260) (0.750)
---------------------------------------------------------------------
Net asset value, end of period ............................. $ 9.950 $10.340 $10.800 $10.720 $10.400 $10.190
=====================================================================
Total return(1) ............................................ 1.85% 1.08% 4.87% 10.32% 4.52% 7.78%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $78,207 $86,013 $69,606 $55,458 $59,105 $63,460
Ratio of expenses to average net assets .................. 1.00% 1.00% 0.92%(2) 0.84% 0.87%(2) 0.85%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.21% 1.22% 1.12%(2) 1.12% 1.07%(2) 0.96%
Ratio of net investment income to average net assets ..... 5.71% 5.18% 5.52%(2) 6.15% 6.06%(2) 6.10%
Ratio of net investment income to average net assets
prior to expense limitation and expenses paid
indirectly ............................................. 5.50% 4.96% 5.32%(2) 5.87% 5.86%(2) 5.99%
Portfolio turnover ....................................... 61% 33% 43%(2) 45% 7% 0%
</TABLE>
----------------------
(1) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(2) 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
36
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding Delaware National High-Yield
throughout each period were as follows: Municipal Bond Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Eight
Months Year Period From
Year Ended Ended Ended 12/18/96(4) to
8/31/00 8/31/99 8/31/98 12/31/97(3) 12/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................... $10.360 $10.820 $10.730 $10.400 $10.370
Income (loss) from investment operations:
Net investment income ........................................ 0.491 0.476 0.348 0.534 0.010
Net realized and unrealized gain (loss) on investments ....... (0.384) (0.435) 0.122 0.433 0.030
------------------------------------------------------------
Total from investment operations ............................. 0.107 0.041 0.470 0.967 0.040
------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ......................... (0.487) (0.476) (0.345) (0.566) (0.010)
Distributions from net realized gain on investments .......... -- (0.025) (0.035) (0.071) --
------------------------------------------------------------
Total dividends and distributions ............................ (0.487) (0.501) (0.380) (0.637) (0.010)
------------------------------------------------------------
Net asset value, end of period ................................. $ 9.980 $10.360 $10.820 $10.730 $10.400
============================================================
Total return(1) ................................................ 1.10% 0.42% 4.44% 9.57% 0.43%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...................... $18,374 $21,423 $10,620 $3,573 $88
Ratio of expenses to average net assets ...................... 1.75% 1.75% 1.67%(2) 1.56% 1.45%(2)
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly .................... 1.96% 1.97% 1.87%(2) 1.84% 1.66%(2)
Ratio of net investment income to average net assets ......... 4.96% 4.43% 4.77%(2) 5.43% 4.65%(2)
Ratio of net investment income to average net assets prior
to expense limitation and expenses paid indirectly ......... 4.75% 4.21% 4.57%(2) 5.15% 4.44%(2)
Portfolio turnover ........................................... 61% 33% 43%(2) 45% 7%
</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
37
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding Delaware National High-Yield
throughout each period were as follows: Municipal Bond Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Eight
Months Period From
Year Ended Ended 5/26/97(3) to
8/31/00 8/31/99 8/31/98 12/31/97
<S> <C> <C> <C> <C>
Net asset value, beginning of period ........................................... $10.370 $10.830 $10.740 $10.440
Income (loss) from investment operations:
Net investment income ........................................................ 0.492 0.476 0.348 0.315
Net realized and unrealized gain (loss) on investments ....................... (0.386) (0.435) 0.122 0.391
--------------------------------------------
Total from investment operations ............................................. 0.106 0.041 0.470 0.706
--------------------------------------------
Less dividends and distributions:
Dividends from net investment income ......................................... (0.486) (0.476) (0.345) (0.335)
Distributions from net realized gain on investments .......................... -- (0.025) (0.035) (0.071)
--------------------------------------------
Total dividends and distributions ............................................ (0.486) (0.501) (0.380) (0.406)
--------------------------------------------
Net asset value, end of period ................................................. $ 9.990 $10.370 $10.830 $10.740
============================================
Total return(1) ................................................................ 1.08% 0.32% 4.44% 6.88%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ...................................... $8,770 $10,267 $4,690 $1,220
Ratio of expenses to average net assets ...................................... 1.75% 1.75% 1.67%(2) 1.62%(2)
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly .................................... 1.96% 1.97% 1.87%(2) 1.90%(2)
Ratio of net investment income to average net assets ......................... 4.96% 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 ......................... 4.75% 4.21% 4.57%(2) 5.09%(2)
Portfolio turnover ........................................................... 61% 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) Commencement of operations.
See accompanying notes
38
<PAGE>
Notes to Financial Statements
August 31, 2000
--------------------------------------------------------------------------------
Delaware Group Tax-Free Fund (the "Company") is organized as a Delaware business
trust and offers three series, the Delaware Tax-Free USA Fund, the Delaware
Tax-Free Insured Fund, and the Delaware Tax-Free USA Intermediate Fund. Each
series is registered as a non-diversified open-end investment company under the
Investment Company Act of 1940, as amended. Delaware National High-Yield
Municipal Bond Fund, is a series of Voyageur Mutual Funds, which is organized as
a Delaware business trust. Delaware National High-Yield Municipal Bond Fund is
registered as a non-diversified open-end investment company under the Investment
Company Act of 1940, as amended. These financial statements and related notes
pertain to the Delaware Tax-Free USA Fund, Delaware Tax-Free Insured Fund,
Delaware Tax-Free USA Intermediate Fund and Delaware 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 Delaware Tax-Free USA Fund, Delaware
Tax-Free Insured Fund and Delaware National High-Yield Municipal Bond Fund, and
2.75% for the Delaware 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 Delaware Tax-Free USA Fund, the Delaware
Tax-Free Insured Fund and the Delaware 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 obligations as consistent with prudent investment
management and preservation of capital.
The investment objective of the Delaware National High-Yield Municipal Bond Fund
is to seek a high level of current income exempt from federal income tax
primarily through investing in a portfolio of medium and lower grade municipal
obligations.
1. Significant Accounting Policies
The following accounting policies are in accordance with accounting principles
generally accepted in the United States and are consistently followed by the
Funds.
Security Valuation - Long-term debt securities are valued by an independent
pricing service and such prices are believed to reflect the fair value of such
securities. Money market instruments having less than 60 days to maturity are
valued at amortized cost, which approximates market value. Other securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Funds' Board
of Trustees.
Federal Income Taxes - Each Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations, which may differ from accounting
principles generally accepted in the United States.
<PAGE>
Notes to Financial Statements (continued)
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
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Other - Expenses common to all funds within the Delaware Investments Family of
Funds are allocated amongst the funds on the basis of average net assets.
Security transactions are recorded on the date the securities are purchased or
sold (trade date). Costs used in calculating realized gains and losses on the
sale of investment securities are those of the specific securities sold.
Interest income is recorded on the accrual basis. Original issue discounts and
market premiums are amortized to interest income over the lives of the
respective securities. 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 commission arrangements with
brokers. These transactions are done subject to best 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 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, 2000 were as follows:
Commission Earnings
Reimbursements Credits
-------------- --------
Delaware Tax-Free USA Fund ........................ $10,944 $12,312
Delaware Tax-Free Insured Fund .................... 1,599 1,896
Delaware Tax-Free USA
Intermediate Fund ............................... 634 832
Delaware National High-Yield
Municipal Bond Fund ............................. 2,522 --
39
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, the Funds
pay Delaware Management Company ("DMC") the investment manager of the Funds, 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 $1.5 billion and 0.425% on the average daily net assets in
excess of $2.5 billion for the Delaware Tax-Free USA Fund and Delaware National
High-Yield Municipal Bond Fund, and 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
$1.5 billion and 0.425% on the average daily net assets in excess of $2.5
billion for the Delaware Tax-Free Insured Fund and Delaware Tax-Free USA
Intermediate Fund.
DMC has elected voluntarily to waive its fee and reimburse the Delaware Tax-Free
USA Intermediate Fund to the extent that the annual operating expenses,
exclusive of 12b-1 plan expenses, taxes, brokerage commissions and extraordinary
expenses, exceed 0.65% of average daily net assets through October 31, 2001. DMC
has elected to voluntarily waive its fee and reimburse the Delaware National
High-Yield Municipal Bond Fund to the extent that annual operating expenses
exclusive of 12b-1 plan expenses, taxes, brokerage commissions and extraordinary
expenses, exceed 0.75% of average daily net assets through October 31, 2001.
The Funds have engaged Delaware Service Company, Inc. ("DSC") an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administration 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.
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 Delaware
Tax-Free USA Fund and the Delaware Tax-Free Insured Fund, 0.15% of the average
daily net assets of the A Class for the Delaware Tax-Free USA Intermediate Fund,
0.25% of the average daily net assets of the A Class for the Delaware National
High-Yield Municipal Bond Fund and 1.00% of the average daily net assets of the
B and C Classes for all Funds.
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
At August 31, 2000, the Funds had payables to affiliates as follows:
Delaware Delaware
Tax-Free Tax-Free
USA Fund Insured Fund
-------- ------------
Investment management fees
payable to DMC .................................. $30,198 $17, 514
Dividend disbursing, transfer
agent fees, accounting
fee and other expenses
payable to DSC .................................. 20,953 4,592
Other expenses payable
to DDLP and affiliates .......................... 58,717 14,000
Delaware
Delaware National
Tax-Free USA High-Yield
Intermediate Municipal
Fund Bond Fund
------------ ----------
Investment management fee
payable to DMC .................................. $10,583 $33,719
Dividend disbursing, transfer
agent fees, accounting
fee and other expenses
payable to DSC .................................. 5,149 12,591
Other expenses payable
to DDLP and affiliates .......................... 14,585 22,408
For the year ended August 31, 2000, DDLP commissions earned on sales of the A
Class shares for each Fund were as follows:
Delaware
Delaware Delaware Delaware National
Tax-Free Tax-Free Tax-Free USA High-Yield
USA Insured Intermediate Municipal
Fund Fund Fund Bond Fund
-------- --------- ------------ ----------
$19,463 $4,612 $3,152 $12,386
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Funds. These officers, trustees and employees are paid no compensation by
the Funds.
40
<PAGE>
--------------------------------------------------------------------------------
3. Investments
During the year ended August 31, 2000, the Funds had purchases and sales of
investment securities other than U.S. government securities and temporary cash
investments as follows:
Delaware Delaware
Tax-Free Tax-Free
USA Fund Insured Fund
-------- ------------
Purchases ..................... $357,739,704 $81,721,926
Sales ......................... 430,908,749 90,435,282
Delaware
Delaware National
Tax-Free USA High-Yield
Intermediate Municipal
Fund Bond Fund
------------ ----------
Purchases ..................... $54,392,347 $66,663,500
Sales ......................... 61,428,959 76,774,286
At August 31, 2000, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
Delaware Delaware
Tax-Free Tax-Free
USA Fund Insured Fund
-------- ------------
Cost of investments ........... $425,513,565 $63,311,219
------------ -----------
Unrealized appreciation ....... $ 22,840,429 $ 3,019,385
Unrealized depreciation ....... (4,701,727) (67,805)
------------ -----------
Net unrealized appreciation ... $ 18,138,702 $ 2,951,580
============ ===========
Delaware
Delaware National
Tax-Free USA High-Yield
Intermediate Municipal
Fund Bond Fund
------------ ------------
Cost of investments ........... $23,655,976 $107,013,737
----------- ------------
Unrealized appreciation ....... $522,356 $2,453,994
Unrealized depreciation ....... (20,128) (4,212,390)
----------- ------------
Net unrealized
appreciation (depreciation) . $502,228 $(1,758,396)
=========== ============
For federal income tax purposes, the Delaware Tax-Free USA Fund had accumulated
capital losses at August 31, 2000 of $29,910,077. The capital loss carryforward
expires in 2008. The Delaware Tax-Free Insured Fund had accumulated capital
losses at August 31, 2000 of $3,349,124. The capital loss carryforward expires
in 2008. The Delaware Tax-Free USA Intermediate Fund had accumulated capital
losses at August 31, 2000 of $1,082,012 which may be carried forward and applied
against future capital gains. The $606,585 capital loss carryforward expires in
2003, and the $475,427 capital loss carryforward expires in 2008. The Delaware
National High-Yield Municipal Bond Fund had accumulated capital losses at August
31, 2000 of $782,666. The capital loss carryforward expires in 2008.
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
4. Capital Shares
Transactions in capital shares were as follows:
Delaware
Tax-Free USA Fund
--------------------
Year Ended
8/31/00 8/31/99
Shares sold:
A Class ................... 8,047,013 18,931,632
B Class ................... 348,581 719,424
C Class ................... 52,620 156,302
Shares issued upon reinvestment of
dividends from net investment income
and net realized gain on investments:
A Class ................... 1,224,791 1,367,786
B Class ................... 70,497 82,291
C Class ................... 7,598 8,411
--------- ----------
9,751,100 21,265,846
--------- ----------
Shares repurchased:
A Class ................... (14,971,682) (25,331,800)
B Class ................... (1,159,698) (776,396)
C Class ................... (203,004) (49,118)
----------- -----------
(16,334,384) (26,157,314)
----------- -----------
Net decrease .................. (6,583,284) (4,891,468)
=========== ===========
Delaware
Tax-Free Insured Fund
Year Ended
8/31/00 8/31/99
Shares sold:
A Class .................... 509,307 517,882
B Class .................... 122,716 148,242
C Class .................... 31,861 134,955
Shares issued upon reinvestment of
dividends from net investment income an
net realized gain on investments:
A Class ................... 166,914 218,421
B Class ................... 11,831 13,084
C Class ................... 4,181 4,718
------- ---------
846,810 1,037,302
------- ---------
Shares repurchased:
A Class ................... (1,339,420) (791,126)
B Class ................... (138,947) (59,433)
C Class ................... (102,784) (23,455)
---------- --------
(1,581,151) (874,014)
---------- --------
Net increase (decrease) ....... (734,341) 163,288
========== ========
41
<PAGE>
--------------------------------------------------------------------------------
4. Capital Shares (continued)
Delaware
Tax-Free USA
Intermediate Fund
--------------------
Year Ended
8/31/00 8/31/99
Shares sold:
A Class ..................... 647,715 832,658
B Class ..................... 122,640 83,273
C Class ..................... 31,174 197,336
Shares issued upon reinvestment of
dividends from net investment income
and net realized gain on investments:
A Class ..................... 64,749 63,937
B Class ..................... 4,988 5,264
C Class ..................... 7,216 6,845
------- ---------
878,482 1,189,313
------- ---------
Shares repurchased:
A Class ..................... (1,171,347) (552,340)
B Class ..................... (172,218) (55,453)
C Class ..................... (124,975) (68,440)
---------- --------
(1,468,540) (676,233)
---------- --------
Net increase (decrease) ....... (590,058) 513,080
========== ========
Delaware
National High-Yield
Municipal Bond Fund
----------------------
Year Ended
8/31/00 8/31/99
Shares sold:
A Class ..................... 1,336,941 2,603,990
B Class ..................... 623,950 1,182,472
C Class ..................... 443,052 683,365
Shares issued upon reinvestment of
dividends from net investment income
and net realized gain on investments:
A Class ..................... 265,771 224,884
B Class ..................... 54,608 40,109
C Class ..................... 30,988 23,840
--------- ---------
2,755,310 4,758,660
--------- ---------
Shares repurchased:
A Class ..................... (2,063,211) (957,179)
B Class ..................... (904,142) (137,289)
C Class ..................... (585,486) (150,648)
---------- ----------
(3,552,839) (1,245,116)
---------- ----------
Net increase (decrease) ....... (797,529) 3,513,544
========== ==========
<PAGE>
5. Lines of Credit
The Funds, along with certain other funds in the Delaware Investments Family of
Funds (the "Participants"), participate in a $375,400,000 revolving line of
credit facility to be used for temporary or emergency purposes as an additional
source of liquidity to fund redemptions of investor shares. The Participants are
charged an annual commitment fee, which is allocated across the Participants on
the basis of each fund's allocation of the entire facility. The Participants may
borrow up to one third of their net assets under the agreement. No amounts were
outstanding at August 31, 2000, or at any time during the period.
6. Market and Credit Risk
The Funds concentrate their investments in securities issued by 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 Delaware National High-Yield Municipal Bond Fund invests 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.
42
<PAGE>
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 2001. Please
consult your tax advisor for proper treatment of this information.
For the fiscal year ended August 31, 2000, each Fund designates as long term
capital gains, ordinary income, and tax-exempt income distributions paid during
the year as follows:
(A) (B)
Long-Term Ordinary
Capital Gains Income
Distributions Distributions
---------------- ----------------
Delaware Tax-Free USA Fund .......... -- --
Delaware Tax-Free Insured Fund ...... -- --
Delaware Tax-Free USA
Intermediate Fund ................. -- --
Delaware National High-Yield
Municipal Bond Fund ............... -- --
(D)
(C) Total
Tax-Exempt Distributions
Distributions (Tax Basis)
------------- ----------------
Delaware Tax-Free USA Fund .......... 100% 100%
Delaware Tax-Free Insured Fund ...... 100% 100%
Delaware Tax-Free USA
Intermediate Fund ................. 100% 100%
Delaware National High-Yield ........ 100% 100%
Municipal Bond Fund
------------------
(A), (B) and (C) are based on a percentage of the Fund's total distributions.
43
<PAGE>
Reports of Independent Auditors
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Delaware Group Tax-Free Fund
We have audited the accompanying statements of net assets of Delaware Group
Tax-Free Fund (comprised of Delaware Tax-Free USA Fund, Delaware Tax-Free
Insured Fund, and Delaware Tax-Free USA Intermediate Fund) (the "Funds") as of
August 31, 2000, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and the financial highlights are
the responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective funds constituting the Delaware Group Tax-Free Fund at August
31, 2000, and the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for each of the periods indicated therein, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 6, 2000
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees
Voyageur Mutual Funds - 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, 2000, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented from January 1, 1997
through August 31, 2000. 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.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2000, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Delaware National High-Yield Municipal Bond Fund at August 31, 2000, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and its financial highlights for
each of the periods presented from January 1, 1997 through August 31, 2000, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 6, 2000
44
<PAGE>
DELAWARE INVESTMENTS FAMILY OF FUNDS
------------------------------------
Complete information on any fund offered by Delaware Investments can be found in
each fund's current prospectus. Prospectuses for all funds offered by Delaware
Investments are available from your financial adviser. Please read the
prospectus carefully before you invest or send money.
<TABLE>
<CAPTION>
<S> <C> <C>
Growth of Capital International and Global Tax-Exempt Income
o Technology and o Emerging Markets Fund o National High-Yield
Innovation Fund o New Pacific Fund Municipal Bond Fund
o Select Growth Fund o Overseas Equity Fund o Tax-Free USA Fund
o Trend Fund o International Equity Fund o Tax-Free Insured Fund
o Growth Opportunities o Global Equity Fund o Tax-Free USA
Fund* o Global Bond Fund Intermediate Fund
o Small Cap Value Fund o State Tax-Free Funds**
o U.S. Growth Fund Current Income
o Tax-Efficient Equity Fund o Delchester Fund Stability of Principal
o Social Awareness Fund o High-Yield o Cash Reserve
Opportunities Fund o Tax-Free Money Fund
Total Return o Strategic Income Fund
o Blue Chip Fund o Corporate Bond Fund Asset Allocation
o Devon Fund o Extended Duration o Foundation Funds
o Growth and Income Fund Bond Fund Growth Portfolio
o Decatur Equity o American Government Balanced Portfolio
Income Fund Bond Fund Income Portfolio
o REIT Fund o U.S. Government
o Balanced Fund Securities Fund
o Limited-Term
Government Fund
</TABLE>
* Formerly known as DelCap Fund.
** Available for the following states: Arizona, California, Colorado, Florida,
Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, North Dakota, New Jersey,
New Mexico, New York, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
(C)Delaware Distributors, L.P.
<PAGE>
DELAWARE(SM)
INVESTMENTS
----------------------
Philadelphia [] London
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
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 for Delaware Tax-Free USA Fund, Delaware Tax-Free Insured Fund,
Delaware Tax-Free USA Intermediate Fund and Delaware National High-Yield
Municipal Bond Fund and the Delaware Investments Performance Update for the most
recently completed calendar quarter. The prospectus sets forth details about
charges, expenses, investment objectives and operating policies of each Fund.
You should read the prospectus carefully before you invest. The figures in this
report represent past results which are not a guarantee of future results. The
return and principal value of an investment in each Fund will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BOARD OF TRUSTEES Charles E. Peck Investment Manager
Retired Delaware Management Company
Wayne A. Stork Fredericksburg, VA Philadelphia, PA
Chairman
Delaware Investments Family of Funds Janet L. Yeomans International Affiliate
Philadelphia, PA Vice President and Treasurer Delaware International Advisers Ltd.
3M Corporation London, England
Walter P. Babich St. Paul, MN
Board Chairman National Distributor
Citadel Constructors, Inc. AFFILIATED OFFICERS Delaware Distributors, L.P.
King of Prussia, PA Philadelphia, PA
Charles E. Haldeman, Jr.
David K. Downes President and Chief Executive Officer Shareholder Servicing, Dividend
President and Chief Executive Officer Delaware Management Holdings, Inc. Disbursing and Transfer Agent
Delaware Investments Family of Funds Philadelphia, PA Delaware Service Company, Inc.
Philadelphia, PA Philadelphia, PA
Richard J. Flannery
John H. Durham Executive Vice President 1818 Market Street
Private Investor and General Counsel Philadelphia, PA 19103-3682
Horsham, PA Delaware Investments Family of Funds
Philadelphia, PA
Anthony D. Knerr
Consultant, Anthony Knerr & Associates Bruce D. Barton
New York, NY President and Chief Executive Officer
Delaware Distributors, L.P.
Ann R. Leven Philadelphia, PA
Former Treasurer, National Gallery of Art
Washington, DC
Thomas F. Madison
President and Chief Executive Officer
MLM Partners, Inc.
Minneapolis, MN
</TABLE>
(3869) Printed in the USA
AR-011 [8/00] PPL 10/00 (J6381)
