<PAGE>
DELAWARE(SM)
INVESTMENTS
--------------
Delaware Tax-Free Arizona Funds
Delaware Tax-Free California Funds
Delaware Tax-Free Colorado Fund
Delaware Tax-Free New Mexico Fund
Tax-Exempt Income
2000 ANNUAL REPORT
[Tax-Exempt Income Artwork]
<PAGE>
TABLE OF CONTENTS
-----------------
Letter to Shareholders 1
Portfolio Management
Review 3
Performance Summary 9
Financial Statements
Statements of Net Assets 15
Statements of Operations 29
Statements of Changes in
Net Assets 30
Financial Highlights 32
Notes to Financial
Statements 50
Report of Independent
Auditors 55
A TRADITION OF SOUND INVESTING SINCE 1929
-----------------------------------------
A Commitment To Our Investors
Experienced
o Our seasoned investment professionals average more than 15 years' experience.
o 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
o We follow strict investment policies and clear buy/sell guidelines.
o We strive to balance risk and reward in order to provide sound investment
alternatives within any given asset class.
Consistent
o We clearly articulate our investment policies and follow them consistently.
o Our commitment to 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
o 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
o 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>
"WE BELIEVE RISING
TREASURY PRICES
LEFT MUNICIPAL BONDS IN
A POSITION OF
RELATIVE VALUE."
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. 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.).
Total Return
For Period Ended August 31, 2000 One Year
--------------------------------------------------------------------------------
Delaware Tax-Free Arizona Fund Class A +3.68%
--------------------------------------------------------------------------------
Delaware Tax-Free Arizona Insured Fund Class A +5.47%
--------------------------------------------------------------------------------
Lipper Arizona Municipal Debt Funds Average (39 funds) +5.10%
--------------------------------------------------------------------------------
Delaware Tax-Free California Fund Class A +5.00%
--------------------------------------------------------------------------------
Lipper California Municipal Debt Funds Average (109 funds) +6.47%
--------------------------------------------------------------------------------
Delaware Tax-Free California Insured Fund Class A +7.10%
--------------------------------------------------------------------------------
Lipper California Insured Municipal Debt Funds Average (23 funds) +6.99%
--------------------------------------------------------------------------------
Delaware Tax-Free Colorado Fund Class A +3.89%
--------------------------------------------------------------------------------
Lipper Colorado Municipal Debt Funds Average (27 funds) +4.42%
--------------------------------------------------------------------------------
Delaware Tax-Free New Mexico Fund Class A +4.36%
--------------------------------------------------------------------------------
Lipper Other States Municipal Debt Funds Average (77 funds) +4.54%
--------------------------------------------------------------------------------
Lehman Brothers Municipal Bond Index +6.77%
Lehman Brothers Insured Municipal Bond Index +7.40%
--------------------------------------------------------------------------------
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 9 through 14. 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 Indexes 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.
*The U.S. government does not guarantee principal and interest of municipal
bonds, unlike Treasuries.
1
<PAGE>
"STATES IN THE WESTERN
REGION OF THE COUNTRY
ESPECIALLY ENJOYED
FISCAL PROSPERITY,
STRONG CREDIT RATINGS
AND HIGH DEMAND FOR
MUNICIPAL BONDS DURING
THE SECOND HALF OF THE
FISCAL YEAR."
[Tax-Exempt Income Artwork]
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 6.16% on
August 31, 2000 (Source: Bloomberg).* For municipal bond tax-equivalent yields,
see chart on page 8.
Delaware's Municipal Bond Funds for Arizona, California, Colorado and New Mexico
struggled during the first half of the fiscal year, but then rode the municipal
market rally to strong overall returns as of August 31, 2000. States in the
western region of the country especially enjoyed fiscal prosperity, strong
credit ratings and high demand for municipal bonds during the second half of the
fiscal year.
Market Outlook - We are encouraged by the current market 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 (Source: The Wall
Street Journal). Evident slowing in the U.S. economy, which has prompted the Fed
to leave rates untouched at its last three meetings, could eventually lead to
lesser revenues for states and municipalities. In our opinion, this would likely
lead to a general increase in the issuance of municipal bonds.
We believe that municipal bonds will continue to play a role in well-diversified
portfolios. In addition, we believe that in an environment where interest rates
trend downward, investing in municipal bond funds will be more attractive to
investors than buying individual bonds. In such an environment, municipal bond
funds, like Delaware's, are holding some slightly older bonds -- many of which
were issued at more attractive rates than most new issues coming to market. We
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
*The U.S. government does not guarantee principal and interest of municipal
bonds, unlike Treasuries.
2
<PAGE>
Andrew M. McCullagh
Senior Portfolio Manager
October 9, 2000
"DURING THE YEAR ENDED
AUGUST 31, 2000, WE
BEGAN TO SEE STRONG
PERFORMANCE IN
MUNICIPAL MARKETS
DESPITE CHANGES IN
INTEREST RATES."
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 funds
cash flows are negative year-to-date, July 2000 brought positive numbers that we
hope to see continue, with investors pouring a net $850 million dollars into
municipal bond funds (Source: Investment Company Institute).
The year was characterized by a continued diminishing of municipal bond supply,
as states, counties and municipalities issued fewer bonds, 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
issues often received substantial credit upgrades -- especially among bonds
whose principal and interest payments are backed by taxes (Source: Moody's
Investors Service).
Healthcare was the one sector in which municipal bonds often faced pressures,
possibly as a result of the uncertain future of Medicaid and Medicare during
this Presidential election year. Of the 37 credit downgrades Moody's has made to
revenue bonds year-to-date, 28 have been to healthcare bonds (Source: Moody's
Investors Service). We have continued to limit our investments in this sector.
When we do invest, we use careful research and always keep an eye out for
undervalued bond issues.
Delaware Tax-Free Arizona Fund and Delaware Tax-Free Arizona Insured Fund
Arizona has a diverse economy, which continued to grow rapidly throughout our
fiscal period. According to a recent report from the U.S. Commerce Department,
Arizona ranked highest in the nation for economic growth. Consumer spending and
a surging housing market helped Arizona grow at an annual rate of +7.5% --
surpassing the national average of +3.9% (Source: The Denver Post). Arizona is
also experiencing rapid employment and population growth, which have heightened
the need for schools, roads and housing (Source: Arizona's Economy -- Eller
School of Business and Public Administration). Considering these impressive
economic factors, combined with a strong credit rating and moderately low debt,
financial conditions in Arizona seem nearly ideal.
The uncertainty surrounding long-term interest rates required us to manage the
portfolios' durations. Duration is a common measure of a bond or bond fund's
sensitivity to interest rate changes. During the second half of the fiscal year,
long-term interest rates began to decline and in response, we began to shorten
Delaware Tax-Free Arizona Fund's duration. As of August 31, 2000, the Fund's
duration stood at 8.3 years.
3
<PAGE>
Delaware Tax-Free
Arizona Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------------
Current 30-Day SEC Yield* +5.37%
---------------------------------------------------------------------------
Average Effective Duration** 8.3 years
---------------------------------------------------------------------------
Average Effective Maturity*** 14.0 years
---------------------------------------------------------------------------
Average Credit Quality BBB
---------------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for Class B shares was
+4.84%. For Class C shares, the 30-day SEC yield was +4.82%.
Delaware Tax-Free
Arizona Insured Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------------
Current 30-Day SEC Yield* +4.27%
---------------------------------------------------------------------------
Average Effective Duration** 6.5 years
---------------------------------------------------------------------------
Average Effective Maturity*** 9.4 years
---------------------------------------------------------------------------
Average Credit Quality AAA
---------------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for Class B and C
shares were both +3.69%.
**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
repayment by issuers of portfolio securities.
<PAGE>
In order to remain consistent with Delaware Tax-Free Arizona Insured Fund's
objective, we maintained a shorter duration for this Fund than for Delaware
Tax-Free Arizona Fund. Since Delaware Tax-Free Arizona Insured Fund's duration
was shorter, the Fund was less affected by the interest rates than funds with a
longer duration. As of August 31, 2000, the average duration of Delaware
Tax-Free Arizona Insured Fund was 6.5 years.
We were able to find an adequate supply of revenue bonds during the period. At
the end of our fiscal period, Delaware Tax-Free Arizona Insured Fund was
invested heavily in school district revenue bonds. In the Delaware Tax-Free
Arizona Fund, housing revenue bonds accounted for 29% of the Fund's portfolio,
its largest sector allocation.
Delaware Tax-Free Arizona Fund
Sector Allocation
August 31, 2000
Sector Percentage of Net Assets
------------------------------------------------------------------------------
Housing 28.63%
------------------------------------------------------------------------------
Miscellaneous 20.08%
------------------------------------------------------------------------------
Hospitals 12.15%
------------------------------------------------------------------------------
Higher Education 9.76%
------------------------------------------------------------------------------
School Districts 9.67%
------------------------------------------------------------------------------
Pollution Control 9.64%
------------------------------------------------------------------------------
General Obligation 5.20%
------------------------------------------------------------------------------
Lease/Certificates of Participation 4.87%
------------------------------------------------------------------------------
Delaware Tax-Free Arizona Insured Fund
Sector Allocation
August 31, 2000
Sector Percentage of Net Assets
------------------------------------------------------------------------------
Housing 17.49%
------------------------------------------------------------------------------
General Obligation 17.01%
------------------------------------------------------------------------------
Hospitals 14.24%
------------------------------------------------------------------------------
Pre-Refunded/Escrowed to Maturity 12.33%
------------------------------------------------------------------------------
Higher Education 9.63%
------------------------------------------------------------------------------
Power Authority 9.35%
------------------------------------------------------------------------------
Water & Sewer 6.62%
------------------------------------------------------------------------------
Miscellaneous 5.95%
------------------------------------------------------------------------------
Lease/Certificates of Participation 4.81%
------------------------------------------------------------------------------
Continuing Care/Retirement 2.57%
------------------------------------------------------------------------------
4
<PAGE>
Delaware Tax-Free
California Fund
Portfolio Characteristics
August 31, 2000
-------------------------------------------------------------------------
Current 30-Day SEC Yield* +5.11%
-------------------------------------------------------------------------
Average Effective Duration** 9.4 years
-------------------------------------------------------------------------
Average Effective Maturity*** 16.1 years
-------------------------------------------------------------------------
Average Credit Quality BBB
-------------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for Class B shares was
+4.55%. For Class C shares, the 30-day SEC yield was +4.57%.
Delaware Tax-Free
California Insured Fund
Portfolio Characteristics
August 31, 2000
-------------------------------------------------------------------------
Current 30-Day SEC Yield* +4.44%
-------------------------------------------------------------------------
Average Effective Duration** 7.6 years
-------------------------------------------------------------------------
Average Effective Maturity*** 11.4 years
-------------------------------------------------------------------------
Average Credit Quality AAA
-------------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for Class B shares
was +3.87%. For Class C shares, the 30-day SEC yield was +3.89%.
**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
repayment by issuers of portfolio securities.
<PAGE>
Delaware Tax-Free California Fund and Delaware Tax-Free California
Insured Fund
As a result of its improving economy and growing population, California has
become the nation's leading state for municipal bond sales (Source: The Bond
Buyer). California's positive economic outlook and high resident tax rate have
created strong investor demand for California municipal bonds.
California's diverse economy enables it to offer a large variety of municipal
bonds. One sector we are particularly interested in is multi-family housing
bonds, as we have watched the demand for housing steadily increase over the
year. As of August 31, 2000, one of Delaware Tax-Free California Fund's largest
sector holdings was housing revenue bonds. This sector accounted for 21% of the
Fund's portfolio. Likewise, housing revenue bonds is Delaware Tax-Free
California Insured Fund's largest sector and accounted for 27% of the portfolio.
California's per-student funding for secondary education ranks near the bottom
nationally. To address the situation, the state has recently started a campaign
to reduce class size, which has increased the need for school facilities. A
recent multi-billion dollar state general obligation bond issue has provided
badly needed money for school construction (Source: Standard & Poor's). Since
February 2000, we doubled Delaware Tax-Free California Fund's holdings in school
district revenue bonds.
Delaware Tax-Free California Fund
Sector Allocation
August 31, 2000
Sector Percentage of Net Assets
-------------------------------------------------------------------------------
Miscellaneous 23.01%
-------------------------------------------------------------------------------
Housing 21.31%
-------------------------------------------------------------------------------
Hospitals 16.88%
-------------------------------------------------------------------------------
Lease/Certificates of Participation 12.43%
-------------------------------------------------------------------------------
School Districts 8.07%
-------------------------------------------------------------------------------
Higher Education 7.41%
-------------------------------------------------------------------------------
Transportation 6.04%
-------------------------------------------------------------------------------
Power Authority 4.85%
-------------------------------------------------------------------------------
Delaware Tax-Free California Insured Fund
Sector Allocation
August 31, 2000
Sector Percentage of Net Assets
-------------------------------------------------------------------------------
Housing 27.33%
-------------------------------------------------------------------------------
Lease/Certificates of Participation 27.17%
-------------------------------------------------------------------------------
Miscellaneous 25.37%
-------------------------------------------------------------------------------
Transportation 10.05%
-------------------------------------------------------------------------------
Hospitals 6.61%
-------------------------------------------------------------------------------
Water & Sewer 3.47%
-------------------------------------------------------------------------------
5
<PAGE>
Delaware Tax-Free
Colorado Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------------
Current 30-Day SEC Yield* +4.92%
---------------------------------------------------------------------------
Average Effective Duration 8.1 years
---------------------------------------------------------------------------
Average Effective Maturity*** 14.1 years
---------------------------------------------------------------------------
Average Credit Quality BBB
---------------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for Class B shares
was +4.37%. For Class C shares, the 30-day SEC yield was +4.36%.
**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
repayment by issuers of portfolio securities.
[Tax-exempt Income Artwork]
<PAGE>
Delaware Tax-Free Colorado Fund
As a result of Colorado's robust economy, the state currently ranks fifth in the
nation for economic growth (Source: The Denver Post). According to a recent
report produced by the Corporation for Economic Development, Colorado received
straight A's for its economic performance, business vitality and development
capacity (Source: Rocky Mountain News). Colorado can attribute its strong
performance to its low poverty rate, rapid employment growth, and a healthy
residential construction industry. Colorado's growing population has lead to an
increase in the number of vehicles on the state's highways, causing massive
traffic congestion. In an attempt to relieve the crowded road conditions,
Colorado recently approved billions of dollars in highway bonding to expand both
roads and mass transit systems (Source: Standard & Poor's). In our opinion, we
were able to find good value in the transportation sector and we increased our
holdings in transportation revenue bonds from 7% mid-year to 11% as of August
31, 2000.
Delaware Tax-Free Colorado Fund's largest sector allocation was
general obligation bonds, at 24%, followed by hospital revenue bonds at 21%.
Although their credit quality has been speculative in the past, in our view,
hospital revenue bonds in Colorado have been offering a more stable relative
value.
Delaware Tax-Free Colorado Fund
Sector Allocation
August 31, 2000
Sector Percentage of Net Assets
------------------------------------------------------------------------------
Miscellaneous 25.87%
------------------------------------------------------------------------------
General Obligation 23.59%
------------------------------------------------------------------------------
Hospitals 20.94%
------------------------------------------------------------------------------
Housing 12.77%
------------------------------------------------------------------------------
Transportation 10.61%
------------------------------------------------------------------------------
Lease/Certificates of Participation 6.22%
------------------------------------------------------------------------------
6
<PAGE>
Delaware Tax-Free
New Mexico Fund
Portfolio Characteristics
August 31, 2000
---------------------------------------------------------------------------
Current 30-Day SEC Yield* +4.91%
---------------------------------------------------------------------------
Average Effective Duration** 8.6 years
---------------------------------------------------------------------------
Average Effective Maturity*** 15.0 years
---------------------------------------------------------------------------
Average Credit Quality BBB
---------------------------------------------------------------------------
*For Class A shares measured according to Securities and Exchange Commission
(SEC) guidelines. Current 30-day SEC yield as of 8/31/00 for Class B and C
shares were both +4.35%.
**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
repayment by issuers of portfolio securities.
<PAGE>
Delaware Tax-Free New Mexico Fund
New Mexico is one of the fastest growing states in the West (Source: New Mexico
Development Department). Over the past decade, we have seen retail,
manufacturing and technology companies move into New Mexico, leading to broader
sector diversification and improved economic conditions.
Historically, New Mexico has relied heavily on revenues from natural resources
and mining. Throughout 1999, weakness in the natural resource sector created
pockets of economic weakness across the state, especially in the manufacturing
and mining sectors. During 2000, however, New Mexico gained several new
manufacturing facilities and this sector is expected to gain strength going into
2001 (Source: New Mexico Development Department). Soaring oil and natural gas
prices throughout 2000 have resulted in a gradual recovery in the state's
natural resources and mining sectors.
Over the years, demand for residential housing has been increasing. We have
focused on large single and multi-family housing bonds. As of August 31, 2000,
we held almost 30% of the Fund's portfolio in housing issues.
Delaware Tax-Free New Mexico Fund
Sector Allocation
August 31, 2000
Sector Percentage of Net Assets
-------------------------------------------------------------------------------
Housing 29.93%
-------------------------------------------------------------------------------
Miscellaneous 21.65%
-------------------------------------------------------------------------------
Pollution Control 13.17%
-------------------------------------------------------------------------------
Higher Education 12.95%
-------------------------------------------------------------------------------
Hospitals 9.34%
-------------------------------------------------------------------------------
Highway 4.58%
-------------------------------------------------------------------------------
Power Authority 4.51%
-------------------------------------------------------------------------------
Recreation 3.87%
-------------------------------------------------------------------------------
7
<PAGE>
"IN THE MONTHS AHEAD,
WE ANTICIPATE A POSITIVE
ENVIRONMENT FOR
MUNICIPAL BONDS."
{Tax Exempt Income Artwork]
<PAGE>
Outlook
In the months ahead, we anticipate a positive environment for municipal bonds.
We think it is possible that the strong performance seen in the first half of
2000 could continue through the fall.
As always with municipal bonds, this depends largely on interest rate trends, as
well as supply and demand in the municipal markets. The Federal Reserve Board
has promised to remain vigilant about keeping inflation under control and could
continue with interest rate increases in the future. As of this writing,
however, many analysts and investors alike 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 (Source: Bloomberg).
We feel that a non-inflationary U.S. economy that has less-robust growth is
likely to boost the demand for capital funding. This would be a positive for
municipal bonds and for the Funds. In our opinion, municipal bond funds will
continue to be an important investment vehicle -- which can provide excellent
diversification to an investor's portfolio, as well as allowing individual
investors to preserve their own capital and generate non-taxable income.*
--------------------------------------------------------------------------------
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
15% 6.68%
28% 7.88%
31% 8.23%
36% 8.88%
39.6% 9.40%
Income Tax Bracket
*A portion of the income from tax-exempt funds may be subject to the
alternative minimum tax.
**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.
8
<PAGE>
FUND BASICS
-----------
Fund Objective
The Fund seeks as high a level of current income exempt from federal and Arizona
state personal income taxes as is consistent with preservation of capital.
Total Fund Assets
As of August 31, 2000
$20.66 million
Number of Holdings
18
Fund Start Date
March 2, 1995
Your Fund Manager
Andrew M. McCullagh joined Delaware Investments in 1997 after holding investment
management positions at Kirchner, Moore & Co. He holds a bachelor's degree from
Washington College and a graduate certificate in public finance from the
University of Michigan.
Nasdaq Symbols
Class A DVAAX
Class B DVATX
Class C DVAZX
<PAGE>
DELAWARE TAX-FREE ARIZONA FUND PERFORMANCE
------------------------------------------
Growth of a $10,000 Investment
March 2, 1995 through August 31, 2000
<TABLE>
<CAPTION>
Mar-95 Aug-95 Feb-96 Aug-96 Feb-97 Aug-97 Feb-98 Aug-98 Feb-99 Aug-99 Feb-00 Aug-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers
Municipal Bond
Index $10,000 $10,469 $10,978 $11,017 $11,583 $12,036 $12,642 $13,077 $13,419 $13,148 $13,140 $14,033
Delaware Tax-
Free Arizona
Fund Class A $ 9,625 $10,151 $10,867 $11,045 $11,587 $12,084 $12,812 $13,228 $13,359 $13,085 $12,586 $13,564
total
</TABLE>
Chart assumes $10,000 invested on March 2, 1995 and includes the effect of a
3.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each
successive month. Past performance does not guarantee future results.
Average Annual Total Returns
Through August 31, 2000 Lifetime Five Years One Year
----------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +6.52% +6.05% +3.68%
Including Sales Charge +5.79% +5.24% -0.23%
----------------------------------------------------------------------
Class B (Est. 6/29/95)
Excluding Sales Charge +5.24% +5.29% +2.82%
Including Sales Charge +5.08% +4.96% -1.10%
----------------------------------------------------------------------
Class C (Est. 5/13/95)
Excluding Sales Charge +5.39% +5.29% +2.88%
Including Sales Charge +5.39% +5.29% +1.90%
----------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free Arizona
Fund during the periods shown. Performance would have been lower if the expense
limitation was not in effect.
9
<PAGE>
FUND BASICS
-----------
Fund Objective
The Fund seeks as high a level of current income exempt from federal and Arizona
state personal income taxes as is consistent with preservation of capital.
Total Fund Assets
As of August 31, 2000
$149.97 million
Number of Holdings
66
Fund Start Date
April 1, 1991
Your Fund Manager
Andrew M. McCullagh
Nasdaq Symbols
Class A VAZIX
Class B DVABX
Class C DVACX
{Tax-Exempt Income Artwork}
<PAGE>
DELAWARE TAX-FREE ARIZONA INSURED
FUND PERFORMANCE
Growth of a $10,000 Investment
April 1, 1991 through August 31, 2000
<TABLE>
<CAPTION>
Apr-91 Aug-91 Aug-92 Aug-93 Aug-94 Aug-95 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers
Insured Municipal
Bond Index $10,000 $10,337 $11,529 $13,046 $12,982 $14,165 $14,933 $16,338 $17,842 $17,790 $19,109
Delaware Tax-
Free Arizona
Insured Fund
Class A $ 9,625 $10,088 $11,199 $12,902 $12,628 $13,737 $14,491 $15,758 $17,002 $16,940 $17,866
</TABLE>
Chart assumes $10,000 invested on April 1, 1991 and includes the effect of a
3.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each
successive month. Past performance does not guarantee future results.
Average Annual Total Returns
Through August 31, 2000 Lifetime Five Years One Year
----------------------------------------------------------------------------
Class A (Est. 4/1/91)
Excluding Sales Charge +6.79% +5.40% +5.47%
Including Sales Charge +6.36% +4.60% +1.50%
----------------------------------------------------------------------------
Class B (Est. 3/10/95)
Excluding Sales Charge +5.19% +4.62% +4.68%
Including Sales Charge +5.04% +4.28% +0.68%
----------------------------------------------------------------------------
Class C (Est. 5/26/94)
Excluding Sales Charge +5.14% +4.56% +4.68%
Including Sales Charge +5.14% +4.56% +3.68%
----------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free Arizona
Insured Fund during the periods shown. Performance would have been lower if the
expense limitation was not in effect.
10
<PAGE>
FUND BASICS
-----------
Fund Objective
The Fund seeks as high a level of current income exempt from federal and
California state personal income taxes as is consistent with preservation of
capital.
Total Fund Assets
As of August 31, 2000
$43.42 million
Number of Holdings
37
Fund Start Date
March 2, 1995
Your Fund Manager
Andrew M. McCullagh
Nasdaq Symbols
Class A DVTAX
Class B DVTFX
Class C DVFTX
<PAGE>
DELAWARE TAX-FREE CALIFORNIA FUND PERFORMANCE
---------------------------------------------
Growth of a $10,000 Investment
March 2, 1995 through August 31, 2000
<TABLE>
<CAPTION>
Mar-95 Aug-95 Feb-96 Aug-96 Feb-97 Aug-97 Feb-98 Aug-98 Feb-99 Aug-99 Feb-00 Aug-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers
Municipal Bond
Index $10,000 $10,469 $10,978 $11,017 $11,583 $12,036 $12,642 $13,077 $13,419 $13,148 $13,140 $14,033
Delaware Tax-
Free California
Fund Class A $ 9,625 $ 9,989 $10,746 $10,711 $11,294 $11,921 $12,694 $13,187 $13,558 $12,984 $12,431 $13,633
</TABLE>
Chart assumes $10,000 invested on March 2, 1995 and includes the effect of a
3.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each
successive month. Past performance does not guarantee future results.
Average Annual Total Returns
Through August 31, 2000 Lifetime Five Years One Year
-----------------------------------------------------------------------------
Class A (Est. 3/2/95)
Excluding Sales Charge +6.65% +6.53% +5.00%
Including Sales Charge +5.91% +5.72% +1.05%
-----------------------------------------------------------------------------
Class B (Est. 8/23/95)
Excluding Sales Charge +6.24% +5.91% +4.31%
Including Sales Charge +6.08% +5.59% +0.33%
-----------------------------------------------------------------------------
Class C (Est. 4/9/96)
Excluding Sales Charge +5.79% +4.22%
Including Sales Charge +5.79% +3.22%
-----------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free
California Fund during the periods shown. Performance would have been lower if
the expense limitation was not in effect.
11
<PAGE>
DELAWARE TAX-FREE CALIFORNIA INSURED
Fund Basics
-----------
Fund Objective
The Fund seeks as high a level of current income exempt from
federal and California state personal income taxes as is
consistent with preservation of capital.
Total Fund Assets
As of August 31, 2000
$30.76 million
Number of Holdings
26
Fund Start Date
October 15, 1992
Your Fund Manager
Andrew M. McCullagh
Nasdaq Symbols
Class A VCINX
Class B DVNBX
Class C DVNCX
<PAGE>
FUND PERFORMANCE
----------------
Growth of a $10,000 Investment
October 15, 1992 through August 31, 2000
<TABLE>
<CAPTION>
Oct-92 Aug-93 Aug-94 Aug-95 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers Insured Municipal Bond Index 10,000 11,392 11,336 12,369 13,040 14,267 15,580 15,534 16,686
Delaware Tax-Free California Insured Fund Class A 9,625 11,128 10,787 11,535 12,224 13,431 14,623 14,335 15,353
</TABLE>
Chart assumes $10,000 invested on October 15, 1992 and includes the effect of a
3.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each
successive month. Past performance does not guarantee future results.
Average Annual Total Returns
Through August 31, 2000 Lifetime Five Years One Year
-------------------------------------------------------------------------------
Class A (Est. 10/15/92)
Excluding Sales Charge +6.12% +5.89% +7.10%
Including Sales Charge +5.61% +5.08% +3.05%
-------------------------------------------------------------------------------
Class B (Est. 3/2/94)
Excluding Sales Charge +4.46% +5.25% +6.30%
Including Sales Charge +4.46% +4.92% +2.30%
-------------------------------------------------------------------------------
Class C (Est. 4/12/95)
Excluding Sales Charge +4.92% +5.03% +6.32%
Including Sales Charge +4.92% +5.03% +5.32%
-------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free
California Insured Fund during the periods shown. Performance would have been
lower if the expense limitation was not in effect.
[TAX-EXEMPT INCOME ARTWORK]
12
<PAGE>
DELAWARE TAX-FREE COLORADO
FUND BASICS
-----------
Fund Objective
The Fund seeks as high a level of current income exempt from federal and
Colorado state personal income taxes as is consistent with
preservation of capital.
Total Fund Assets
As of August 31, 2000
$322.10 million
Number of Holdings
86
Fund Start Date
April 23, 1987
Your Fund Manager
Andrew M. McCullagh
Nasdaq Symbols
Class A VCTFX
Class B DVBTX
Class C DVCTX
<PAGE>
FUND PERFORMANCE
----------------
Growth of a $10,000 Investment
August 31, 1990 through August 31, 2000
<TABLE>
<CAPTION>
Aug-90 Aug-91 Aug-92 Aug-93 Aug-94 Aug-95 Aug-96 Aug-97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers Municipal Bond Index $10,000 $11,179 $12,400 $13,944 $13,963 $15,201 $15,997 $17,476
Delaware Tax-Free Colorado Fund Class A $ 9,621 $10,591 $11,691 $13,453 $13,179 $14,279 $15,168 $16,685
</TABLE>
<TABLE>
<CAPTION>
Aug-98 Aug-99 Aug-00
<S> <C> <C> <C>
Lehman Brothers Municipal Bond Index $18,987 $19,091 $20,376
Delaware Tax-Free Colorado Fund Class A $18,318 $18,006 $18,707
</TABLE>
Chart assumes $10,000 invested on August 31, 1990 and includes the effect of a
3.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each
successive month. Past performance does not guarantee 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. 4/23/87)
Excluding Sales Charge +7.24% +6.90% +5.56% +3.89%
Including Sales Charge +6.94% +6.48% +4.75% +0.00%
---------------------------------------------------------------------------------------------
Class B (Est. 3/22/95)
Excluding Sales Charge +5.10% +4.74% +3.00%
Including Sales Charge +4.95% +4.41% -0.94%
---------------------------------------------------------------------------------------------
Class C (Est. 5/6/94)
Excluding Sales Charge +5.13% +4.71% +3.11%
Including Sales Charge +5.13% +4.71% +2.13%
---------------------------------------------------------------------------------------------
</TABLE>
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free
Colorado Fund during the periods shown. Performance would have been lower if the
expense limitation was not in effect.
13
<PAGE>
DELAWARE TAX-FREE NEW MEXICO
FUND BASICS
-----------
Fund Objective
The Fund seeks as high a level of current income exempt from federal and
New Mexico state personal income taxes as is consistent with
preservation of capital.
Total Fund Assets
As of August 31, 2000
$23.26 million
Number of Holdings
25
Fund Start Date
October 5, 1992
Your Fund Manager
Andrew M. McCullagh
Nasdaq Symbols
Class A VNMTX
Class B DVWBX
Class C DVWCX
[TAX-EXEMPT INCOME ARTWORK]
<PAGE>
FUND PERFORMANCE
----------------
Growth of a $10,000 Investment
October 5, 1992 through August 31, 2000
<TABLE>
<CAPTION>
Oct-92 Aug-93 Aug-94 Aug-95 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lehman Brothers Municipal Bond Index $10,000 $11,258 $11,247 $12,273 $12,916 $14,110 $15,330 $15,414 $16,451
Delaware Tax-Free New Mexico $ 9,625 $11,020 $11,032 $11,790 $12,505 $13,175 $14,959 $14,783 $15,428
</TABLE>
Chart assumes $10,000 invested on October 5, 1992 and includes the effect of a
3.75% front-end sales charge and the reinvestment of all dividends and capital
gains. Performance of other Fund classes will vary due to differing charges and
expenses. Returns plotted on the chart were as of the last day of each
successive month. Past performance does not guarantee future results.
Average Annual Total Returns
Through August 31, 2000 Lifetime Five Years One Year
--------------------------------------------------------------------------------
Class A (Est. 10/5/92)
Excluding Sales Charge +6.17% +5.53% +4.36%
Including Sales Charge +5.66% +4.72% +0.45%
--------------------------------------------------------------------------------
Class B (Est. 3/3/94)
Excluding Sales Charge +4.43% +4.77% +3.59%
Including Sales Charge +4.43% +4.44% -0.37%
--------------------------------------------------------------------------------
Class C (Est. 5/7/96)
Excluding Sales Charge +4.90% +3.70%
Including Sales Charge +4.90% +2.70%
--------------------------------------------------------------------------------
Returns reflect reinvestment of distributions and any applicable sales charges
as noted below. Return and share values will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Class B and C
share results excluding sales charges assume either that contingent deferred
sales charges did not apply or the investment was not redeemed. Past performance
is not a guarantee of future results.
Class A shares have a 3.75% maximum front-end sales charge and a 12b-1 fee.
Class B shares do not have a front-end sales charge, but are subject to a 1%
annual distribution and service fee. They are also subject to a contingent
deferred sales charge of up to 4% if redeemed before the end of the sixth year.
Class C shares have a 1% annual distribution and service fee. If redeemed within
12 months, a 1% contingent deferred sales charge applies.
An expense limitation was in effect for all classes of Delaware Tax-Free New
Mexico Fund during the periods shown. Performance would have been lower if the
expense limitation was not in effect.
[TAX-EXEMPT INCOME ARTWORK]
14
<PAGE>
Statements of Net Assets
DELAWARE TAX-FREE ARIZONA FUND
------------------------------
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 94.03%
General Obligation Bonds - 5.20%
Eagle Mountain Community Facility District
6.50% 7/1/21 ........................................ $1,010,000 $ 1,075,276
-----------
1,075,276
-----------
Higher Education Revenue Bonds - 9.76%
Arizona Capital Facilities Finance Corporation
Student Housing Revenue 6.25% 9/1/32 ................ 1,000,000 998,610
Arizona Student Loan Acquisition Authority
Revenue Series B 6.15% 5/1/29 ....................... 1,000,000 1,017,670
-----------
2,016,280
-----------
Hospital Revenue Bonds - 12.15%
Maricopa County Hospital Revenue
(Sun Health Corporation) 5.30% 4/1/29 ............... 1,000,000 804,070
Maricopa County Industrial Development
Authority Hospital Facilities Revenue
(Mayo Clinic Hospital) 5.25% 11/15/37 ............... 1,000,000 927,830
Winslow Industrial Development Authority
Hospital Revenue (Winslow Memorial
Hospital Project) 5.50% 6/1/22 ...................... 1,000,000 779,050
-----------
2,510,950
-----------
Housing Revenue Bonds - 28.63%
Maricopa County Industrial Development
Authority Single Family Housing Revenue
6.625% 7/1/21 (GNMA) ................................ 1,000,000 1,049,870
Peoria Casa Del Rio Multifamily Housing
7.30% 2/20/28 (GNMA) ................................ 500,000 537,210
Phoenix Industrial Development Authority
Multifamily Housing
7.50% 7/20/35 (GNMA) ................................ 2,000,000 2,266,900
Pima County Industrial Development Authority
Multifamily Housing Revenue
(Sunbriar Apartments Project)
7.25% 7/1/25 (MBIA) ................................. 500,000 532,325
Pima County Industrial Development
Authority Single Family Housing Revenue
6.10% 5/1/31 (GNMA) ................................. 500,000 509,040
Pima County Industrial Development Authority
Single Family Mortgage Revenue
6.125% 11/1/33 (GNMA) ............................... 1,000,000 1,019,890
-----------
5,915,235
-----------
Lease/Certificates of Participation - 4.87%
Sedona Partner Series 1999 5.75% 7/1/16 .............. 1,000,000 1,005,870
-----------
1,005,870
-----------
Pollution Control Revenue Bonds - 9.64%
Coconimo County (Nevada Power)
6.375% 10/1/36 ...................................... 1,000,000 989,490
Maricopa County Pollution Control Corporation
6.375% 8/1/15 ....................................... 1,000,000 1,002,210
-----------
1,991,700
-----------
<PAGE>
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
School Revenue Bonds - 9.67%
Maricopa County Industrial Development
Authority Education Revenue 6.75% 7/1/29 ............ $2,000,000 $ 1,997,220
-----------
1,997,220
-----------
Other Revenue Bonds - 14.11%
ABSL 1999-A A 7.25% 7/1/18 ........................... 2,898,680 2,916,797
-----------
2,916,797
-----------
Total Municipal Bonds (cost $19,434,999) 19,429,328
-----------
Number
of Shares
---------
Short-Term Investments - 0.68%
Wells Fargo National Tax-Free Money
Market Fund ......................................... 141,339 141,339
-----------
Total Short-Term Investments
(cost $141,339) ..................................... 141,339
-----------
Total Market Value of Securities - 94.71%
(cost $19,576,338) .................................. $19,570,667
Receivables and Other Assets
Net of Liabilities - 5.29% .......................... 1,092,614
-----------
Net Assets Applicable to 2,016,521
Shares Outstanding - 100.00% ........................ $20,663,281
===========
Net Asset Value - Delaware Tax-Free Arizona
Fund A Class ($13,872,763 / 1,353,905 Shares) ........ $10.25
-----------
Net Asset Value - Delaware Tax-Free Arizona
Fund B Class ($4,910,930 / 479,544 Shares) .......... $10.24
-----------
Net Asset Value - Delaware Tax-Free Arizona
Fund C Class ($1,879,588 / 183,072 Shares) .......... $10.27
-----------
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ............................. $22,075,898
Accumulated net realized loss on investments ......... (1,406,946)
Net unrealized depreciation of investments ........... (5,671)
-----------
Total net assets $20,663,281
===========
Summary of Abbreviations:
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Arizona Fund
Net asset value A Class (A) $10.25
Sales charge (3.75% of offering price or
3.90% of amount invested per share) (B) 0.40
-----------
Offering price $10.65
===========
------------
(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
15
<PAGE>
Statement of Assets and Liabilities
Delaware Tax-Free
August 31, 2000 Arizona Fund
-------------------------------------------------------------------
Assets:
Investments at market (cost $19,576,338) .......... $19,570,667
Receivable for securities sold .................... 833,954
Interest receivable ............................... 245,950
Subscriptions receivable .......................... 96,964
Cash .............................................. 1,262
Other assets ...................................... 12,046
-----------
Total assets ...................................... 20,760,843
-----------
Liabilities:
Liquidations payable .............................. 44,117
Dividends payable ................................. 25,871
Other liabilities and accrued expenses ............ 27,574
-----------
Total liabilities ................................. 97,562
-----------
Total Net Assets .................................. $20,663,281
===========
See accompanying notes
16
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE ARIZONA INSURED FUND
--------------------------------------
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.90%
Continuing Care / Retirement
Revenue Bonds - 2.57%
Maricopa County Industrial Revenue
6.30% 9/20/38 (GNMA) .............................. $ 3,715,000 $ 3,853,718
-----------
3,853,718
-----------
General Obligation Bonds - 17.01%
Cochise County Unified School District
7.50% 7/1/10 (FGIC) ............................... 1,000,000 1,217,240
Maricopa County Madison Unified School
District #38 5.80% 7/1/15 (MBIA) .................. 3,150,000 3,271,779
Maricopa County Osborn Unified School
District #8 5.875% 7/1/14 (FGIC) .................. 2,000,000 2,091,960
Maricopa County Peoria Unified School
District #11
7.00% 7/1/10 (AMBAC) .............................. 1,000,000 1,030,180
5.50% 7/1/15 (FGIC) ............................... 1,000,000 1,025,080
Maricopa County School District #3 Tempe
Elementary Series E 5.70% 7/1/16 (FGIC) ........... 1,025,000 1,061,541
Mohave County Unified School District #1
(Lake Havasu) 5.90% 7/1/15 (FGIC) ................. 5,000,000 5,218,150
Peoria
5.00% 4/1/18 (FGIC) ............................... 1,075,000 1,037,192
5.00% 4/1/19 (FGIC) ............................... 1,125,000 957,950
5.00% 4/1/20 (FGIC) ............................... 1,210,000 953,160
Pima County Manana Unified School
District #6 5.25% 7/1/14 (FGIC) ................... 1,240,000 1,255,227
Pinal County Apache Junction Unified
School District #43 5.85% 7/1/15 (FGIC) ........... 1,250,000 1,301,438
Tucson
6.10% 7/1/12 (FGIC) ............................... 4,890,000 5,082,715
-----------
25,503,612
-----------
Higher Education Revenue Bonds - 9.63%
Arizona State University System
6.125% 7/1/15 (MBIA) .............................. 1,000,000 1,028,120
Glendale Industrial Development Authority
(Midwestern University) Series A
6.00% 5/15/26 (Connie Lee) ........................ 630,000 646,701
Glendale Industrial Development Authority
Educational Facilities
(American Graduate School International)
5.625% 7/1/20 (Connie Lee) ........................ 1,000,000 1,007,510
5.875% 7/1/15 (Connie Lee) ........................ 3,000,000 3,111,270
Mohave County Community College
6.00% 3/1/20 (MBIA) ............................... 1,000,000 1,044,830
<PAGE>
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Higher Education Revenue Bonds (continued)
University of Arizona
5.50% 6/1/16 (FGIC) ............................... $ 1,000,000 $ 1,019,490
6.25% 6/1/11 (AMBAC) .............................. 3,000,000 3,133,290
University of Puerto Rico
5.375% 6/1/30 (MBIA) .............................. 3,500,000 3,451,105
-----------
14,442,316
-----------
Hospital Revenue Bonds - 14.24%
Arizona Health Facility Authority Phoenix
(Baptist Hospital and Medical Center)
6.25% 9/1/11 (MBIA) ............................... 2,000,000 2,100,760
Mesa Individual Development Authority
5.625% 1/1/29 (MBIA) .............................. 10,000,000 10,073,100
Mohave County Industrial Development
Authority (Chris/Silver Ridge)
6.375% 11/1/31 (GNMA) ............................. 1,300,000 1,351,064
Phoenix Industrial Development Authority
Hospital Revenue (John C. Lincoln Health)
Series B 5.75% 12/1/16 (Connie Lee) ............... 4,110,000 4,234,245
Pima County Tucson Medical Center
6.375% 4/1/12 (MBIA) .............................. 1,000,000 1,044,070
Pima Individual Health Care
6.75% 7/1/10 (MBIA) ............................... 1,000,000 1,037,020
University of Arizona Medical Center
6.25% 7/1/10 (MBIA) ............................... 1,445,000 1,511,094
-----------
21,351,353
-----------
Housing Revenue Bonds - 17.49%
Chandler Industrial Development Authority
Multifamily Housing
5.90% 7/20/15 (GNMA) .............................. 1,060,000 1,087,380
Maricopa County Industrial Development
Authority Mulitfamily Housing Revenue
5.90% 7/1/29 (MBIA) ............................... 1,205,000 1,229,028
Maricopa County (Metro Gardens-Mesa
Ridge Project) 5.15% 7/1/29 (MBIA) ................ 1,000,000 918,780
Maricopa County Industrial Development
Authority Multifamily Housing Revenue
(Villas De Merced Apartments Project)
5.50% 12/20/37 (GNMA) ............................. 1,145,000 1,084,361
Phoenix Industrial Development Authority
Multifamily Housing Revenue
(Ventana Palms Apartments)
6.15% 10/1/29 (MBIA) .............................. 510,000 530,747
6.20% 10/1/34 (MBIA) .............................. 940,000 968,802
Phoenix Industrial Development Authority
Multifamily Housing
7.50% 7/20/35 (GNMA) .............................. 5,500,000 6,233,975
7.50% 10/20/35 (GNMA) ............................. 1,359,000 1,574,279
17
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free Arizona Insured Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Housing Revenue Bonds (continued)
Pima County Industrial Development
Authority Single Family Revenue Housing
6.10% 5/1/31 (GNMA) .............................. $ 3,500,000 $ 3,563,280
Pima County Industrial Development
Authority Multifamily Revenue Housing
(Nova and Villa Projects)
5.125% 12/20/18 (GNMA) ........................... 1,000,000 961,470
5.20% 12/20/31 (GNMA) ............................ 1,000,000 925,940
7.00%12/30/31 (GNMA) ............................. 1,290,000 1,439,447
Pima County Industrial Development
Authority Multifamily Housing Revenue
(Sunbriar Apartments Project)
7.25% 7/1/25 (MBIA) .............................. 1,225,000 1,304,196
Yuma Industrial Development Authority
Multifamily Revenue (Government
National Mortgage Association Regency
Apartments A) 5.50% 12/20/32 (GNMA) .............. 2,000,000 1,938,200
Yuma Industrial Development Authority
Multifamily Revenue
6.10% 9/20/19 (GNMA) ............................. 2,340,000 2,467,390
-----------
26,227,275
-----------
Lease / Certificates of Participation - 4.81%
Oro Valley Common Trust Funds Partnership
5.75% 7/1/11 (MBIA) .............................. 1,000,000 1,053,430
5.75% 7/1/17 (MBIA) .............................. 1,000,000 1,025,960
Scottsdale Municipal Property Corporation
Lease 6.25% 11/1/14 (FGIC) ....................... 3,900,000 3,990,012
University of Arizona Certificates of
Participation 5.75% 6/1/19 (AMBAC) ............... 1,115,000 1,144,916
-----------
7,214,318
-----------
Power Authority Revenue Bonds - 9.35%
Mesa Utility Systems Revenue
5.25% 7/1/16 (FGIC) .............................. 12,000,000 11,960,760
Salt River Agricultural Improvement
& Power Project 6.25% 1/1/19 (FGIC) .............. 2,000,000 2,064,680
-----------
14,025,440
-----------
*Pre-Refunded Bonds / Escrowed to
Maturity - 12.33%
Chandler Refunding 7.00% 7/1/12-01 (FGIC) ......... 805,000 828,506
Chandler Water & Sewer Revenue
7.00% 7/1/12-01 (FGIC) ........................... 1,000,000 1,029,200
Glendale Industrial Development Authority
Educational Facilities
(American Graduate School International)
7.00% 7/1/14-05 (Connie Lee) ..................... 1,000,000 1,118,910
<PAGE>
Principal Market
Delaware Tax-Free Arizona Insured Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
*Pre-Refunded Bonds / Escrowed to
Maturity (continued)
Maricopa County Hospital District #1
6.125% 6/1/15-06 (FGIC) .......................... $ 5,500,000 $ 5,871,855
Maricopa County Industrial Development
Authority Baptist Hospital
5.50% 9/1/13-05 (MBIA) ........................... 3,080,000 3,252,141
5.50% 9/1/16-05 (MBIA) ........................... 1,000,000 1,055,890
Maricopa County School District #14
(Creighton School Improvement Project
of 1990) Series C 6.50% 7/1/08
(Escrowed to Maturity) (FGIC) .................... 1,000,000 1,124,220
Phoenix
6.375% 7/1/13-02 (MBIA) .......................... 2,000,000 2,094,000
Phoenix Street & Highway Revenue
6.50% 7/1/09-02 (AMBAC) .......................... 2,000,000 2,112,720
------------
18,487,442
------------
Transportation Revenue Bonds - 0.68%
Tucson Airport Authority Revenue
5.70% 6/1/13 (MBIA) .............................. 1,000,000 1,028,260
------------
1,028,260
------------
Water & Sewer Revenue Bonds - 6.62%
Gilbert Water & Waste Water Revenue
6.50% 7/1/12 (FGIC) .............................. 1,000,000 1,066,940
6.50% 7/1/22 (FGIC) .............................. 2,650,000 2,786,660
Phoenix Civic Improvement Waste Water
Systems Revenue
5.375% 7/1/22 (MBIA) ............................. 1,000,000 991,670
6.00% 7/1/24 (FGIC) .............................. 4,875,000 5,087,501
------------
9,932,771
------------
Other Revenue Bonds - 4.17%
Prescott Valley Property Corporate Municipal
Facilities Revenue 5.125% 1/1/18 (FGIC) .......... 1,000,000 979,140
Surprise Municipal Property Excise
Tax Revenue 5.70% 7/1/20 (FGIC) .................. 5,150,000 5,279,162
------------
6,258,302
------------
Total Municipal Bonds
(cost $142,407,197) .............................. 148,324,807
------------
18
<PAGE>
Statements of Net Assets (continued)
Delaware Tax-Free Arizona Insured Fund
-----------------------------------------------------------------
Total Market Value of Securities - 98.90%
(cost $142,407,197) ............................ $148,324,807
Receivables and Other Assets
Net of Liabilities - 1.10% ..................... 1,645,525
------------
Net Assets Applicable to 13,587,492
Shares Outstanding - 100.00% ................... $149,970,332
============
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund A Class
($142,018,039 / 12,867,140 Shares) ............. $11.04
------
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund B Class
($6,630,120 / 600,640 Shares) .................. $11.04
------
Net Asset Value - Delaware Tax-Free
Arizona Insured Fund C Class
($1,322,173 / 119,712 Shares) .................. $11.04
------
-----------------------
*For Pre-Refunded Bonds, the stated maturity is followed
by the year in which each bond is pre-refunded.
<PAGE>
Delaware Tax-Free Arizona Insured Fund
-----------------------------------------------------------------
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) . ...................... $147,256,204
Accumulated net realized loss
on investments ................................. (3,203,482)
Net unrealized appreciation of investments ...... 5,917,610
------------
Total net assets ................................ $149,970,332
============
-----------------------------------------------------------------
Summary of Abbreviations:
AMBAC - Insured by AMBAC Indemnity Corporation
Connie Lee - Insured by the College Construction Insurance Association
FGIC - Insured by the Financial Guaranty Insurance Company
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Arizona Insured Fund
Net asset value A class (A) ..................... $11.04
Sales charge (3.75% of offering price or
3.89% of amount invested per share) (B) ........ 0.43
------
Offering price .................................. $11.47
======
------------------------
(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
19
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE CALIFORNIA FUND
---------------------------------
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.50%
Higher Education Bonds - 7.41%
California Educational Facilities Authority
Revenue 5.75% 11/1/30 (MBIA) ...................... $1,000,000 $ 1,030,940
Fullerton University Foundation Auxiliary
Organization 5.75% 7/1/25 (MBIA) .................. 1,000,000 1,036,400
San Francisco State University Auxiliary
Organization 5.25% 7/1/32 (ACA) ................... 1,250,000 1,150,575
----------
3,217,915
----------
Hospital Revenue Bonds - 16.88%
California Infrastructure & Economic
Development Bank Revenue 5.625% 7/1/20 ............ 750,000 761,520
California Statewide Community Development
Authority Partnership 5.375% 4/1/17 ............... 4,000,000 3,704,000
San Benito Health Care Revenue
5.45% 10/1/28 ..................................... 2,500,000 1,898,350
Sierra View Local Health Care District
California Revenue 5.25% 7/1/18 (ACA) ............. 1,000,000 966,240
----------
7,330,110
----------
Housing Revenue Bonds - 21.31%
Abag Finance Authority of California
6.10% 2/15/25 ..................................... 2,575,000 2,696,643
California Statewide Communities Development
Authority Multifamily Revenue
5.80% 8/1/33 ...................................... 1,000,000 1,017,380
Fairfield Housing Authority 5.625% 9/1/23 .......... 1,000,000 914,070
Monterey County Housing Authority
5.00% 7/1/19 ...................................... 2,260,000 2,008,440
San Marcos Redevelopment Agency Tax
Allocation Affordable Housing Project -
Series A 6.00% 10/1/27 ............................ 530,000 532,178
Stanton Multifamily Revenue
5.625% 8/1/29 (FNMA) .............................. 1,990,000 2,082,754
----------
9,251,465
----------
Lease / Certificates of Participation - 12.43%
Mendocino County Certificates of Participation
5.25% 6/1/30 ...................................... 1,000,000 974,940
San Diego County Certificates of Participation
5.70% 2/1/28 ...................................... 1,500,000 1,424,310
6.25% 9/1/29 ...................................... 1,000,000 1,020,700
Santa Ana Financing Authority Revenue
(Inner City Commuter C) 5.60% 9/1/19 .............. 600,000 586,290
Soledad Unified School District
Financing Project 5.30% 5/1/19 .................... 1,000,000 934,450
Turlock Public Funding
5.45% 9/1/24 ...................................... 500,000 454,520
----------
5,395,210
----------
<PAGE>
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Power Authority Revenue Bonds - 4.85%
Puerto Rico Industrial Tourist Educational
Medical & Environmental Control
Cogeneration Facilities (Puerto Rico Project)
6.625% 6/1/26 ..................................... $2,000,000 $ 2,105,740
-----------
2,105,740
-----------
School District Revenue Bonds - 8.07%
Carmel Unified School District 5.50% 8/1/25 ........ 1,315,000 1,327,808
Pomona Unified School District Series A
6.55% 8/1/29 (MBIA) ............................... 1,000,000 1,170,520
Tustin University School District
Community Facilities District # 97-1
6.375% 9/1/35 ..................................... 1,000,000 1,007,690
-----------
3,506,018
-----------
Transportation Revenue Bonds - 6.04%
Foothill/Eastern Corridor Agency Toll Road
Revenue 5.375% 1/15/14 (MBIA) ..................... 1,000,000 1,049,290
Long Beach Harbor Revenue
6.00% 5/15/11 (FGIC) .............................. 1,000,000 1,110,860
Port Redwood City Revenue
5.40% 6/1/19 ...................................... 500,000 462,900
-----------
2,623,050
-----------
Other Revenue Bonds - 21.51%
Delano Community Redevelopment Agency
Tax Allocation 6.00% 11/1/03 ...................... 2,500,000 2,539,850
El Monte Public Authority Tax Allocation
Special Term
(Muliple Redevelopment Project)
5.75% 6/1/28 ...................................... 880,000 832,216
Escondido Improvement Bond Act 1915
5.625% 9/2/18 ..................................... 455,000 437,828
La Mirada Redevelopment Agency Special
Tax Ref-Community Facilities District #89-1
5.70% 10/1/20 ..................................... 500,000 475,895
Lake Elisnore Public Financing Authority
5.50% 9/1/30 ...................................... 1,000,000 908,070
5.80% 9/2/15 ...................................... 1,125,000 1,127,711
Poway Redevelopment Agency Tax Allocation
5.75% 6/15/33 ..................................... 1,000,000 1,033,740
Sacramento County Special Tax
(Community Facilities District #1)
5.70% 12/1/20 ..................................... 500,000 478,555
San Diego Redevelopment Agency
6.40% 9/1/25 ...................................... 1,000,000 1,033,460
Whittier Redevelopment Agency
Tax Allocation (Whittier Boulevard)
5.75% 11/1/28 ..................................... 500,000 473,345
-----------
9,340,670
-----------
Total Municipal Bonds (cost $43,493,681) ........... 42,770,178
-----------
20
<PAGE>
Statements of Net Assets (continued)
Number Market
Delaware Tax-Free California Fund of Shares Value
--------------------------------------------------------------------------------
Short-Term Investments - 0.71%
Wells Fargo National Tax-Free
Money Market Fund ................................. 309,119 $ 309,119
-----------
Total Short-Term Investments
(cost $309,119) ................................... 309,119
-----------
Total Market Value of Securities - 99.21%
(cost $43,802,800) ................................ $43,079,297
Receivables and Other Assets
Net of Liabilities - 0.79% ........................ 342,434
-----------
Net Assets Applicable to 4,158,272
Shares Outstanding - 100.00% ...................... $43,421,731
===========
Net Asset Value - Delaware Tax-Free
California Fund A Class
($24,794,192 / 2,377,263 Shares) .................. $10.43
------
Net Asset Value - Delaware Tax-Free
California Fund B Class
($14,448,587 / 1,380,736 Shares) .................. $10.46
------
Net Asset Value - Delaware Tax-Free
California Fund C Class
($4,178,952 / 400,273 Shares) ..................... $10.44
------
<PAGE>
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ........................... $45,875,661
Undistributed net investment income ................ 660
Accumulated net realized loss on investments ....... (1,731,087)
Net unrealized depreciation of investments ......... (723,503)
-----------
Total net assets ................................... $43,421,731
===========
-------------------------
Summary of Abbreviations:
ACA - Insured by American Capital Access
FGIC - Insured by the Financial Guaranty Insurance Company
FNMA - Insured by the Federal National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free California Fund
Net asset value A Class (A) ........................ $10.43
Sales charge (3.75% of offering price or
3.93% of amount invested per share) (B) ........... 0.41
------
Offering price ..................................... $10.84
======
----------------------
(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
21
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE CALIFORNIA INSURED FUND
-----------------------------------------
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 99.18%
Higher Education Revenue Bonds - 3.35%
California Educational Facilities Authority
Revenue 5.75% 11/1/30 (MBIA) ...................... $1,000,000 $ 1,030,940
-----------
1,030,940
-----------
Hospital Revenue Bonds - 6.61%
California Health Facilities Finance Authority
Revenue 5.375% 8/15/30 (MBIA) ..................... 1,000,000 978,840
California Health Facilities (San Diego Hospital)
6.20% 8/1/12 (MBIA) ............................... 1,000,000 1,053,510
-----------
2,032,350
-----------
Housing Revenue Bonds - 27.33%
California Housing Finance Agency Home
Mortgage Revenue Series E
6.05% 8/1/16 (MBIA) ............................... 1,000,000 1,037,320
California Housing Finance Agency Home
Mortgage Revenue Series K
6.15% 8/1/16 (MBIA) ............................... 1,100,000 1,154,593
California Housing Finance Agency Revenue
Series E 6.75% 8/1/26 (MBIA) ...................... 1,000,000 1,055,050
California Housing Finance Agency Revenue
Series F 6.00% 8/1/17 (MBIA) ...................... 1,000,000 1,034,710
California Housing Finance Agency
Single Family 6.00% 8/1/20 (AMT) (MBIA) ........... 875,000 895,204
California Rural Home Mortgage
Finance Authority Single Family
Mortgage Revenue
7.95% 12/1/24 (AMBAC) ............................. 935,000 1,018,131
Fresno Multifamily Housing Revenue
(Woodlands Apartments Project) Series A
6.65% 5/20/17 (GNMA) .............................. 1,000,000 1,095,470
Ventura County Area Housing Authority
Multifamily Housing Revenue
(Glen Oaks Apartments) Series A
6.35% 7/20/34 (GNMA) .............................. 1,053,000 1,114,811
-----------
8,405,289
-----------
Lease / Certificates of Participation - 27.17%
Del Mar School District
5.25% 9/1/29 (AMBAC) .............................. 1,000,000 975,280
Huntington Beach Public Financing
Authority Revenue
5.50% 9/1/25 (AMBAC) .............................. 1,000,000 1,009,170
Mendocino County Certificates of Participation
County Public Facilities Corporation
5.25% 6/1/30 (MBIA) ............................... 1,000,000 974,940
Placer County Water Agency Capital
Improvement Projects
5.50% 7/1/29 (AMBAC) .............................. 1,000,000 1,006,400
<PAGE>
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Lease / Certificates of Participation (continued)
San Diego County Certificates of Participation
5.75% 7/1/31(MBIA) ................................. $2,000,000 $ 2,056,880
Santa Barbara Water Revenue Certificates
of Participation 6.70% 4/1/27 (AMBAC) .............. 1,000,000 1,050,030
Santa Clara Finance Authority
7.75% 11/15/11 (AMBAC) ............................. 1,000,000 1,282,190
-----------
8,354,890
-----------
Transportation Revenue Bonds - 10.05%
Port of Oakland 5.75% 11/1/29 (FGIC) ................ 2,000,000 2,048,940
Puerto Rico Commonwealth Highway &
Transportation Authority (Highway Revenue)
5.875% 7/1/35 (MBIA) ............................... 1,000,000 1,043,450
-----------
3,092,390
-----------
Water & Sewer Revenue Bonds - 3.47%
Calaveras County Water District Revenue
6.125% 9/1/17 (AMBAC) .............................. 1,000,000 1,067,940
-----------
1,067,940
-----------
Other Revenue Bonds - 21.20%
Culver City Redevelopment Finance Authority
(Tax Allocation) Series A
5.60% 11/1/25 (FSA) ................................ 1,000,000 1,018,190
Oakland Industrial Revenue - Harrison
Foundation Series B
6.00% 1/1/29 (AMBAC) ............................... 1,300,000 1,359,319
Ontario Redevelopment Cimarron Project
6.25% 8/1/15 (MBIA) ................................ 1,000,000 1,042,270
Poway Redevelopment Agency Tax Allocation
5.75% 6/15/33 (MBIA) ............................... 3,000,000 3,101,220
-----------
6,520,999
-----------
Total Municipal Bonds (cost $29,053,530) ............ 30,504,798
-----------
Number
of Shares
---------
Short-Term Investments - 2.98%
Wells Fargo National Tax-Free Money
Market Fund ........................................ 918,039 918,039
-----------
Total Short-Term Investments
(cost $918,039) .................................... 918,039
-----------
22
<PAGE>
Statements of Net Assets (continued)
--------------------------------------------------------------------------------
Delaware Tax-Free California Insured Fund
Total Market Value of Securities - 102.16%
(cost $29,971,569) ............................. $31,422,837
Liabilities Net of Receivables and
Other Assets - (2.16)% ......................... (666,820)
-----------
Net Assets Applicable to 2,890,229
Shares Outstanding - 100.00% ................... $30,756,017
===========
Net Asset Value - Delaware Tax-Free
California Insured Fund A Class
($23,876,680 / 2,243,729 Shares) ............... $10.64
------
Net Asset Value - Delaware Tax-Free
California Insured Fund B Class
($6,440,035 / 605,056 Shares) .................. $10.64
------
Net Asset Value - Delaware Tax-Free
California Insured Fund C Class
($439,302 / 41,444 Shares) ..................... $10.60
------
<PAGE>
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ........................ $30,030,357
Accumulated net realized loss on investments .... (725,608)
Net unrealized appreciation of investments ...... 1,451,268
-----------
Total net assets ................................ $30,756,017
===========
-------------------
Summary of Abbreviations:
AMBAC - Insured by the AMBAC Indemnity Corporation
AMT - Subject to Alternative Minimum Tax
FGIC- Insured by the Financial Guaranty Insurance Company
FSA - Insured by Financial Security Assurance
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free California Insured Fund
Net asset value A Class (A) ..................... $10.64
Sales charge (3.75% of offering price or
3.85% of amount invested per share) (B) ........ 0.41
------
Offering price .................................. $11.05
======
-----------------------
(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 Net Assets (continued)
DELAWARE TAX-FREE COLORADO FUND
-------------------------------
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.48%
General Obligation Bonds - 23.59%
Arapahoe Water & Sanitation
District Arapahoe County
Series 1995A 6.00% 12/1/15 (MBIA) ................. $ 6,010,000 $ 6,162,594
Series 1995A 6.15% 12/1/19 (MBIA) ................. 10,075,000 10,304,710
Central Platte Valley Metropolitan District
5.20% 12/1/17 (ACA) ............................... 7,675,000 7,181,267
Concord Metropolitan District
8.00% 12/1/19 ..................................... 5,000,000 4,903,050
Eagles Nest Metropolitan District Limited Tax
6.50% 11/15/17 .................................... 6,350,000 6,621,399
E-470 Business Metropolitan District
5.125% 12/1/17 (ACA) .............................. 2,500,000 2,318,850
Galleria Metropolitan District
7.25% 12/1/09 ..................................... 1,130,000 1,151,108
Highlands Ranch Metropolitan District #3
5.30% 12/1/19 (ACA) ............................... 450,000 420,129
Interlocken Metropolitan District
5.625% 12/15/16 (Asset Gty) ....................... 1,750,000 1,775,375
5.625% 12/15/16 (Asset Gty) ....................... 7,000,000 7,131,040
5.75% 12/15/12 (Asset Gty) ........................ 1,985,000 2,087,168
5.75% 12/15/19 (Asset Gty) ........................ 9,000,000 9,110,880
Interstate South Metropolitan District
6.00% 12/1/20 ..................................... 8,755,000 8,919,069
Jefferson County Metropolitan District-
Section 14, Series A 6.20% 12/1/13 ................. 1,750,000 1,840,020
Loveland Special Improvement District #1
7.50% 7/1/29 ...................................... 6,140,000 6,067,609
-----------
75,994,268
-----------
Higher Education Revenue Bonds - 1.66%
Colorado Springs Revenue (Colorado
College Project) 5.375% 6/1/32 ..................... 5,570,000 5,328,819
-----------
5,328,819
-----------
Hospital Revenue Bonds - 20.94%
Boulder County Hospital Revenue
Development (Longmont United Hospital)
5.60% 12/1/27 ..................................... 6,765,000 5,734,217
Boulder County Hospital Revenue (Longmont
United Project) 5.875% 12/1/20 .................... 3,000,000 2,722,740
Colorado Health Facilities Authority
(Baptist Home Association) Series A
6.375% 8/15/24 .................................... 3,250,000 2,717,553
Colorado Health Facilities Authority
(Covenant Retirement) 6.75% 12/1/25 ............... 4,150,000 4,256,655
Colorado Health Facilities Authority
(National Benevolent Association)
Series B 5.25% 2/1/28 ............................. 3,700,000 2,978,981
Colorado Health Facilities Authority
(National Benevolent Association)
Series A 6.90% 6/1/15 ............................. 1,085,000 1,111,789
<PAGE>
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Hospital Revenue Bonds (continued)
Colorado Health Facilities Authority (National
Jewish Medical & Research Center)
5.375% 1/1/23 (ACA) ............................... $ 4,945,000 $ 4,450,599
5.375% 1/1/28 (ACA) ............................... 2,000,000 1,789,340
5.375% 1/1/29 (ACA) ............................... 1,000,000 889,990
Colorado Health Facilities Authority
(Parkview Hospital)
6.00% 9/1/16 ...................................... 4,000,000 3,833,560
6.125% 9/1/25 ..................................... 7,750,000 7,204,090
Colorado Health Facilities Authority
(Parkview Medical Center Income Project)
5.25% 9/1/18 ...................................... 1,500,000 1,270,335
Colorado Health Facilities Authority
(Rocky Mountain Adventist Healthcare)
6.625% 2/1/13 ..................................... 15,000,000 14,695,200
6.625% 2/1/22 ..................................... 3,885,000 3,634,651
Colorado Health Facilities Authority
(Steamboat Springs Health)
5.75% 9/15/22 ..................................... 1,100,000 904,200
Colorado Health Facilities Authority
(Vail Valley Medical Center Revenue)
6.50% 1/15/13 (ACA) ............................... 2,150,000 2,236,409
6.60% 1/15/20 (ACA) ............................... 5,475,000 5,733,146
Denver Health & Hospital Revenue
5.375% 12/1/28 .................................... 1,000,000 809,620
University of Colorado Hospital Authority
Hospital Revenue Series A
5.20% 11/15/17 (AMBAC) ............................ 500,000 484,495
-----------
67,457,570
-----------
Housing Revenue Bonds - 12.77%
Adams County Housing Authority Mortgage
Revenue (Aztec Villa Apartments Project)
5.85% 12/1/27 ..................................... 1,825,000 1,812,516
Adams County Housing Authority Mortgage
Revenue (Greenbriar Project)
6.75% 7/1/21 ...................................... 1,730,000 1,819,752
Aurora Housing Authority
Multifamily Revenue
5.60% 7/1/19 ...................................... 2,635,000 2,560,192
5.70% 7/1/23 ...................................... 1,535,000 1,472,495
Boulder County Housing Authority Revenue
4.75% 12/1/28 (ACA) ............................... 2,500,000 2,104,525
Burlingame Multifamily Housing Revenue
6.00% 11/1/29 (MBIA) .............................. 1,250,000 1,277,525
Colorado Housing & Finance Authority
6.15% 10/1/41 ..................................... 1,590,000 1,618,668
Colorado Housing & Finance Authority
Series A-3 6.25% 10/1/26 (FHA) .................... 8,530,000 8,862,499
24
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE COLORADO FUND
-------------------------------
Principal Market
Delaware Tax-Free Colorado Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Housing Revenue Bonds (continued)
Colorado Housing & Finance Authority
Single Family Series D-3
6.75% 4/1/32 ...................................... $ 500,000 $ 547,770
Eaglebend Affordable Housing Corporate
Multifamily Revenue Housing Project
Series A 6.20% 7/1/12 ............................. 1,000,000 982,670
Series A 6.40% 7/1/17 ............................. 1,000,000 973,810
Series A 6.45% 7/1/21 ............................. 1,000,000 954,780
Englewood Multifamily (Marks Apartments)
Series B 6.00% 12/15/18 ........................... 8,295,000 8,355,222
Series 96 6.65% 12/1/26 ........................... 5,700,000 5,789,376
Pueblo County Single Family Mortgage
Revenue Series 1994A
7.05% 11/1/27 (GNMA) .............................. 1,940,000 2,012,052
-----------
41,143,852
-----------
Lease/Certificates of Participation - 6.22%
Aurora Certificates of Participation
5.50% 12/1/30 (AMBAC) ............................. 7,500,000 7,390,575
Broomfield Certificates of Participation
6.00% 12/1/29 (AMBAC) ............................. 1,750,000 1,812,528
Conejos & Alamosa Counties School District
Certificates of Participation
6.50% 4/1/11 ...................................... 1,615,000 1,626,886
Garfield County Building Corporation
5.75% 12/1/19 (AMBAC) ............................. 1,200,000 1,234,488
Greeley Building Authority Certificates of
Participation 6.10% 8/15/16 ....................... 2,600,000 2,640,976
Pueblo County Certificates of Participation
6.50% 12/1/24 ..................................... 5,460,000 5,329,288
-----------
20,034,741
-----------
Power Authority Revenue Bonds - 0.76%
Puerto Rico Electric & Power Authority
Revenue 5.25% 7/1/29 .............................. 2,500,000 2,434,625
-----------
2,434,625
-----------
Territorial Revenue Bonds - 0.72%
Virgin Islands Public Finance Authority
Revenue 6.125% 10/1/29 (ACA) ...................... 2,250,000 2,299,793
-----------
2,299,793
-----------
Transportation Revenue Bonds - 10.61%
Arapahoe County Capital Improvement Trust
Highway Revenue Vehicle Reg E-470
6.15% 8/31/26 (MBIA) .............................. 8,530,000 8,867,617
Colorado Department of Transportation
Revenue Antic Notes
6.00% 6/15/15 (AMBAC) ............................. 8,000,000 8,540,720
Denver City & County Airport
Series E 5.25% 11/15/23 (MBIA) .................... 5,000,000 4,780,150
Series E 5.50% 12/1/25 (AMBAC) .................... 5,000,000 4,952,400
E-470 Public Highway Authority Colorado
Revenue 5.75% 9/1/35 (MBIA) ....................... 3,300,000 3,342,768
<PAGE>
Principal Market
Delaware Tax-Free Colorado Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Transportation Revenue Bonds (continued)
Puerto Rico Highway & Transportation
Authority 6.00% 7/1/29 ........................... $ 3,000,000 $ 3,183,660
5.875% 7/1/35 (MBIA) ............................. 500,000 521,724
-----------
34,189,039
-----------
Utility Revenue Bonds - 2.81%
Colorado Springs Utilities Revenue
Series A 5.00% 11/15/27 ........................... 10,000,000 9,048,000
-----------
9,048,000
-----------
Water & Sewer Revenue Bonds - 2.74%
Erie Water Enterprise Revenue
5.00% 12/1/23 (ACA) .............................. 5,000,000 4,415,650
Gypsum Sewer Enterprise Revenue
6.50% 12/1/20 .................................... 1,575,000 1,543,579
Ute Utility Water Conservancy District
Water Revenue 5.75% 6/15/20 (MBIA) ............... 2,800,000 2,874,396
-----------
8,833,625
-----------
Other Revenue Bonds - 15.66%
Aurora Golf Course Enterprise System
Revenue (Saddle Rock Golf Course)
6.20% 12/1/15 .................................... 2,000,000 2,029,160
Colorado Educational & Cultural Facilities
Authority Revenue (Aspen)
6.125% 7/1/12 .................................... 605,000 585,338
Colorado Educational & Cultural Facilities
Authority Revenue (Aspen Foundation
Colorado) 6.50% 7/1/24 ........................... 1,710,000 1,648,013
Colorado Educational & Cultural Facilities
Authority Revenue (Charter School -
Renaissance School Project)
6.75% 6/1/29 ..................................... 2,000,000 2,047,380
Colorado Educational & Cultural Facilities
Authority Revenue
6.50% 7/15/12 .................................... 1,975,000 1,940,437
6.50% 7/15/24 .................................... 5,145,000 4,952,063
7.00% 11/1/29 .................................... 1,000,000 1,008,750
7.75% 7/15/31 .................................... 2,150,000 2,146,926
Colorado Post Secondary Education (Ocean
Journey Project) 8.375% 12/1/26 .................. 8,000,000 8,926,240
Lowry Economic Redevelopment Authority
Revenue 7.50% 12/1/10 ............................ 13,700,000 15,094,248
Lowry Economic Redevelopment Authority
Revenue (Private Placement)
Series A 7.00% 12/1/10 ........................... 1,400,000 1,506,301
Metropolitan Football Stadium District
Sales Tax Revenue
*Series A 5.062% 1/1/11 (MBIA) .................... 3,600,000 2,138,760
*Series A 5.144% 1/1/12 (MBIA) .................... 1,750,000 977,673
Pueblo Urban Renewal Authority Tax
Increment Revenue 6.625% 12/1/19 ................. 2,060,000 2,126,991
25
<PAGE>
Statements of Net Assets (continued)
Principal Market
Delaware Tax-Free Colorado Fund Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Other Revenue Bonds (continued)
South Suburban Park & Recreation District
(Golf & Ice Arena Facility)
6.00% 11/1/15 ..................................... $ 2,330,000 $ 2,349,199
Westminster Golf Course
5.55% 12/1/23 (Asset Gty) ......................... 1,000,000 973,190
------------
50,450,669
------------
Total Municipal Bonds (cost $312,788,759) 317,215,001
------------
Number
of Shares
-----------
Short-Term Investments - 0.41%
Wells Fargo National Tax-Free Money
Market Fund ....................................... 1,311,515 1,311,515
------------
Total Short-Term Investments
(cost $1,311,515) ................................. 1,311,515
------------
Total Market Value of Securities -
98.89% (cost $314,100,274) ........................ $318,526,516
Receivables and Other Assets
Net of Liabilities - 1.11% ........................ 3,576,985
------------
Net Assets Applicable to 30,302,496
Shares Outstanding - 100.00% ...................... $322,103,501
------------
Net Asset Value - Delaware Tax-Free
Colorado Fund A Class
($304,408,885/28,638,714 Shares) .................. $10.63
------
Net Asset Value - Delaware Tax-Free
Colorado Fund B Class
($13,440,642/1,263,940 Shares) .................... $10.63
------
Net Asset Value - Delaware Tax-Free
Colorado Fund C Class
($4,253,974/399,842 Shares) ....................... $10.64
------
-----------------
*Zero Coupon Bond - The interest rate shown is the effective yield as of
August 31, 2000.
<PAGE>
Principal Market
Delaware Tax-Free Colorado Fund Amount Value
--------------------------------------------------------------------------------
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ...................................... $327,020,613
Accumulated net realized loss
on investments ............................................... (9,343,354)
Net unrealized appreciation of investments .................... 4,426,242
------------
Total net assets .............................................. $322,103,501
------------
---------------------------------
Summary of Abbreviations:
ACA - Insured by American Capital Access
Asset Gty - Insured by the Asset Guaranty Insurance Company
AMBAC - Insured by the AMBAC Indemnity Corporation
FHA - Insured by the Federal Housing Authority
GNMA - Insured by the Government National Mortgage Association
MBIA - Insured by the Municipal Bond Insurance Association
Net Asset Value and Offering Price per Share -
Delaware Tax-Free Colorado Fund
Net asset value A Class (A) ................................... $10.63
Sales charge (3.75% of offering price
or 3.86% of amount invested
per share) (B) ............................................... 0.41
------
Offering price ................................................ $11.04
------
------------------
(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.
See accompanying notes
26
<PAGE>
Statements of Net Assets (continued)
DELAWARE TAX-FREE NEW MEXICO FUND
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds - 98.48%
Higher Education Revenue Bonds - 12.95%
New Mexico Education Assistance Foundation
6.65% 11/1/25 ...................................... $1,000,000 $ 1,034,810
Santa Fe Education Facilities Revenue
(St. John's College) 5.50% 3/1/24 (ACA) ............ 1,000,000 912,570
University of New Mexico Revenue
6.00% 6/1/25 (MBIA) ................................ 1,000,000 1,064,240
-----------
3,011,620
-----------
Highway Revenue Bonds - 4.58%
New Mexico State Highway Commission
Tax Revenue 6.00% 6/15/15 .......................... 1,000,000 1,064,550
-----------
1,064,550
-----------
Hospital Revenue Bonds - 9.34%
New Mexico State Hospital Equipment
Council Hospital Revenue 5.50% 6/2/28 .............. 1,500,000 1,198,125
New Mexico State Hospital Equipment
Memorial Medical Center Project
6.40% 6/1/16 ....................................... 1,000,000 974,750
-----------
2,172,875
-----------
Housing Revenue Bonds - 29.93%
Carlsbad Housing Multifamily Revenue
(Colonial Hillcrest) 7.375% 8/1/27 ................. 1,000,000 1,000,900
New Mexico Mortgage Finance Authority
Series 1994B 6.75% 7/1/25 (GNMA) ................... 1,000,000 1,116,960
Series 1994F 6.95% 1/1/26 (GNMA) ................... 1,000,000 1,121,360
Series 1996G 6.85% 1/1/21 (GNMA) ................... 1,500,000 1,682,550
New Mexico Mortgage Finance Authority
Single Family 5.875% 9/1/21 ........................ 500,000 502,340
Santa Fe Single Family Mortgage Revenue
6.20% 11/1/16 (FNMA) ............................... 570,000 590,207
Southeastern New Mexico Affordable
Housing (Casa Hermosa Apartments)
7.25% 12/1/27 ...................................... 1,000,000 946,680
-----------
6,960,997
-----------
Pollution Control Revenue Bonds - 13.17%
Farmington Pollution Control Revenue
6.15% 11/1/13 ...................................... 1,000,000 1,000,990
Farmington Pollution Control Public Service
Company (Project CBI) 6.375% 4/1/22 (ACA) .......... 1,000,000 1,026,130
Lordsburg Pollution Control Revenue
6.50% 4/1/13 ....................................... 1,000,000 1,036,610
-----------
3,063,730
-----------
Power Revenue Bonds - 4.51%
Los Alamos Utility System Revenue 1994A
6.00% 7/1/15 (FSA) ................................. 1,000,000 1,048,840
-----------
1,048,840
-----------
<PAGE>
Principal Market
August 31, 2000 Amount Value
--------------------------------------------------------------------------------
Municipal Bonds (continued)
Recreational Revenue Bonds - 3.87%
Santa Fe Municipal Recreation Complex
Net Revenue 5.625% 12/1/23 .......................... $1,000,000 $ 900,130
-----------
900,130
-----------
Waste Disposal Revenue Bonds - 0.88%
Las Cruses Solid Waste Authority
Environmental Services 6.00% 6/1/16 ................. 200,000 204,350
-----------
204,350
-----------
Other Revenue Bonds - 19.25%
Albuquerque Special Assessment #223
6.45% 1/1/15 ........................................ 505,000 505,929
Bernalillo County Gross Receipts Tax Revenue
5.25% 10/1/26 ....................................... 1,000,000 950,950
5.25% 4/1/27 ........................................ 1,000,000 962,550
San Juan Gross Receipts
5.55% 3/15/16 (AMBAC) ............................... 1,000,000 1,020,760
Truth or Consequences Gross Tax Receipts
6.30% 7/1/16 ........................................ 1,000,000 1,035,760
-----------
4,475,949
-----------
Total Municipal Bonds
(cost $22,659,257) .................................. 22,903,041
-----------
Number
of Shares
-----------
Short-Term Investments - 2.42%
Wells Fargo National Tax-Free Money
Market Fund ......................................... 562,614 562,614
-----------
Total Short-Term Investments
(cost $562,614) ..................................... 562,614
-----------
27
<PAGE>
Statements of Net Assets (continued)
Delaware Tax-Free New Mexico Fund
--------------------------------------------------------------------------------
Total Market Value of Securities - 100.90%
(cost $23,221,871) ..................................... $23,465,655
Liabilities Net of Receivables
and Other Assets - (0.90)% ............................. (209,861)
-----------
Net Assets Applicable to 2,174,593
Shares Outstanding - 100.00% ........................... $23,255,794
-----------
Net Asset Value - Delaware Tax-Free
New Mexico Fund A Class
($20,162,465/1,885,573 Shares) ......................... $10.69
------
Net Asset Value - Delaware Tax-Free
New Mexico Fund B Class
($2,538,765/237,175 Shares) ............................ $10.70
------
Net Asset Value - Delaware Tax-Free
New Mexico Fund C Class
($554,564 / 51,845 Shares) ............................. $10.70
------
28
<PAGE>
Delaware Tax-Free New Mexico Fund
--------------------------------------------------------------------------------
Components of Net Assets at August 31, 2000:
Shares of beneficial interest (unlimited
authorization - no par) ....................................... $23,651,179
Accumulated net realized loss on investments ................... (639,169)
Net unrealized appreciation of investments ..................... 243,784
-----------
Total net assets ............................................... $23,255,794
-----------
-------------------------
Summary of Abbreviations:
ACA - Insured by American Capital Access
AMBAC - Insured by the AMBAC Indemnity Corporation
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
Net Asset Value and Offering Price per Share -
Delaware Tax-Free New Mexico Fund
Net asset value A Class (A) .................................... $10.69
Sales charge (3.75% of offering price or 3.93%
of amount invested per share) (B) ............................. 0.42
------
Offering price ................................................. $11.11
------
--------------
(A) Net asset value per share, as illustrated, is the estimated amount which
would be paid upon the redemption or repurchase of shares.
(B) See the current prospectus for purchases of $100,000 or more.
See accompanying notes
<PAGE>
Statements of Operations
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona California California Colorado New Mexico
Year Ended August 31, 2000 Fund Insured Fund Fund Insured Fund Fund Fund
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest ............................................ $1,414,307 $9,136,546 $2,425,250 $1,777,648 $20,369,226 $1,401,479
---------- ---------- ---------- ---------- ----------- ----------
Expenses:
Management fees ..................................... 123,690 783,612 223,821 151,118 1,798,384 124,068
Dividend disbursing and transfer agent fees
and expenses ....................................... 21,325 120,290 30,400 33,418 273,110 24,196
Distribution expense ................................ 108,747 450,766 233,163 128,962 951,778 79,007
Registration fees ................................... 1,910 6,150 5,600 1,625 1,900 1,250
Reports and statements to shareholders .............. 15,800 61,572 15,431 22,550 162,348 4,103
Accounting and administration ....................... 8,875 55,846 17,400 14,367 149,694 9,515
Professional fees ................................... 1,425 33,500 13,575 14,676 65,200 500
Custodian fees and expenses ......................... 3,100 15,950 4,000 6,005 24,850 1,025
Trustees' fees ...................................... 550 3,900 420 1,750 12,300 475
Taxes (other than taxes on income) .................. 3,751 14,638 4,349 600 48,392 735
Other ............................................... 2,802 51,338 8,242 7,551 40,374 1,934
---------- ---------- ---------- ---------- ----------- ----------
291,975 1,597,562 556,401 382,622 3,528,330 246,808
Less expenses absorbed or waived .................... (70,622) (48,577) (220,623) (27,232) (124,747) --
Less expenses paid indirectly ....................... (517) (3,602) (935) (695) (7,515) (519)
---------- ---------- ---------- ---------- ----------- ----------
Total operating expenses (before interest expense) .. 220,836 1,545,383 334,843 354,695 3,396,068 246,289
Interest expense .................................... 3,461 7,842 1,424 2,201 33,609 402
---------- ---------- ---------- ---------- ----------- ----------
Total expenses ...................................... 224,297 1,553,225 336,267 356,896 3,429,677 246,691
---------- ---------- ---------- ---------- ----------- ----------
Net Investment Income ............................... 1,190,010 7,583,321 2,088,983 1,420,752 16,939,549 1,154,788
---------- ---------- ---------- ---------- ----------- ----------
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized loss on investments .................... (1,342,712) (1,688,183) (1,546,839) (528,420) (8,433,502) (178,276)
Net change in unrealized appreciation/
depreciation of investments ........................ 624,003 1,805,686 1,323,475 1,133,654 2,477,316 (34,558)
---------- ---------- ---------- ---------- ----------- ----------
Net Realized and Unrealized Gain (Loss)
on Investments ..................................... (718,709) 117,503 (223,364) 605,234 (5,956,186) (212,834)
---------- ---------- ---------- ---------- ----------- ----------
Net Increase in Net Assets
Resulting from Operations .......................... $ 471,301 $7,700,824 $1,865,619 $2,025,986 $10,983,363 $ 941,954
========== ========== ========== ========== =========== ==========
</TABLE>
See accompanying notes
29
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
Arizona Fund Arizona Insured Fund California Fund
------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
8/31/00 8/31/99 8/31/00 8/31/99 8/31/00 8/31/99
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................... $ 1,190,010 $ 1,018,076 $ 7,583,321 $ 8,400,085 $ 2,088,983 $ 1,583,975
Net realized gain (loss) on investments ............. (1,342,712) (29,459) (1,688,183) 1,231,358 (1,546,839) (153,896)
Net change in unrealized appreciation/depreciation
of investments ..................................... 624,003 (1,463,852) 1,805,686 (10,348,205) 1,323,475 (2,720,093)
-----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations .................................... 471,301 (475,235) 7,700,824 (716,762) 1,865,619 (1,290,014)
-----------------------------------------------------------------------------
Distributions to Shareholders from:
Net investment income:
A Class ........................................... (854,975) (749,961) (7,269,966) (8,137,700) (1,262,693) (980,018)
B Class ........................................... (248,840) (224,287) (257,283) (219,824) (623,432) (482,470)
C Class ........................................... (86,195) (43,828) (56,072) (42,785) (202,578) (119,973)
Net realized gain on investments:
A Class ........................................... -- (131,098) -- -- -- (33,213)
B Class ........................................... -- (51,618) -- -- -- (21,093)
C Class ........................................... -- (6,493) -- -- -- (3,610)
-----------------------------------------------------------------------------
(1,190,010) (1,207,285) (7,583,321) (8,400,309) (2,088,703) (1,640,377)
-----------------------------------------------------------------------------
Capital Share Transactions:
Proceeds from shares sold:
A Class ........................................... 5,722,220 11,402,727 5,866,309 13,298,123 9,028,276 16,534,979
B Class ........................................... 746,582 1,743,609 1,114,572 2,565,318 3,063,764 7,123,662
C Class ........................................... 208,973 1,548,540 320,457 1,011,175 724,203 5,165,216
Net asset value of shares issued upon reinvestment
of distributions from net investment income and
net realized gain on investments:
A Class ........................................... 464,390 537,599 3,141,155 3,531,111 817,953 695,651
B Class ........................................... 100,832 138,997 134,508 124,743 231,708 186,395
C Class ........................................... 60,818 24,670 43,405 31,272 133,502 73,254
-----------------------------------------------------------------------------
7,303,815 15,396,142 10,620,406 20,561,742 13,999,406 29,779,157
-----------------------------------------------------------------------------
Cost of shares repurchased:
A Class ........................................... (10,365,411) (4,355,710) (33,430,183) (21,041,194) (9,518,846) (2,615,126)
B Class ........................................... (1,749,909) (473,276) (714,763) (1,098,285) (2,437,781) (1,691,031)
C Class ........................................... (305,596) (146,074) (423,190) (219,748) (1,720,135) (556,491)
-----------------------------------------------------------------------------
(12,420,916) (4,975,060) (34,568,136) (22,359,227) (13,676,762) (4,862,648)
-----------------------------------------------------------------------------
Increase (decrease) in net assets derived from
capital share transactions ......................... (5,117,101) 10,421,082 (23,947,730) (1,797,485) 322,644 24,916,509
-----------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets ............... (5,835,810) 8,738,562 (23,830,227) (10,914,556) 99,560 21,986,118
Net Assets:
Beginning of period ................................. 26,499,091 17,760,529 173,800,559 184,715,115 43,322,171 21,336,053
-----------------------------------------------------------------------------
End of period ....................................... $20,663,281 $26,499,091 $149,970,332 $173,800,559 $43,421,731 $43,322,171
=============================================================================
</TABLE>
See accompanying notes
30
<PAGE>
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
Delaware Tax-Free Delaware Tax-Free Delaware Tax-Free
California Insured Fund Colorado Fund New Mexico Fund
------------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
8/31/00 8/31/99 8/31/00 8/31/99 8/31/00 8/31/99
<S> <C> <C> <C> <C> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ............................... $ 1,420,752 $ 1,532,885 $ 16,939,549 $ 18,008,626 $ 1,154,788 $ 1,133,406
Net realized gain (loss) on investments ............. (528,420) 224,505 (8,433,502) 2,194,583 (178,276) 79,785
Net change in unrealized appreciation/depreciation
of investments ..................................... 1,133,654 (2,466,054) 2,477,316 (26,520,859) (34,558) (1,525,343)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets resulting
from operations .................................... 2,025,986 (708,664) $ 10,983,363 (6,317,650) 941,954 (312,152)
----------- ----------- ------------ ------------ ----------- -----------
Distributions to Shareholders from:
Net investment income:
A Class ............................................ (1,127,677) (1,251,911) (16,143,193) (17,362,714) (1,020,460) (1,030,059)
B Class ............................................ (273,068) (261,992) (598,267) (515,419) (113,401) (87,267)
C Class ............................................ (20,007) (18,982) (198,089) (130,493) (20,927) (16,080)
Net realized gain on investments:
A Class ............................................ -- -- -- -- -- --
B Class ............................................ -- -- -- -- -- --
C Class ............................................ -- -- -- -- -- --
----------- ----------- ------------ ------------ ----------- -----------
(1,420,752) (1,532,885) (16,939,549) (18,008,626) (1,154,788) (1,133,406)
----------- ----------- ------------ ------------ ----------- -----------
Capital Share Transactions:
Proceeds from shares sold:
A Class ............................................ 3,966,821 3,134,581 19,934,266 40,867,433 2,393,351 3,548,401
B Class ............................................ 730,189 1,604,122 1,798,331 4,975,757 358,374 1,146,134
C Class ............................................ 1,914 165,394 1,229,615 3,101,825 214,002 127,550
Net asset value of shares issued upon reinvestment
of distributions from net investment income and
net realized gain on investments:
A Class ............................................ 446,507 475,385 10,169,104 11,025,848 522,534 529,912
B Class ............................................ 110,731 92,112 427,513 376,661 76,249 54,162
C Class ............................................ 4,636 4,050 153,885 102,368 17,375 15,431
----------- ----------- ------------ ------------ ----------- -----------
5,260,798 5,475,644 33,712,714 60,449,892 3,581,885 5,421,590
----------- ----------- ------------ ------------ ----------- -----------
Cost of shares repurchased:
A Class ............................................ (6,054,532) (5,406,160) (58,213,012) (47,655,352) (3,299,933) (3,225,423)
B Class ............................................ (1,114,561) (1,228,041) (2,109,558) (1,657,829) (493,958) (212,757)
C Class ............................................ (162,489) (3,129) (1,376,438) (685,845) (56,800) (131,741)
----------- ----------- ------------ ------------ ----------- -----------
(7,331,582) (6,637,330) (61,699,008) (49,999,026) (3,850,691) (3,569,921)
----------- ----------- ------------ ------------ ----------- -----------
Increase (decrease) in net assets derived from
capital share transactions ......................... (2,070,784) (1,161,686) (27,986,294) 10,450,866 (268,806) 1,851,669
----------- ----------- ------------ ------------ ----------- -----------
Net Increase (Decrease) in Net Assets ............... (1,465,550) (3,403,235) ( 33,942,480) (13,875,410) (481,640) 406,111
Net Assets:
Beginning of period ................................. 32,221,567 35,624,802 356,045,981 369,921,391 23,737,434 23,331,323
----------- ----------- ------------ ------------ ----------- -----------
End of period ....................................... $30,756,017 $32,221,567 $322,103,501 $356,045,981 $23,255,794 $23,737,434
=========== =========== ============ ============ =========== ===========
</TABLE>
See accompanying notes
31
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Arizona Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 3/2/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.450 $11.210 $11.140 $10.700 $10.750 $10.000
Income (loss) from investment operations:
Net investment income .................................. 0.555 0.538 0.376 0.589 0.580 0.460
Net realized and unrealized gain (loss)
on investments ....................................... (0.200) (0.645) 0.170 0.455 (0.010) 0.840
-------------------------------------------------------------------
Total from investment operations ....................... 0.355 (0.107) 0.546 1.044 0.570 1.300
-------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.555) (0.538) (0.376) (0.589) (0.580) (0.460)
Distributions from net realized gain on investments .... -- (0.115) (0.100) (0.015) (0.040) (0.090)
-------------------------------------------------------------------
Total dividends and distributions ...................... (0.555) (0.653) (0.476) (0.604) (0.620) (0.550)
-------------------------------------------------------------------
Net asset value, end of period ........................... $10.250 $10.450 $11.210 $11.140 $10.700 $10.750
===================================================================
Total return(3) .......................................... 3.68% (1.09%) 4.99% 10.07% 5.48% 13.27%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $13,873 $18,586 $12,177 $10,916 $9,755 $6,225
Ratio of expenses to average net assets ................ 0.75% 0.60% 0.49% 0.48% 0.46% 0.52%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.06% 1.10% 1.07% 1.08% 1.25% 1.25%(4)
Ratio of net investment income to
average net assets ................................... 5.53% 4.88% 5.03% 5.42% 5.43% 5.19%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ......................... 5.22% 4.38% 4.45% 4.82% 4.64% 4.46%(4)
Portfolio turnover ..................................... 115% 68% 96% 39% 70% 38%
</TABLE>
-----------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
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 Arizona Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 6/29/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.450 $11.200 $11.140 $10.690 $10.740 $10.300
Income (loss) from investment operations:
Net investment income .................................. 0.481 0.456 0.319 0.502 0.510 0.260
Net realized and unrealized gain (loss)
on investments ....................................... (0.210) (0.635) 0.160 0.469 (0.010) 0.530
---------------------------------------------------------------------
Total from investment operations ....................... 0.271 (0.179) 0.479 0.971 0.500 0.790
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.481) (0.456) (0.319) (0.506) (0.510) (0.260)
Distributions from net realized gain on investments .... -- (0.115) (0.100) (0.015) (0.040) (0.090)
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.481) (0.571) (0.419) (0.521) (0.550) (0.350)
---------------------------------------------------------------------
Net asset value, end of period ........................... $10.240 $10.450 $11.200 $11.140 $10.690 $10.740
=====================================================================
Total return(3) .......................................... 2.82% (1.74%) 4.38% 9.34% 4.84% 7.74%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $4,911 $5,956 $4,952 $3,711 $3,491 $1,629
Ratio of expenses to average net assets ................ 1.50% 1.35% 1.23% 1.22% 1.11% 0.99%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.81% 1.85% 1.81% 1.82% 2.00% 2.00%(4)
Ratio of net investment income to
average net assets ................................... 4.78% 4.13% 4.29% 4.68% 4.77% 4.60%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ......................... 4.47% 3.63% 3.71% 4.08% 3.88% 3.59%(4)
Portfolio turnover ..................................... 115% 68% 96% 39% 70% 38%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
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 Arizona Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 5/13/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.470 $11.230 $11.160 $10.710 $10.760 $10.200
Income (loss) from investment operations:
Net investment income .................................. 0.478 0.456 0.313 0.534 0.500 0.300
Net realized and unrealized gain (loss)
on investments ....................................... (0.200) (0.645) 0.176 0.437 (0.010) 0.650
---------------------------------------------------------------------
Total from investment operations ....................... 0.278 (0.189) 0.489 0.971 0.490 0.950
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.478) (0.456) (0.319) (0.506) (0.500) (0.300)
Distributions from net realized gain on investments .... -- (0.115) (0.100) (0.015) (0.040) (0.090)
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.478) (0.571) (0.419) (0.521) (0.540) (0.390)
---------------------------------------------------------------------
Net asset value, end of period ........................... $10.270 $10.470 $11.230 $11.160 $10.710 $10.760
=====================================================================
Total return(3) .......................................... 2.88% (1.82%) 4.46% 9.32% 4.70% 9.43%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $1,880 $1,957 $632 $332 $23 $27
Ratio of expenses to average net assets ................ 1.50% 1.35% 1.23% 1.23% 1.21% 1.20%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.81% 1.85% 1.81% 1.83% 2.00% 2.00%(4)
Ratio of net investment income to
average net assets ................................... 4.78% 4.13% 4.29% 4.67% 4.68% 4.65%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ......................... 4.47% 3.63% 3.71% 4.07% 3.89% 3.85%(4)
Portfolio turnover ..................................... 115% 68% 96% 39% 70% 38%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
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 Arizona Insured Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ....................... $10.990 $11.550 $11.470 $11.060 $11.150 $9.860
Income (loss) from investment operations:
Net investment income .................................... 0.525 0.528 0.358 0.548 0.530 0.540
Net realized and unrealized gain (loss)
on investments ......................................... 0.050 (0.560) 0.080 0.416 (0.090) 1.310
---------------------------------------------------------------------
Total from investment operations ........................... 0.575 (0.032) 0.438 0.964 0.440 1.850
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ..................... (0.525) (0.528) (0.358) (0.554) (0.530) (0.560)
Distributions from net realized gain on investments ...... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ........................ (0.525) (0.528) (0.358) (0.554) (0.530) (0.560)
---------------------------------------------------------------------
Net asset value, end of period ............................. $11.040 $10.990 $11.550 $11.470 $11.060 $11.150
=====================================================================
Total return(2) ............................................ 5.47% (0.36%) 3.88% 8.96% 4.09% 19.10%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................. $142,018 $166,368 $179,306 $186,485 $209,258 $238,114
Ratio of expenses to average net assets .................. 0.95% 0.91% 0.84% 0.84% 0.82% 0.69%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 0.98% 0.91% 0.91% 0.89% 0.95% 0.95%
Ratio of net investment income to
average net assets ..................................... 4.88% 4.60% 4.68% 4.92% 4.89% 5.07%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ........................... 4.85% 4.60% 4.61% 4.87% 4.76% 4.81%
Portfolio turnover ....................................... 50% 29% 21% 42% 42% 42%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager. 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 Tax-Free Arizona Insured Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 3/10/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.990 $11.550 $11.460 $11.050 $11.140 $10.440
Income (loss) from investment operations:
Net investment income .................................. 0.444 0.441 0.300 0.455 0.450 0.380
Net realized and unrealized gain (loss)
on investments ....................................... 0.050 (0.560) 0.091 0.414 (0.090) 0.690
---------------------------------------------------------------------
Total from investment operations ....................... 0.494 (0.119) 0.391 0.869 0.360 1.070
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.444) (0.441) (0.301) (0.459) (0.450) (0.370)
Distributions from net realized gain on investments .... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.444) (0.441) (0.301) (0.459) (0.450) (0.370)
---------------------------------------------------------------------
Net asset value, end of period ........................... $11.040 $10.990 $11.550 $11.460 $11.050 $11.140
=====================================================================
Total return(3) .......................................... 4.68% (1.11%) 3.46% 8.06% 3.32% 10.36%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $6,630 $6,059 $4,782 $3,657 $3,110 $2,048
Ratio of expenses to average net assets ................ 1.70% 1.66% 1.59% 1.65% 1.59% 1.33%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.73% 1.66% 1.66% 1.70% 1.70% 1.60%(4)
Ratio of net investment income to
average net assets ................................... 4.13% 3.85% 3.93% 4.11% 4.11% 4.08%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ......................... 4.10% 3.85% 3.86% 4.06% 4.00% 3.81%(4)
Portfolio turnover ..................................... 50% 29% 21% 42% 42% 42%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
36
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Arizona Insured Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $10.990 $11.560 $11.470 $11.060 $11.150 $9.860
Income (loss) from investment operations:
Net investment income .................................. 0.444 0.441 0.301 0.456 0.430 0.450
Net realized and unrealized gain (loss)
on investments ........................................ 0.050 (0.570) 0.090 0.414 (0.090) 1.310
---------------------------------------------------------------------
Total from investment operations ....................... 0.494 (0.129) 0.391 0.870 0.340 1.760
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.444) (0.441) (0.301) (0.460) (0.430) (0.470)
Distributions from net realized gain on investments ..... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ....................... (0.444) (0.441) (0.301) (0.460) (0.430) (0.470)
---------------------------------------------------------------------
Net asset value, end of period .......................... $11.040 $10.990 $11.560 $11.470 $11.060 $11.150
=====================================================================
Total return(2) .......................................... 4.68% (1.20%) 3.46% 8.05% 3.18% 18.10%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $1,322 $1,373 $627 $675 $554 $541
Ratio of expenses to average net assets ................. 1.70% 1.66% 1.59% 1.65% 1.70% 1.54%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.73% 1.66% 1.66% 1.70% 1.70% 1.69%
Ratio of net investment income to
average net assets ..................................... 4.13% 3.85% 3.93% 4.11% 4.01% 4.18%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ........................... 4.10% 3.85% 3.86% 4.06% 4.01% 4.03%
Portfolio turnover ...................................... 50% 29% 21% 42% 42% 42%
</TABLE>
-----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
37
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free California Fund A Class
----------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 3/2/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $10.490 $11.220 $11.050 $10.430 $10.640 $10.000
Income (loss) from investment operations:
Net investment income .................................. 0.547 0.556 0.387 0.590 0.600 0.470
Net realized and unrealized gain (loss)
on investments ........................................ (0.060) (0.709) 0.163 0.665 (0.180) 0.700
---------------------------------------------------------------------
Total from investment operations ....................... 0.487 (0.153) 0.550 1.255 0.420 1.170
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.547) (0.554) (0.380) (0.595) (0.600) (0.470)
Distributions from net realized gain on investments .... -- (0.023) -- (0.040) (0.030) (0.060)
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.547) (0.577) (0.380) (0.635) (0.630) (0.530)
---------------------------------------------------------------------
Net asset value, end of period .......................... $10.430 $10.490 $11.220 $11.050 $10.430 $10.640
=====================================================================
Total return(3) ......................................... 5.00% (1.53%) 5.07% 12.43% 4.21% 11.97%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $24,794 $24,515 $11,600 $4,385 $1,218 $1,012
Ratio of expenses to average net assets ................ 0.50% 0.33% 0.22% 0.13% 0.27% 0.46%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.04% 0.97% 1.07% 1.19% 1.25% 1.22%(4)
Ratio of net investment income to
average net assets .................................... 5.46% 4.95% 5.00% 5.32% 5.71% 5.57%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 4.92% 4.31% 4.15% 4.26% 4.73% 4.81%(4)
Portfolio turnover ..................................... 82% 123% 62% 17% 8% 40%
</TABLE>
------------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
38
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free California Fund B Class
-----------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 8/23/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $10.520 $11.260 $11.080 $10.440 $10.650 $9.960
Income (loss) from investment operations:
Net investment income .................................. 0.473 0.470 0.319 0.520 0.560 0.200
Net realized and unrealized gain (loss)
on investments ........................................ (0.060) (0.717) 0.186 0.688 (0.180) 0.740
---------------------------------------------------------------------
Total from investment operations ....................... 0.413 (0.247) 0.505 1.208 0.380 0.940
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.473) (0.470) (0.325) (0.528) (0.560) (0.190)
Distributions from net realized gain on investments .... -- (0.023) -- (0.040) (0.030) (0.060)
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.473) (0.493) (0.325) (0.568) (0.590) (0.250)
---------------------------------------------------------------------
Net asset value, end of period .......................... $10.460 $10.520 $11.260 $11.080 $10.440 $10.650
=====================================================================
Total return(3) ......................................... 4.31% (2.35%) 4.62% 11.91% 3.77% 9.52%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $14,449 $13,676 $8,962 $5,576 $660 $128
Ratio of expenses to average net assets ................ 1.25% 1.08% 0.97% 0.80% 0.50% 0.60%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.79% 1.72% 1.82% 1.86% 2.00% 1.93%(4)
Ratio of net investment income to
average net assets .................................... 4.71% 4.20% 4.27% 4.65% 5.34% 5.33%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 4.17% 3.56% 3.42% 3.59% 3.84% 4.00%(4)
Portfolio turnover ...................................... 82% 123% 62% 17% 8% 40%
</TABLE>
---------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
39
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free California Fund C Class
-------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Period From
Ended Ended Ended Ended 4/9/96(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.500 $11.230 $11.050 $10.420 $10.070
Income (loss) from investment operations:
Net investment income ................................... 0.472 0.470 0.335 0.487 0.370
Net realized and unrealized gain (loss)
on investments ......................................... (0.060) (0.707) 0.170 0.696 0.380
---------------------------------------------------------
Total from investment operations ........................ 0.412 (0.237) 0.505 1.183 0.750
---------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.472) (0.470) (0.325) (0.513) (0.370)
Distributions from net realized gain on investments -- (0.023) -- (0.040) (0.030)
---------------------------------------------------------
Total dividends and distributions ....................... (0.472) (0.493) (0.325) (0.553) (0.400)
---------------------------------------------------------
Net asset value, end of period ........................... $10.440 $10.500 $11.230 $11.050 $10.420
=========================================================
Total return(3) .......................................... 4.22% (2.26%) 4.64% 11.69% 7.58%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $4,179 $5,132 $774 $109 $94
Ratio of expenses to average net assets ................. 1.25% 1.08% 0.97% 0.87% 0.78%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.79% 1.72% 1.82% 1.93% 2.00%(4)
Ratio of net investment income to
average net assets ..................................... 4.71% 4.20% 4.27% 4.58% 5.13%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ........................... 4.17% 3.56% 3.42% 3.52% 3.91%(4)
Portfolio turnover ...................................... 82% 123% 62% 17% 8%
</TABLE>
------------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
40
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free California Insured Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $10.430 $11.130 $10.980 $10.500 $10.650 $9.330
Income (loss) from investment operations:
Net investment income .................................. 0.500 0.497 0.345 0.513 0.520 0.530
Net realized and unrealized gain (loss)
on investments ........................................ 0.210 (0.700) 0.150 0.486 (0.150) 1.340
---------------------------------------------------------------------
Total from investment operations ....................... 0.710 (0.203) 0.495 0.999 0.370 1.870
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.500) (0.497) (0.345) (0.519) (0.520) (0.550)
Distributions from net realized gain on investments .... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.500) (0.497) (0.345) (0.519) (0.520) (0.550)
---------------------------------------------------------------------
Net asset value, end of period .......................... $10.640 $10.430 $11.130 $10.980 $10.500 $10.650
=====================================================================
Total return(2) ......................................... 7.10% (1.97%) 4.58% 9.78% 3.63% 20.51%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $23,877 $25,042 $28,577 $26,923 $30,551 $33,860
Ratio of expenses to average net assets ................ 1.00% 0.99% 0.94% 0.99% 0.82% 0.70%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.09% 1.10% 0.94% 1.02% 1.01% 1.02%
Ratio of net investment income to
average net assets .................................... 4.87% 4.51% 4.69% 4.85% 5.05% 5.23%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 4.78% 4.40% 4.69% 4.82% 4.86% 4.91%
Portfolio turnover ...................................... 91% 114% 44% 63% 55% 107%
</TABLE>
-----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
41
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free California Insured Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.430 $11.130 $10.990 $10.500 $10.650 $9.330
Income (loss) from investment operations:
Net investment income ................................... 0.423 0.414 0.290 0.457 0.480 0.500
Net realized and unrealized gain (loss)
on investments ........................................ 0.210 (0.700) 0.140 0.495 (0.150) 1.330
---------------------------------------------------------------------
Total from investment operations ........................ 0.633 (0.286) 0.430 0.952 0.330 1.830
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.423) (0.414) (0.290) (0.462) (0.480) (0.510)
Distributions from net realized gain on investments ..... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ....................... (0.423) (0.414) (0.290) (0.462) (0.480) (0.510)
---------------------------------------------------------------------
Net asset value, end of period ............................ $10.640 $10.430 $11.130 $10.990 $10.500 $10.650
=====================================================================
Total return(2) ........................................... 6.30% (2.70%) 3.96% 9.29% 3.22% 20.01%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $6,440 $6,588 $6,588 $6,629 $6,717 $6,029
Ratio of expenses to average net assets ................. 1.75% 1.74% 1.69% 1.53% 1.21% 1.10%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.84% 1.85% 1.69% 1.56% 1.76% 1.75%
Ratio of net investment income to
average net assets .................................... 4.12% 3.76% 3.94% 4.31% 4.64% 4.75%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 4.03% 3.65% 3.94% 4.28% 4.09% 4.10%
Portfolio turnover ...................................... 91% 114% 44% 63% 55% 107%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
42
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free California Insured Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 4/12/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $10.390 $11.090 $10.940 $10.460 $10.650 $10.190
Income (loss) from investment operations:
Net investment income ................................. 0.423 0.414 0.289 0.485 0.440 0.250
Net realized and unrealized gain (loss)
on investments ...................................... 0.210 (0.700) 0.151 0.432 (0.190) 0.530
---------------------------------------------------------------------
Total from investment operations ...................... 0.633 (0.286) 0.440 0.917 0.250 0.780
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................. (0.423) (0.414) (0.290) (0.437) (0.440) (0.320)
Distributions from net realized gain on investments ... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ....................... (0.423) (0.414) (0.290) (0.437) (0.440) (0.320)
---------------------------------------------------------------------
Net asset value, end of period .......................... $10.600 $10.390 $11.090 $10.940 $10.460 $10.650
=====================================================================
Total return(3) ......................................... 6.32% (2.70%) 4.08% 8.98% 2.47% 7.77%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ............... $439 $592 $461 $476 $55 $53
Ratio of expenses to average net assets ............... 1.75% 1.74% 1.69% 1.71% 1.58% 1.53%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ..... 1.84% 1.85% 1.69% 1.74% 1.77% 1.77%(4)
Ratio of net investment income to
average net assets .................................. 4.12% 3.76% 3.94% 4.13% 4.02% 4.25%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ........................ 4.03% 3.65% 3.94% 4.10% 3.83% 4.01%(4)
Portfolio turnover .................................... 91% 114% 44% 63% 55% 107%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
43
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Colorado Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.780 $11.510 $11.380 $10.780 $10.900 $9.530
Income (loss) from investment operations:
Net investment income ................................... 0.543 0.552 0.376 0.574 0.560 0.540
Net realized and unrealized gain (loss)
on investments ........................................ (0.150) (0.730) 0.130 0.618 (0.130) 1.380
---------------------------------------------------------------------
Total from investment operations ........................ 0.393 (0.178) 0.506 1.192 0.430 1.920
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.543) (0.552) (0.376) (0.592) (0.550) (0.550)
Distributions from net realized gain on investments ..... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ....................... (0.543) (0.552) (0.376) (0.592) (0.550) (0.550)
---------------------------------------------------------------------
Net asset value, end of period ............................ $10.630 $10.780 $11.510 $11.380 $10.780 $10.900
=====================================================================
Total return(2) ........................................... 3.89% (1.69%) 4.51% 11.40% 4.08% 20.54%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $304,409 $338,184 $357,127 $357,993 $358,328 $392,815
Ratio of expenses to average net assets ................. 1.00% 0.91% 0.83% 0.81% 0.78% 0.76%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.04% 0.91% 0.92% 0.86% 0.91% 0.93%
Ratio of net investment income to
average net assets .................................... 5.22% 4.86% 4.93% 5.25% 5.27% 5.18%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 5.18% 4.86% 4.84% 5.20% 5.14% 5.01%
Portfolio turnover ...................................... 53% 55% 36% 54% 40% 82%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
44
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Colorado Fund B Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Period From
Ended Ended Ended Ended Ended 3/22/95(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.790 $11.510 $11.380 $10.780 $10.900 $10.250
Income (loss) from investment operations:
Net investment income .................................. 0.463 0.466 0.319 0.483 0.470 0.350
Net realized and unrealized gain (loss)
on investments ....................................... (0.160) (0.719) 0.130 0.616 (0.130) 0.650
---------------------------------------------------------------------
Total from investment operations ....................... 0.303 (0.253) 0.449 1.099 0.340 1.000
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.463) (0.467) (0.319) (0.499) (0.460) (0.350)
Distributions from net realized gain on investments .... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ...................... (0.463) (0.467) (0.319) (0.499) (0.460) (0.350)
---------------------------------------------------------------------
Net asset value, end of period ........................... $10.630 $10.790 $11.510 $11.380 $10.780 $10.900
=====================================================================
Total return(3) .......................................... 3.00% (2.34%) 3.99% 10.47% 3.25% 9.96%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $13,441 $13,530 $10,726 $7,798 $4,172 $1,643
Ratio of expenses to average net assets ................ 1.75% 1.66% 1.58% 1.62% 1.58% 1.39%(4)
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ...... 1.79% 1.66% 1.67% 1.67% 1.65% 1.60%(4)
Ratio of net investment income to
average net assets ................................... 4.47% 4.11% 4.18% 4.44% 4.45% 3.96%(4)
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ......................... 4.43% 4.11% 4.09% 4.39% 4.38% 3.75%(4)
Portfolio turnover ..................................... 53% 55% 36% 54% 40% 82%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
45
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free Colorado Fund C Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...................... $10.790 $11.520 $11.380 $10.780 $10.900 $9.530
Income (loss) from investment operations:
Net investment income ................................... 0.465 0.463 0.319 0.484 0.460 0.450
Net realized and unrealized gain (loss)
on investments ........................................ (0.150) (0.726) 0.140 0.615 (0.130) 1.370
---------------------------------------------------------------------
Total from investment operations ........................ 0.315 (0.263) 0.459 1.099 0.330 1.820
---------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.465) (0.467) (0.319) (0.499) (0.450) (0.450)
Distributions from net realized gain on investments ..... -- -- -- -- -- --
---------------------------------------------------------------------
Total dividends and distributions ....................... (0.465) (0.467) (0.319) (0.499) (0.450) (0.450)
---------------------------------------------------------------------
Net asset value, end of period ............................ $10.640 $10.790 $11.520 $11.380 $10.780 $10.900
=====================================================================
Total return(2) ........................................... 3.11% (2.42%) 4.08% 10.47% 3.17% 19.44%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $4,254 $4,332 $2,068 $1,697 $1,522 $1,042
Ratio of expenses to average net assets ................. 1.75% 1.66% 1.58% 1.64% 1.66% 1.66%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 1.79% 1.66% 1.67% 1.69% 1.66% 1.66%
Ratio of net investment income to
average net assets .................................... 4.47% 4.11% 4.18% 4.42% 4.40% 4.20%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 4.43% 4.11% 4.09% 4.37% 4.40% 4.20%
Portfolio turnover ...................................... 53% 55% 36% 54% 40% 82%
</TABLE>
--------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
46
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free New Mexico Fund A Class
------------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period .................... $10.790 $11.450 $11.280 $10.790 $10.890 $9.590
Income (loss) from investment operations:
Net investment income .................................. 0.546 0.537 0.364 0.547 0.540 0.520
Net realized and unrealized gain (loss)
on investments ........................................ (0.100) (0.660) 0.171 0.503 (0.110) 1.330
----------------------------------------------------------------------
Total from investment operations ....................... 0.446 (0.123) 0.535 1.050 0.430 1.850
----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ................... (0.546) (0.537) (0.365) (0.560) (0.530) (0.550)
Distributions from net realized gain on investments .... -- -- -- -- -- --
----------------------------------------------------------------------
Total dividends and distributions ...................... (0.546) (0.537) (0.365) (0.560) (0.530) (0.550)
----------------------------------------------------------------------
Net asset value, end of period .......................... $10.690 $10.790 $11.450 $11.280 $10.790 $10.890
======================================================================
Total return(2) ......................................... 4.36% (1.17%) 4.81% 10.01% 4.13% 19.64%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................ $20,162 $20,732 $21,155 $18,959 $20,133 $21,402
Ratio of expenses to average net assets ................ 0.99% 0.99% 1.00% 0.99% 0.88% 0.87%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ....... 0.99% 1.01% 1.15% 1.04% 1.07% 1.09%
Ratio of net investment income to
average net assets .................................... 5.22% 4.75% 4.81% 5.00% 5.06% 5.07%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly .......................... 5.22% 4.73% 4.66% 4.95% 4.87% 4.85%
Portfolio turnover ..................................... 33% 37% 20% 28% 42% 55%
---------------
</TABLE>
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a
share during the period and assumes reinvestment of distributions at net
asset value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
47
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free New Mexico Fund B Class
-----------------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Year Year
Ended Ended Ended Ended Ended Ended
8/31/00 8/31/99 8/31/98(1) 12/31/97(3) 12/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ..................... $10.800 $11.460 $11.290 $10.790 $10.890 $9.590
Income (loss) from investment operations:
Net investment income ................................... 0.468 0.453 0.309 0.465 0.460 0.460
Net realized and unrealized gain (loss)
on investments ......................................... (0.100) (0.661) 0.169 0.508 (0.110) 1.320
----------------------------------------------------------------------
Total from investment operations ........................ 0.368 (0.208) 0.478 0.973 0.350 1.780
----------------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income .................... (0.468) (0.452) (0.308) (0.473) (0.450) (0.480)
Distributions from net realized gain on investments ..... -- -- -- -- -- --
----------------------------------------------------------------------
Total dividends and distributions ....................... (0.468) (0.452) (0.308) (0.473) (0.450) (0.480)
----------------------------------------------------------------------
Net asset value, end of period ........................... $10.700 $10.800 $11.460 $11.290 $10.790 $10.890
======================================================================
Total return(2) .......................................... 3.59% (1.91%) 4.29% 9.24% 3.39% 18.84%
Ratios and supplemental data:
Net assets, end of period (000 omitted) ................. $2,539 $2,624 $1,782 $1,065 $794 $605
Ratio of expenses to average net assets ................. 1.74% 1.74% 1.75% 1.76% 1.61% 1.53%
Ratio of expenses to average net assets prior to
expense limitation and expenses paid indirectly ........ 1.74% 1.76% 1.90% 1.81% 1.82% 1.83%
Ratio of net investment income to
average net assets ..................................... 4.47% 4.00% 4.06% 4.23% 4.31% 4.33%
Ratio of net investment income to average
net assets prior to expense limitation
and expenses paid indirectly ........................... 4.47% 3.98% 3.91% 4.18% 4.10% 4.03%
Portfolio turnover ...................................... 33% 37% 20% 28% 42% 55%
</TABLE>
----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Total investment return is based on the change in net asset value of a share
during the period and assumes reinvestment of distributions at net asset
value and does not reflect the impact of a sales charge.
(3) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
48
<PAGE>
Financial Highlights (continued)
<TABLE>
<CAPTION>
Selected data for each share of the Fund outstanding
throughout each period were as follows: Delaware Tax-Free New Mexico Fund C Class
--------------------------------------------------------------------------------------------------------------------------
Year Year Eight Months Year Period From
Ended Ended Ended Ended 5/7/96(2) to
8/31/00 8/31/99 8/31/98(1) 12/31/97(5) 12/31/96
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........................ $10.790 $11.460 $11.280 $10.790 $10.410
Income (loss) from investment operations:
Net investment income ...................................... 0.469 0.452 0.305 0.459 0.280
Net realized and unrealized gain (loss) on investments ..... (0.090) (0.670) 0.183 0.495 0.370
-------------------------------------------------------------
Total from investment operations ........................... 0.379 (0.218) 0.488 0.954 0.650
-------------------------------------------------------------
Less dividends and distributions:
Dividends from net investment income ....................... (0.469) (0.452) (0.308) (0.464) (0.270)
Distributions from net realized gain on investments ........ -- -- -- -- --
-------------------------------------------------------------
Total dividends and distributions .......................... (0.469) (0.452) (0.308) (0.464) (0.270)
-------------------------------------------------------------
Net asset value, end of period .............................. $10.700 $10.790 $11.460 $11.280 $10.790
=============================================================
Total return(3) ............................................. 3.70% (1.99%) 4.38% 9.06% 6.30%
Ratios and supplemental data:
Net assets, end of period (000 omitted) .................... $555 $381 $394 $315 $341
Ratio of expenses to average net assets .................... 1.74% 1.74% 1.75% 1.84% 1.74%(4)
Ratio of expenses to average net assets prior to expense
limitation and expenses paid indirectly ................... 1.74% 1.76% 1.90% 1.89% 1.83%(4)
Ratio of net investment income to average net assets ....... 4.47% 4.00% 4.06% 4.15% 4.21%(4)
Ratio of net investment income to average net assets prior to
expense limitation and expenses paid indirectly ........... 4.47% 3.98% 3.91% 4.10% 4.12%(4)
Portfolio turnover ......................................... 33% 37% 20% 28% 42%
</TABLE>
----------------
(1) Ratios have been annualized and total return has not been annualized.
(2) Commencement of operations.
(3) 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.
(4) Annualized.
(5) Commencing May 1, 1997, Delaware Management Company replaced Voyageur Fund
Managers, Inc. as the Fund's investment manager.
See accompanying notes
49
<PAGE>
Notes to Financial Statements
August 31, 2000
--------------------------------------------------------------------------------
Delaware Tax-Free Arizona Fund and Delaware Tax-Free California Fund are series
within the Voyageur Mutual Funds, which is organized as a Delaware business
trust. Delaware Tax-Free Arizona Insured Fund is a series of the Voyageur
Insured Funds, which is organized as a Delaware business trust. Delaware
Tax-Free Colorado Fund is a series of the Voyageur Mutual Funds II, which is
organized as a Delaware business trust. Delaware Tax-Free California Insured
Fund and Delaware Tax-Free New Mexico Fund are series within the Voyageur
Investment Trust, which is organized as a Massachusetts business trust. Each
series is referred to as a "Fund" or collectively as the "Funds" and are
registered as non-diversified, open-end management investment companies under
the Investment Company Act of 1940, as amended. The Funds offer three classes of
shares. The A Class carries a front-end sales charge of 3.75%. The B Class
carries a back-end deferred sales charge. The C Class carries a level load
deferred sales charge.
Delaware Tax-Free Arizona Fund, Delaware Tax-Free California Fund, Delaware
Tax-Free Colorado Fund and Delaware Tax-Free New Mexico Fund seek a high level
of current income free from both federal and state income taxes by investing
primarily in investment grade municipal bonds. Delaware Tax-Free Arizona Insured
Fund and Delaware Tax-Free California Insured Fund seek a high level of current
income free from both federal and state income taxes with the added safety of an
insured portfolio by investing in insured municipal bonds.
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.
<PAGE>
Federal Income Taxes - Each Fund intends to continue to qualify as a regulated
investment company and make the requisite distributions to shareholders.
Accordingly, no provision for federal income taxes has been made in the
financial statements. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from accounting
principles generally accepted in the United States.
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.
50
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Certain expenses of the Funds are paid through commission arrangements with
brokers. These transactions are done subject to best execution. The expenses
paid under the above arrangements are included in their respective expense
captions on the Statement of Operations with the corresponding expense offset
shown as "Expenses paid indirectly". The amount of these expenses for the year
ended August 31, 2000 were:
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
--------------------------------------------------------------------------------
$517 $3,602 $935 $695 $7,515 $519
2. Investment Management and Other Transactions with Affiliates
In accordance with the terms of the Investment Management Agreement, each fund
pays Delaware Management Company (DMC), the Investment Manager of the Funds, an
annual fee which is calculated daily based on the net assets of each fund. The
following are the management fees as a percentage of average daily net assets
for each respective fund:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
On the first $500 million ................. 0.550% 0.500% 0.550% 0.500% 0.550% 0.550%
On the next $500 million .................. 0.500% 0.475% 0.500% 0.475% 0.500% 0.500%
On the next $1.5 billion .................. 0.450% 0.450% 0.450% 0.450% 0.450% 0.450%
In excess of $2.5 billion ................. 0.425% 0.425% 0.425% 0.425% 0.425% 0.425%
</TABLE>
DMC has elected to waive its fees and reimburse each Fund to the extent that
annual operating expenses, exclusive of taxes, interest, brokerage commissions,
extraordinary expenses and distribution expenses, exceed the following
percentages of average daily net assets through October 31, 2001.
<PAGE>
The waiver rates are as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating expense limitation as a
percentage of average daily net
assets (per annum) ........................... 0.50% 0.70% 0.25% 0.75% 0.75% 0.75%
</TABLE>
The Funds have engaged Delaware Service Company, Inc. (DSC), an affiliate of
DMC, to provide dividend disbursing, transfer agent, accounting and
administration services. The Funds pay DSC a monthly fee based on number of
shareholder accounts, shareholder transactions and average net assets, subject
to certain minimums.
Pursuant to the Distribution Agreement, each Fund pays Delaware Distributors,
L.P. (DDLP), the Distributor and an affiliate of DMC, an annual fee not to
exceed 0.25% of the average daily net assets of the A Class and 1.00% of the
average daily net assets of the B and C Classes.
At August 31, 2000, the Funds had liabilities payable to affiliates as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment management fees payable to DMC ..... $3,664 $5,967 $384 $7,980 $-- $2,677
Dividend disbursing, transfer agent fees,
accounting fees and other expenses
payable to DSC ............................. 2,960 17,459 5,171 3,970 37,900 3,310
Other expenses payable
to DMC and affiliates ...................... 2,932 22,910 6,079 4,472 45,563 3,375
</TABLE>
51
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
2. Investment Management and Other Transactions with Affiliates (continued)
For the year ended August 31, 2000, DDLP earned commissions on sales of the Fund
A Class shares for each Fund as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5,884 $23,990 $3,370 $1,639 $49,658 $6,133
</TABLE>
Certain officers of DMC, DSC and DDLP are officers, trustees and/or employees of
the Funds. These officers, trustees and employees are paid no compensation by
the Funds.
3. Investments
During the year ended August 31, 2000, the Funds made purchases and sales of
investment securities other than temporary cash investments as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases .................................... $25,572,317 $77,728,492 $32,833,265 $27,636,317 $169,917,673 $7,463,987
Sales ........................................ 31,550,728 102,288,319 33,481,679 29,734,439 191,771,170 7,790,371
</TABLE>
At August 31, 2000, the aggregate cost of securities and unrealized appreciation
(depreciation) for federal income tax purposes for each Fund were as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cost of investments ......................... $19,576,338 $142,407,197 $43,802,800 $29,971,569 $314,100,274 $23,221,871
===================================================================================
Aggregate unrealized
appreciation .............................. $395,168 $6,200,899 $846,554 $1,487,718 $10,373,731 $793,418
Aggregate unrealized
depreciation .............................. (400,839) (283,289) (1,570,057) (36,450) (5,947,489) (549,634)
-----------------------------------------------------------------------------------
Net unrealized
appreciation
(depreciation) .............................. $ (5,671) $ 5,917,610 $ (723,503) $ 1,451,268 $ 4,426,242 $ 243,784
====================================================================================
</TABLE>
For federal income tax purposes, each Fund had accumulated capital losses at
August 31, 2000 as following:
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Arizona Arizona Insured California California Insured Colorado New Mexico
Fund Fund Fund Fund Fund Fund
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expires 2002 ................................ $ -- $ -- $ -- $ -- $ -- $161,295
Expires 2003 ................................ -- 1,513,303 -- 197,188 48,864 277,128
Expires 2004 ................................ -- -- -- -- 832,567 22,469
Expires 2005 ................................ -- -- -- -- -- --
Expires 2008 ................................ 245,089 367,818 338,639 528,420 1,340,059 33,736
-----------------------------------------------------------------------------------
$245,089 $1,881,121 $338,639 $725,608 $2,221,490 $494,628
===================================================================================
</TABLE>
52
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
4. Capital Shares
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
Arizona Fund Arizona Insured Fund California Fund
----------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
8/31/00 8/31/99 8/31/00 8/31/99 8/31/00 08/31/99
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class .................................. 571,748 1,047,440 544,323 1,153,449 908,359 1,479,618
B Class .................................. 74,510 158,996 103,352 224,304 302,707 638,576
C Class .................................. 20,825 141,433 30,072 87,589 72,260 463,063
Shares issued upon reinvestment
of distributions from net
investment income and net
realized gain on investments:
A Class .................................. 46,388 49,046 292,070 308,344 81,604 62,783
B Class .................................. 10,083 12,651 12,506 10,909 23,059 16,717
C Class .................................. 6,072 2,263 4,035 2,747 13,324 6,677
----------------------------------------------------------------------------------
729,626 1,411,829 986,358 1,787,342 1,401,313 2,667,434
----------------------------------------------------------------------------------
Shares repurchased:
A Class .................................. (1,042,053) (405,027) (3,112,680) (1,836,808) (950,088) (238,419)
B Class .................................. (175,018) (43,718) (66,828) (97,602) (244,931) (151,565)
C Class .................................. (30,684) (13,128) (39,302) (19,695) (174,116) (49,887)
----------------------------------------------------------------------------------
(1,247,755) (461,873) (3,218,810) (1,954,105) (1,369,135) (439,871)
----------------------------------------------------------------------------------
Net increase (decrease) .................... (518,129) 949,956 (2,232,452) (166,763) 32,178 2,227,563
==================================================================================
</TABLE>
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Tax-Free Tax-Free Tax-Free
California Insured Fund Colorado Fund New Mexico Fund
----------------------------------------------------------------------------------
Year Ended Year Ended Year Ended
8/31/00 8/31/99 8/31/00 8/31/99 8/31/00 08/31/99
<S> <C> <C> <C> <C> <C> <C>
Shares sold:
A Class .................................. 389,603 282,890 1,908,179 3,566,953 228,081 314,287
B Class .................................. 71,114 145,203 171,990 436,017 33,833 101,556
C Class .................................. 184 15,326 116,757 272,821 20,322 11,230
Shares issued upon reinvestment
of distributions from net
investment income and net
realized gain on investments:
A Class .................................. 43,544 43,195 979,140 970,397 49,825 46,834
B Class .................................. 10,794 8,368 41,166 33,206 7,272 4,816
C Class .................................. 454 371 14,818 9,040 1,659 1,367
---------------------------------------------------------------------------------
515,693 495,353 3,232,050 5,288,434 340,992 480,090
---------------------------------------------------------------------------------
Shares repurchased:
A Class .................................. (591,059) (491,489) (5,610,279) (4,197,362) (314,321) (286,039)
B Class .................................. (108,561) (113,530) (203,526) (146,477) (46,921) (18,826)
C Class .................................. (16,137) (283) (133,099) (60,096) (5,467) (11,640)
---------------------------------------------------------------------------------
(715,757) (605,302) (5,946,904) (4,403,935) (366,709) (316,505)
---------------------------------------------------------------------------------
Net increase (decrease) .................... (200,064) (109,949) (2,714,854) 884,499 (25,717) 163,585
=================================================================================
</TABLE>
53
<PAGE>
Notes to Financial Statements (continued)
--------------------------------------------------------------------------------
5. Lines of Credit
The Fund(s), 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 funds' allocation of the entire facility. The Participants may
borrow up to one third of their net assets under the agreement.
The Fund(s) had no amounts outstanding at August 31, 2000, or at any time during
the period.
6. Credit and Market Risk
The Funds concentrate their investments in securities mainly issued by each
specific state's municipalities. The value of these investments may be adversely
affected by new legislation within the state, regional or local economic
conditions, and differing levels of supply and demand for municipal bonds. Many
municipalities insure repayment for their obligations. Although bond insurance
reduces the risk of loss due to default by an issuer, such bonds remain subject
to the risk that market value 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.
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 is sent to them in January of each year.
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 distributions paid during the
year as follows:
<TABLE>
<CAPTION>
(A) (B)
Long-Term Capital Gains Ordinary Income
Fund Distributions (Tax Basis) Distributions (Tax Basis)
-------------------------------- ------------------------- -------------------------
<S> <C> <C>
Tax-Free Arizona Fund -- --
Tax-Free Arizona Insured Fund -- --
Tax-Free California Fund -- --
Tax-Free California Insured Fund -- --
Tax-Free Colorado Fund -- --
Tax-Free New Mexico Fund -- --
</TABLE>
<TABLE>
<CAPTION>
(C) (D)
Tax-Exempt Total Distributions
Fund Distributions (Tax Basis) (Tax Basis)
-------------------------------- ------------------------- -------------------
<S> <C> <C>
Tax-Free Arizona Fund 100% 100%
Tax-Free Arizona Insured Fund 100% 100%
Tax-Free California Fund 100% 100%
Tax-Free California Insured Fund 100% 100%
Tax-Free Colorado Fund 100% 100%
Tax-Free New Mexico Fund 100% 100%
</TABLE>
----------------------
Items (A), (B) and (C) are based on a percentage of the Fund's total
distributions.
54
<PAGE>
Report of Independent Auditors
Voyageur Mutual Funds - Delaware Tax-Free Arizona Fund
Voyageur Insured Funds - Delaware Tax-Free Arizona Insured Fund
Voyageur Mutual Funds - Delaware Tax-Free California Fund
Voyageur Investment Trust - Delaware Tax-Free California Insured Fund
Voyageur Mutual Funds II - Delaware Tax-Free Colorado Fund
Voyageur Investment Trust - Delaware Tax-Free New Mexico Fund
We have audited the accompanying statements of net assets of Delaware Tax-Free
Arizona Fund, Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free
California Fund, Delaware Tax-Free California Insured Fund, Delaware Tax-Free
Colorado Fund, and Delaware Tax-Free New Mexico Fund (the "Funds") and the
statement of assets and liabilities of Delaware Tax-Free Arizona Fund 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
presented from January 1, 1997 through August 31, 2000. These financial
statements and 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. The financial
highlights for the periods presented through December 31, 1996 were audited by
other auditors whose reports thereon dated February 14, 1997 expressed
unqualified opinions 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 each
of the above listed funds at August 31, 2000, the results of their operations
for the year then ended, the changes in their net assets for each of the two
years in the period then ended, and their financial highlights for each of the
periods 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
55
<PAGE>
This page intentionally left blank.
<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, Ohio, Oregon, Pennsylvania and Wisconsin. Insured and
intermediate bond funds are available in selected states.
<PAGE>
DELAWARE(SM)
INVESTMENTS
----------------------
Philadelphia o 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 Arizona Fund,
Delaware Tax-Free Arizona Insured Fund, Delaware Tax-Free California Fund,
Delaware Tax-Free California Insured Fund, Delaware Tax-Free Colorado Fund and
Delaware Tax-Free New Mexico Fund shareholders, but it may be used with
prospective investors when preceded or accompanied by a current Prospectus for
these Funds 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>
(3870) Printed in the USA
AR-WEST [08/00] PPL 10/00 (J6385)
